decoding section 40 liens: understanding the … · decoding section 40 liens: understanding the...

DECODING SECTION 40

LIENS: Understanding the

Reimbursement of Workers

Compensation Benefits

from the Proceeds of a

Third-Party Claim

Dennis Baptista, Esq. Ginarte, O’Dwyer, Gonzalez,Gallardo, Winogard,LLP (Newark, Clifton, Union City, Perth Amboy, Elizabeth NJ and Jackson Heights, NY)

WCP008116

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SECTION 40 LIENS DECODED: UNDERSTANDING THE REIMBURSEMENT OF WORKERS

COMPENSATION BENEFITS FROM THE PROCEEDS OF A THIRD PARTY CLAIM

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SECTION 40 LIENS DECODED 2016

DENNIS M. BAPTISTA, ESQ.Certified Workers’ Compensation Law Attorneywww.dennisbaptista.com

34:15-40Liability of a third party

Comp Lore vs. Comp Law

(C) 2016 Dennis M. Baptista, Esq.

34:15-40 Liability of third party

Where a third person is liable to the employee or his dependents for an

injury or death, the existence of a right of compensation from the

employer or insurance carrier under this statute shall not operate as a

bar to the action of the employee or his dependents, nor be regarded as

establishing a measure of damage therein. In the event that the

employee or his dependents shall recover and be paid from the said third

person or his insurance carrier, any sum in release or in judgment on

account of his or its liability to the injured employee or his

dependents, the liability of the employer under this statute thereupon

shall be only such as is hereinafter in this section provided.


34:15-40(a)Comp payments continue until 3rd party award is paid

(a) The obligation of the employer or his insurance carrier under this

statute to make compensation payments shall continue until the

payment, if any, by such third person or his insurance carrier is made.


34:15-40(b)Reimbursement when 3rd party award equals or exceeds Comp award

(b) If the sum recovered by the employee or his dependents from the

third person or his insurance carrier is equivalent to or greater than the

liability of the employer or his insurance carrier under this statute, the

employer or his insurance carrier shall be released from such liability

and shall be entitled to be reimbursed, as hereinafter provided, for the

medical expenses incurred and compensation payments theretofore

paid to the injured employee or his dependents less employee’s

expenses of suit and attorney’s fee as hereinafter defined.


34:15-40(c)Reimbursement when 3rd Party awardis less than the Comp award

(c) If the sum recovered by the employee or his dependents as aforesaid

is less than the liability of the employer or his insurance carrier under

this statute, the employer or his insurance carrier shall be liable for the

difference, plus the employee’s expenses of suit and attorney’s fee as

hereinafter defined, and shall be entitled to be reimbursed, as

hereinafter provided for so much of the medical expenses incurred and

compensation payments theretofore paid to the injured employee or

his dependents as exceeds the amount of such difference plus such

employee’s expenses of suit and attorney’s fee.


34:15-40(d) “Perfecting the lien”

(d) If at any time prior to the payment by the third person or his

insurance carrier to the injured employee or his dependents, the

employer or his insurance carrier shall serve notice, as hereinafter provided,

upon such third person or his insurance carrier that compensation has been

applied for by the injured employee or his dependents it shall thereupon

become the duty of such third person or his insurance carrier, before

making any payment to the injured employee or his dependents, to inquire

from such employer or his insurance carrier the amount of medical

expenses incurred and compensation theretofore paid to the injured

employee or to his dependents. Where such notice shall have been served,

it shall further become the duty of such third person or his insurance carrier,

before making any payment as aforesaid, to inquire from such injured

employee or his dependents the amount of the expenses of suit and attorney’s fee

or either of them in the action or settlement of the claim against such third person or

his insurance carrier.


Thereafter, out of that part of any amount about to be paid in

release or in judgment by such third person or his insurance carrier

on account of his or its liability to the injured employee or his dependents,

the employer or his insurance carrier shall be entitled to receive from such

third person or his insurance carrier so much thereof as may be due the

employer or insurance carrier pursuant to subparagraph (b) or (c) of this

section. Such sum shall be deducted by such third person or his insurance

carrier from the sum to be paid in release or in judgment to the injured

employee or his dependents and shall be paid by such third person or his

insurance carrier to the employer or his insurance carrier. Service of notice,

hereinbefore required to be made by the employer or his insurance carrier

upon such third person or his insurance carrier, shall be by registered mail,

return receipt and in cases other than an individual shall be mailed to the

registered office of such other third person or his insurance carrier.


