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Terrence Johnson v. State of New Jersey


June 28, 2011


On appeal from the Division of Workers' Compensation, Department of Labor and Workforce Development, Claim Petition No. 2004-29233.

Per curiam.


Submitted: June 8, 2011 - : Before Judges Axelrad, R. B. Coleman, and Lihotz.

This case returns following a remand to the judge of workers' compensation. We affirm.

We incorporate by reference rather than reciting at length the facts and procedural history of this case contained in our prior opinion. Johnson v. State, No. A-3202-07T3 (App. Div. Nov. 20, 2009). We recite only the salient facts.

On August 30, 2004, petitioner Terrence Johnson, a New Jersey Department of Corrections employee, was injured in the course of his employment in Ewing Township, New Jersey. Petitioner, who was driving a State-owned work vehicle, was struck by an uninsured motorist. At the time, petitioner was a Pennsylvania resident and owned a personal vehicle covered by a Pennsylvania automobile policy with State Farm Insurance Company.

Petitioner received workers' compensation benefits through the State of New Jersey and filed an uninsured motorist (UM) claim with State Farm. New Jersey asserted a subrogation lien against petitioner's UM claim, seeking to recover the $26,769.99 it paid in temporary compensation benefits and medical expenses. Petitioner argued that Pennsylvania law applied to the proceeds of his Pennsylvania UM claim and, therefore, prevented New Jersey from being reimbursed through subrogation. In September 2007, the State filed a motion in the New Jersey workers' compensation court to set the lien, arguing that petitioner was bound by New Jersey workers' compensation law. The workers' compensation judge ruled that New Jersey law should apply, giving petitioner's employer a right of subrogation against the proceeds. Petitioner appealed, and in an unpublished opinion we reversed that determination, concluding the court had failed to perform a conflict of laws analysis to discern which state's law should apply when the two are in conflict.*fn1 Johnson v. State, supra, slip op. at 8.

We remanded for a determination of the second prong of the governmental-interest analysis to determine the interest each state has in resolving the issue in dispute, with consideration of the policies that underlie the respective state statutes that are in conflict in this case. Id. at 7-9. See Gantes v. Kason Corp., 145 N.J. 478, 485 (1996); Veazey v. Doremus, 103 N.J. 244, 248 (1986).

We noted that on February 8, 2007, State Farm's representative had sent a letter to petitioner's attorney regarding petitioner's UM claim, stating, in pertinent part:

Your correspondence also indicates a workers' compensation lien of $12,628.20. As I'm sure you are aware, the carrier has no right to assert a lien in a UM claim; however, you should also be aware that your client has a right to prove, plead and recover the amount of their payment. In this case, my file reflects a total WC payment of approximately $27,000, which has already been factored into my evaluation of the claim. . . .

With regard to your demand for the policy limits, at present I do not think the information in my file warrants that type of value; however, I am certainly willing to consider any new information that is available. . . .

Incidentally, since it appears we will not be able to settle the claim for my initial offer amount of $52,000, I will be forwarding that amount to you under separate cover in the near future. It is State Farm's procedure to do this as we believe that is the minimum amount your client will be entitled to receive. The claim will of course remain open and we are not asking Mr. Johnson to sign any sort of Release. [Emphasis added.]

Moreover, petitioner's counsel had forwarded this letter to the State representative, advising that State Farm had sent a $52,000 check to petitioner to avoid any claim of bad faith under the policy and the matter would proceed to arbitration.

The judge of compensation had summarily concluded that "[c]learly, in this matter, to deny [the State's] motion would, in fact permit such a double recovery" by petitioner in contravention of the legislative intent of N.J.S.A. 34:15-40 as articulated by our Supreme Court in Midland Insurance Co. v. Colatrella, 102 N.J. 612 (1986). We were concerned that ifPennsylvania law were applied and the State was not permitted to assert a compensation lien against petitioner's UM proceeds, he would, in fact, receive a "double recovery." In remanding the matter, we noted, for example, that the record was unclear as to the extent to which the workers' compensation payments were "factored in" to the UM settlement and whether petitioner ultimately resolved his UM claim for more than the initial offer of $52,000. Accordingly, we directed the workers' compensation judge to perform a "choice-of-law analysis as to the specific issue and public policy considerations presented in this case." Johnson v. State, supra, slip op. at 9.

Following extensive oral argument, the court issued a written opinion on October 18, 2010, concluding New Jersey's interests were superior, thus the State's subrogation request should prevail, and directed the lien be set as previously ordered. Petitioner again appealed. On appeal, petitioner reasserts the trial court erred in determining the conflict-of-laws issue in favor of New Jersey.

We recognize we are not bound by the trial court's application of law to the facts, and issues involving interpretation of statutes are questions of law reviewed de novo; thus no deference is owed to the trial court. Real v. Radir Wheels, Inc., 198 N.J. 511, 524 (2009); Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995); Hirl ex rel. Hirl v. Bank of Am., 401 N.J. Super. 573, 585 (App. Div. 2008), aff'd, 198 N.J. 318 (2009). Nonetheless, based on our review of the record and applicable law, we are not persuaded by any of petitioner's challenges to the court's rulings and affirm substantially for the reasons articulated by the judge of compensation in his written opinion.

