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New Jersey Transit Corp. v. Sanchez

Superior Court of New Jersey, Appellate Division

December 4, 2018

NEW JERSEY TRANSIT CORPORATION, a/s/o DAVID MERCOGLIANO, Plaintiff-Appellant,
v.
SANDRA SANCHEZ and CHAD SMITH, Defendants-Respondents.

          Argued October 30, 2018

          On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8504-16.

          Shawn C. Huber argued the cause for appellant (Brown & Connery, LLP, attorneys; Shawn C. Huber, of counsel and on the briefs; Benjamin S. Teris, on the brief).

          John V. Mallon argued the cause for respondents (Chasan Lamparello Mallon & Cappuzzo, PC, attorneys; John V. Mallon, of counsel and on the brief; Ryan J. Gaffney, on the brief).

          Before Judges Hoffman, Geiger and Firko.

          OPINION

          GEIGER, J.A.D.

         In this appeal, we consider whether a workers' compensation carrier can obtain reimbursement of medical expenses and wage loss benefits it paid from tortfeasors who negligently caused injuries to an employee in a work-related motor vehicle accident, if the employee would be barred from recovering non-economic damages from the tortfeasors because he did not suffer a permanent injury. Because we hold the workers' compensation carrier can obtain reimbursement from the tortfeasors in this subrogation action, we reverse.

         Plaintiff New Jersey Transit Corporation (NJ Transit) appeals from the grant of summary judgment dismissing its subrogation action against defendants Sandra Sanchez and Chad Smith for reimbursement of the workers' compensation benefits paid to employee, David Mercogliano, for wage loss and medical expenses resulting from a work-related automobile accident. N.J. Transit alleges defendants negligently caused the accident and are thereby liable for reimbursement of the workers' compensation benefits pursuant to N.J.S.A. 34:15-40(f) (Section 40) of the Workers' Compensation Act (WCA), N.J.S.A. 34:15-1 to -146. Defendants claim N.J. Transit's claims are barred by the limitation on lawsuit option (the verbal threshold), N.J.S.A. 39:6A-8(a), of the Automobile Insurance Cost Reduction Act (AICRA), N.J.S.A. 39:6A-1 to -35.

         The motion judge, relying primarily on Continental Insurance Co. v. McClelland, 288 N.J.Super. 185 (App. Div. 1996), held the verbal threshold barred N.J. Transit's claims.[1] We hold that in subrogation actions against tortfeasors, the reimbursement rights of workers' compensation carriers are governed by the WCA, not AICRA. Therefore, the workers' compensation carrier is entitled to reimbursement from the negligent tortfeasors, even though the injured employee could not recover the medical expenses and wage loss from his own automobile insurer or noneconomic damages from the tortfeasors. Accordingly, we reverse and remand for entry of partial summary judgment in favor of N.J. Transit.

         I.

         The facts relating to the cross-motions are not in dispute. On December 2, 2014, Mercogliano was involved in a motor vehicle collision during the course of his employment. The vehicle driven by Mercogliano was owned by N.J. Transit. Sanchez was the driver and Smith was the owner of the other vehicle involved in the accident.

         At the time of the collision, Mercogliano, Sanchez, and Smith maintained personal automobile insurance policies compliant with AICRA. Mercogliano's policy provided $250, 000 in Personal Injury Protection (PIP) benefits and the verbal threshold applied. The parties stipulate Mercogliano's injuries do not vault the verbal threshold because he did not sustain a permanent injury as defined by N.J.S.A. 39:6A-8(a).[2]

         As a direct result of Mercogliano's injuries and lost wages, N.J. Transit's workers' compensation carrier paid him $33, 625.70 in workers' compensation benefits, comprised of $6694.04 in medical benefits, $3982.40 in temporary indemnity benefits, and $22, 949.26 in permanent indemnity benefits. Mercogliano did not sue defendants directly. Instead, N.J. Transit has initiated this subrogation action pursuant to Section 40, which gives workers' compensation carriers the right to institute proceedings against third-party tortfeasors for recovery of damages paid to injured employees.

         NJ Transit and defendants filed cross-motions for summary judgment on stipulated facts. The motion judge, relying primarily on Continental and language in Lefkin v. Venturini, 229 N.J.Super. 1 (App. Div. 1988), held AICRA trumped the WCA, ruling that N.J.S.A. 39:6A-8(a) barred N.J. Transit's claims because N.J. Transit, as subrogee, stands in the shoes of the injured employee, and has no rights superior to the injured employee under AICRA. Mercogliano was fully compensated by the workers' compensation carrier for his medical expenses and wage loss; he suffered no uncompensated economic loss. The motion judge held N.J. Transit's claim must be dismissed because AICRA bars claims for compensated economic damages. In reaching that conclusion, the judge quoted the following language from Lefkin:

N.J.S.A. 39:6A-6 places the primary obligation for the payment of benefits covered both by workers compensation and PIP on the employer rather than the PIP carrier. This policy decision may be presumed to have been based on the legislative perception that in terms of societal distribution of the burden of loss resulting from automobile-accident injury, the primary cost of work-related injuries should continue to be borne by the ultimate consumers of the goods and services in whose production they are incurred. Thus, the automobile-owning public, whose insurance rates are proportionally related to the PIP claims experience of the insurance industry, is relieved of that portion of the overall burden.

[229 N.J.Super. at 12.]

         The judge then noted "[d]efendant's liability is not affected by the fortuitous circumstance that plaintiff was entitled to workers' compensation benefits. The compensation carrier's rights rise no higher than the employee's rights to which it is subrogated." Continental, 288 N.J.Super. at 190.

         The judge also attempted to reconcile the holdings in Lambert v. Travelers Indemnity Co. of America, 447 N.J.Super. 61 (App. Div. 2016) and Continental. He distinguished Lambert, determining those plaintiffs were not subject to the verbal threshold or presumptively vaulted it; thus, "each of the three plaintiffs could prove a viable cause of action against the tortfeasor." Each of the three plaintiffs in Lambert reached settlements with the tortfeasors. Therefore, the judge deemed it "appropriate that the lien on economic damages paid by the workers' compensation carrier [was] satisfied" by the plaintiffs' respective recoveries.

         Finally, the judge concluded the workers' compensation carrier does not have an independent right to subrogate against a tortfeasor when the injured employee is unable to establish a cause of action against the tortfeasor. Regarding the interplay of the WCA and AICRA as to final responsibility for medical expenses ...


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