On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-3489-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 21, 2009
Before Judges Rodríguez and Reisner.
In this appeal, we decide whether an underinsured motorist (UIM) carrier is entitled to a set-off from the proceeds of a plaintiff's lawsuit recovery against his employer, pursuant to the intentional wrong exception to the exclusive remedy provision of the Workers' Compensation Act, N.J.S.A. 34:15-8. We hold that in appropriate circumstances a claim against an employer pursuant to the intentional wrong exception can be the subject of a subrogation claim by a UIM carrier and entitle the carrier to a partial set-off. However, given the procedural scenario presented here, the UIM carrier is not so entitled.
These are the operative facts. As the result of an accident on August 6, 2003, Mauro Ramos was severely injured while riding unrestrained in the back of a box truck owned by his employer James Durr Wholesale Florist, Inc. (Durr).*fn1 Ramos was employed as a migrant worker for Durr. At the time of the accident, neither fixed seating nor restraints were provided for Ramos and his co-workers. They were required to ride in the rear of the box truck. Because it was August and there was no ventilation in the rear of the box truck, its overhead door was left open. As a result of the collision, the workers riding in the rear of the box truck, including Ramos, were thrown out of the vehicle. Ramos violently impacted the paved highway with his head and shoulder, resulting in a multitude of serious and permanent injuries about his head and body. Immediately following the accident, Ramos was intubated at the scene by emergency medial personnel and flown by helicopter to Helene Fuld Medical Center. He was admitted on August 6, 2003 and discharged on August 18, 2003. Ramos was transferred to St. Lawrence Rehabilitation Center's brain injury unit on August 18, 2003 and discharged on September 17, 2003.
Ramos and his wife, Paola Mexticla, filed an action against Arthur L. McDonnell, the owner, and Kari L. McDonnell, the driver of the vehicle that hit the box truck. In July 2004, the parties settled that lawsuit for the McDonnells' $15,000 insurance policy limit.
In August 2005, Ramos and his wife filed the present tort action against Durr pursuant to the intentional wrong exception to the workers' compensation bar, N.J.S.A. 34:15-8.*fn2 The suit alleged that over the years, as far back as 1997, Durr received numerous citations and pled guilty to various violations of the Migrant and Seasonal Agricultural Worker Protection Act, 29 U.S.C.A. §§ 1801 to -1872, for unsafe and hazardous labor practices, including the unsafe transportation of seasonal and migrant workers. The complaint also alleged that on September 6, 2002, almost a year before this accident, three seasonal or migrant workers employed by Durr were killed in a motor vehicle accident as a result of Durr's failure to provide safe transportation. The transport van used by Durr lacked secure seats, and in addition to those killed, several other workers were seriously injured because they were forced to sit on the floor of the transport vehicle or on milk crates without any restraints.
The Ramos lawsuit sought damages for Durr's "intentionally wrongful, willful, wanton, carelessly, grossly negligent and or reckless [conduct]." The action sought "compensatory and punitive damages, interest, attorneys' fees, costs of suit and other relief." For reasons not clear on this record, after the intentional wrong lawsuit was filed, it was not prosecuted. Therefore, this lawsuit was pending but not decided when Ramos pursued the UIM against Countryway Insurance Company (CIC), the insurer of the box truck. CIC received notice of the intentional wrong lawsuit, and denied coverage to Durr under its auto policy. A different insurer defended Durr against that lawsuit.
In the UIM claim, Ramos alleged the following serious injuries: multiple trauma and closed-head injury; unconsciousness and coma during acute phase of injury; a contusion abrasion of the forehead and the face with extensive hematoma of the scalp and the right side of the head and face; profuse bleeding and clotting at the bilateral ear canal; left subdural hematoma; subarachnoid hemorrhage; intra cranial bleeding-subdural, subarachnoid, at the left temporal area; hemorrhagic contusion of the left temporoparietal lobe of the brain; multiple skull fractures: basal, right temporal, left parietal; fracture of the C7 transverse process of the left side; deep laceration of the right ear posterior portion-complex type; blunt trauma to the chest and abdomen; acute respiratory failure secondary to blunt chest injury; fracture of the left lumbar vertebra at L-4; contusion abrasion of the right shoulder; right brachial plexus injury/brachial plexopathy; rotator cuff tear in the right shoulder; severe cognitive deficit/closed head injury/brain injury; sensorineural hearing loss related to temporal bone fracture in right ear; tinnitus; scarring about the head, face and body diminished strength about the right arm, shoulder and back; pain about the right arm, shoulder and back; personality changes, inability to concentrate, memory deficits, and word seeking delays among cognitive affects of brain injury.
Ramos also sustained economic losses. The total amount of money expended for Ramos's medical and diagnostic care was $215,272.92, paid by American International Recovery, Inc. as the workers' compensation carrier covering Durr for this accident. Additionally, the workers' compensation carrier paid Ramos indemnity in the amount of $55,030.42 as temporary disability income benefits. The total workers' compensation lien amounted to $270,303.34.
The UIM claim was arbitrated. In February 2007, the UIM panel of three arbitrators found, by a 2-to-1 vote, that McDonnell was "entirely liable" and awarded Ramos $1,300,000 in damages, less the $15,000 credit from the McDonnell settlement. The arbitrators did not consider the fault of Durr, concluding that the workers' compensation bar or exclusive remedy provision set by N.J.S.A. 34:15-8 would preclude recovery. After the UIM arbitration was concluded, Ramos pursued the intentional wrong lawsuit and entered into non-binding arbitration of that claim. The arbitrator of the tort action awarded $2,250,000 million in damages, including punitive damages, and found Durr seventy percent negligent. Durr moved for a trial de novo. The parties subsequently settled the matter for $435,000 in February 2008. There is no indication in the settlement what items of damages were covered by the award, although Ramos signed a release covering, among other things, claims for punitive damages as well as any future right to seek additional workers' compensation benefits. Two months later, CIC moved to intervene in the tort action against Durr, seeking to obtain the entire settlement proceeds as a set-off against the UIM award. This motion was denied and CIC's claim was dismissed with prejudice.
On appeal, CIC contends that because it paid the full amount of the UIM award, it is entitled to repayment of all sums obtained from any other source. We disagree. Had CIC timely intervened in the lawsuit, it would have been entitled to a setoff of any portion of the intentional wrong settlement that represented compensatory damages, i.e., pain and suffering, loss of enjoyment of life, lost wages, disfigurement and permanent disabilities. On the other hand, it is clear that CIC would not be entitled to recover from any portion of the settlement representing punitive or exemplary damages for Durr's wrongful conduct. Moreover, CIC would not be entitled to any portions of the settlement representing future workers' compensation benefits. See Walkowitz v. Royal Glove Ins. Co., 149 N.J. Super. 442, 446-48 (App. Div.), certif. denied, 75 N.J. 584 (1977).
At the outset, we note that this case presents an unusual situation because the UIM arbitration occurred long before the disposition of the intentional wrong action. Usually, the UIM arbitration follows or is contemporaneous with the resolution of all causes of action asserted by a claimant, although it need not be. See Longworth v. Van Houten, 223 N.J. Super. 174, ...