The judge of compensation performed a sufficient choice-oflaw analysis on remand and reached the correct decision based on his examination of the respective state statutes, policies, and interests. The rationale for New Jersey's subrogation policy is to prevent employees from obtaining double recovery from the employer and the tortfeasor. Frazier v. N.J. Mfrs. Ins. Co., 142 N.J. 590, 601 (1995). Even when the employee makes a third-party recovery against a party other than the tortfeasor, the "no double recovery" rule still applies. Id. at 605 (finding that recoveries "not directly from the tortfeasor are subject to a lien even when the employee is not fully compensated"); Midland, supra, 102 N.J. at 617 (finding a workers' compensation lien attached to the proceeds of a UM policy because the tortious act of a third-party is the predicate for both recovery of UM proceeds and the assertion of a workers' compensation lien); Montedore v. Asbury Park, 174 N.J. Super. 305, 308-09(App. Div. 1980) (opining that the Legislature would not have "intended an employee-accident victim of an uninsured driver to fare better than an employee-accident victim of an insured driver, when the legislative effort has been in the other direction"). Recoveries "not directly from the tortfeasor are subject to a lien even when the employee is not fully compensated." Frazier, supra, 142 N.J. at 605.

The judge of compensation addressed illustrative case law, Van Den Heuval v. Wallace, 555 A.2d 162 (Pa. Super. Ct. 1989) and Davish v. Gidley, 611 A.2d 1307 (Pa. Super. Ct. 1992), in which Pennsylvania permitted an out-of-state workers' compensation insurer to subrogate proceeds from the employee's suit under a vehicular policy, despite Pennsylvania's law precluding workers' compensation subrogation. In Van Den Heuval, supra, a Delaware employer was allowed to intervene in a Pennsylvania tort action under the Delaware Workers' Compensation law's right of subrogation. 555 A.2d at 164. In Davish, supra, a New Jersey employer was permitted to intervene under N.J.S.A. 34:15-40 in a Pennsylvania tort action of a New Jersey employee who was a Pennsylvania resident. 611 A.2d at 1310. The Pennsylvania court recognized that "New Jersey is the state with the most significant interest in determining the right of a New Jersey employer to subrogate where it has made workers' compensation payments to a Pennsylvania employee pursuant to the New Jersey Workers' Compensation Law." Ibid.

The judge of compensation thus reasoned that the State of New Jersey could have intervened in petitioner's third-party action in Pennsylvania to protect its rights under N.J.S.A. 34:15-40, so it "would be illogical to deny" it the same right against proceeds available to it in New Jersey based on the same accident because of a provision in an insurance contract entered into in Pennsylvania, "a state that permits intervention for that very purpose."

The judge of compensation also found there would be a double recovery absent subrogation. He stated:

Finally, I find that there is a double recovery in this case. At oral argument Petitioner's counsel insisted that the $52,000.00 received by his client should not be considered a tort recovery but was instead an amount paid by State Farm pursuant to a contract and that contract was entered into in Pennsylvania. I [am] unable to appreciate the logic of that argument. At oral argument counsel admitted that Petitioner incurred no additional medical or property damage expenses in this case other than the amounts paid by the State of New Jersey. I find it no mere coincidence that the correspondence between counsel and the adjuster in arriving at the $52,000.00 tender made reference to "WC payment of approximately $27,000 which has already been factored into my evaluation of the claim." I take judicial notice of the fact that Petitioner settled his workers' compensation claim with another attorney of the same firm for a permanent partial disability 7 1/2% of the lumbar spine, reflecting a relatively minor sprain and/or strain. As noted earlier, there were no additional medical or other expenses. Absent a provision in Petitioner's automobile policy of insurance reflecting an obligation by State Farm to pay a minimum of $52,000.00 or some similar amount regardless of the severity of the accident, I can only conclude that the amount received by Petitioner from his insurance carrier was determined to a large degree by the workers' compensation payments made by the State of New Jersey. I note also that counsel at oral argument informed the Court that the question of additional recovery in Pennsylvania is still pending.

The $52,000.00 received to date represents a good faith offer of the minimum that Petitioner will recover.

Double recovery "occurs when the employee keeps any workers' compensation benefits that have been matched by recovery against the liable third person[.]" Frazier, supra, 142 N.J. at 602. The double recovery to be prevented "under [N.J.S.A. 34:15-40] is payment from two different sources for the same injury[.]" Id. at 603. Double recovery "within the context of an injured employee's receipt of both workers' compensation benefits and civil damages for the same injuries focuses upon the notion that an employee cannot have both." Calalpa v. Dae Ryung Co., 357 N.J. Super. 220, 228 (App. Div.), certif. denied, 176 N.J. 278 (2003). The double recovery rule applies, and the employer is entitled to a compensation lien, "whether or not the employee is fully compensated . . . ." Frazier, supra, 142 N.J. at 602-03.

We are satisfied the judge of compensation sufficiently reviewed the evidence in the record respecting the double recovery issue and gave counsel ample opportunity to present additional evidence and arguments thereon. We discern no error in the judge's ruling, which was amply supported by the record and case law.


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