On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-6929-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Reisner and LeWinn.
Defendant City of East Orange (City) appeals from two October 4, 2010 orders granting summary judgment in favor of plaintiff John R. Thomas, Jr. and denying defendant's summary judgment motion. We affirm substantially for the reasons stated in Judge Michael R. Casale's written opinion dated October 4, 2010.
Plaintiff, a police officer employed by the City, was injured while driving a vehicle during his work as an officer. He obtained worker's compensation from the City, which self-insured for that purpose. He also sued the City of Newark and County of Essex for negligence and obtained a settlement. The lawsuit did not seek recovery for medical bills or lost wages and the settlement did not allocate any funds for such expenses or losses. In fact, plaintiff was barred by statute from recovering an award from a public entity for medical bills or lost income that would be recoverable through worker's compensation. See N.J.S.A. 59:9-2(e); Travelers Ins. Co. v. Collella, 169 N.J. Super. 412, 416 (App. Div. 1979).
The City, seeking subrogation for the amounts it paid plaintiff, placed a lien on the settlement proceeds, pursuant to the Worker's Compensation Act (Act), N.J.S.A. 34:15-40(d). The Act provides that an employer or its compensation carrier may obtain reimbursement, out of an employee's settlement with a third party, for worker's compensation payments made to the employee. N.J.S.A. 34:15-40 (b), (c). The Act also permits the employer or its insurer to subrogate to the employee's cause of action and directly sue the third-party tortfeasor to recover the compensation payments. N.J.S.A. 34:15-40(f).
Relying on Travelers, supra, 169 N.J. Super. at 415, Judge Casale held that where, as here, a public entity is the third-party tortfeasor, the Tort Claims Act (TCA), N.J.S.A. 59:9-2(e), bars subrogation by the employer or its worker's compensation carrier. That section provides: "No insurer or other person shall be entitled to bring an action under a subrogation provision in an insurance contract against a public entity or public employee." Ibid.
We agree with Judge Casale that the TCA bars subrogation in this case. To his cogent opinion, we add only the following. It is clear that N.J.S.A. 34:15-40 not only permits subrogation recovery from the employee, but would allow a lawsuit directly against the third-party tortfeasor. N.J.S.A. 34:15-40(f). However, in enacting the TCA, N.J.S.A. 59:9-2(e), the Legislature intended that the cost of worker's compensation payments should not be shifted to a public entity that happened to be a third-party tortfeasor. Instead, those costs were to be absorbed by the worker's compensation insurer. Travelers, supra, 169 N.J. Super. at 415.
As a practical matter, if an injured plaintiff knows that any settlement of a negligence suit will be subject to a worker's compensation lien, the plaintiff will be likely to demand a larger settlement from the tortfeasor. See Kramer v. Sony Corp., 201 N.J. Super. 314, 316-17 (App. Div. 1985). Where the tortfeasor is a public entity, that scenario could result in a greater outlay from the public fisc, a result inconsistent with the purpose of the anti-subrogation section of the TCA. See Travelers, supra, 169 N.J. Super. at 416 ("subrogation --permitted under N.J.S.A. 34:15-40(f) -- is expressly prohibited by N.J.S.A. 59:9-2(e), in order to 'limit the exposure to liability of public entities.'"); Kramer, supra, 201 N.J. Super. at 319 (allowing worker's compensation subrogation against an insured public entity could drive up its insurance premiums, contrary to the intent of the TCA).
Further, allowing subrogation where the employer and the tortfeasor are both public entities would authorize one public entity to sue another, resulting in litigation costs to both, and, at best, an eventual shift of funds from one taxpayer-funded pocket to another. Again, that result would be counterproductive and inconsistent with the purpose of the TCA. Ibid.
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