34:15-40(d) “Perfecting the lien”

34:14-40(e)Expenses and attorney’s fees

(e) As used in this section, “expenses of suit” shall mean such expenses,

but not in excess of $750, and “attorney’s fee” shall mean such fee, but

not in excess of 33 1/3 % of that part of the sum paid in release or in

judgment to the injured employee or his dependents by such third

person or his insurance carrier to which the employer or his insurance

carrier shall be entitled in reimbursement under the provisions of this

section, but on all sums in excess thereof, this percentage shall not be

binding.


34:15-40(f)Subrogation

(f) When an injured employee or his dependents fail within one year of the accident to either effect a

settlement with the third person or his insurance carrier or institute proceedings for recovery of

Damages for his injuries and loss against the third person, the employer or his insurance carrier, 10

days after a written demand on the injured employee or his dependents, can either effect a settlement

with the third person or his insurance carrier or institute proceedings against the third person for the

recovery of damages for the injuries and loss sustained by such injured employee or his dependents

and any settlement made with the third person or his insurance carrier or proceedings had and taken

by such employer or his insurance carrier against such third person, and such right of action shall be

only for such right of action that the injured employee or his dependents would have had against the

third person, and shall constitute a bar to any further claim or action by the injured employee or his

dependents against the third person. If a settlement is effected between the employer or his insurance

carrier and the third person or his insurance carrier, or a judgment is recovered by the employer or his

insurance carrier against the third person for the injuries and loss sustained by the employee or his

dependents and if the amount secured or obtained by the employer or his insurance carrier is in excess

of the employer’s obligation to the employee or his


dependents and the expense of suit, such excess shall be paid to the

employee or his dependents. The legal action contemplated herein

above shall be a civil action at law in the name of the injured

employee or by the employer or insurance carrier in the name of the

employee to the use of the employer or insurance carrier, or by the

proper party for the benefit of the next of kin of the employee.

Where an injured employee or his dependents have instituted

proceedings for recovery of damages for his injuries and loss against

a third person and such proceedings are dismissed for lack of

prosecution, the employer or insurance carrier shall, upon

application made within 90 days thereafter, be entitled to have such

dismissal set aside, and to continue the prosecution of such proceedings in

the name of the injured employee or dependents in accordance with the

provisions of this section.


34:15-40(f)Subrogation

(g) If such employee or his dependents effect a settlement with the

third person or his insurance carrier or institute proceedings against the

third person prior to the service of notice upon the third person or his

insurance carrier of the compensation obligation of the employer or his

insurance carrier or prior to the institution of any proceedings against

the third person by the employer or his insurance carrier for the injuries

and loss sustained by such employee or his dependents, such employer

or his insurance carrier is barred from instituting any action or

proceedings against the third person for the injuries and loss sustained

by such employee or his dependents.


34:15-40(g)No Subrogation once employee pursues

34:15-40Definition of “third party”

The words “third person” as used in this section

include corporations, companies, associations,

societies, firms, partnerships and joint stock

companies as well as individuals.


THIRD PARTY CLAIMS2 Cases/1 Injury

Workers Compensation Claim- against the employer- the injury arose out of and in the course of employment- no fault basis

Law Suit for Tort- against a “third party”- someone not related to the petitioner by employment.- negligence, products liability, medical malpractice, etc…


2 CASES/1 InjuryNo Double Recovery

Workers Comp Case Medical Benefits

Temporary Disability Benefits

Permanent Disability Benefits

Law Suit Medical Bills

Lost Wages

Permanent Injury

Pain & Suffering

Consequential Damages

Per Quod


Double Recovery

COMP CASE

Med - $2,000

Temp - $2,000

Perm - $2,000

$6,000

LAW SUIT

Med - $2,000

Lost Wages - $3,500

Perm - $4,000

Pain/Suffer $4,000

Consequential $4,000

Per Quod $ 500

$18,000


Computing Lien PaybackComp Resolved Before 3rd Party

GROSS COMP $6,000 LAW SUIT $18,000

Costs ( 3,000)

100% of Comp $6,000 Net 15 ,000

Less 1/3 (2,000) 1/3 Fee ( 5,000)

Equals 2/3 4,000 Client 10,000

Less Cost ( 750) Lien ( 3,250)

Pay Sec 40 Lien $3,250 Client Net $6,750

Future Benefits:

Petitioner pays 2/3 of the next $12,000 in benefits = 8,000 (2/3 of $12K)

Respondent pays 1/3 of the next $12,000 in benefits = 4,000 (1/3 of $12K)


Computing LienWhich Case Settles First?

3rd Party Settles First 3rd Party Settles Second

Medical $2,000 Medical $2,000

Temporary $2,000 Temporary $2,000

Total Benefits$4,000 Permanent $2,000

Less 2/3+cost ( 1,916) Total $6,000

2,083 Less 2/3+cost ( 3,250)

Perm $2000

(Pay only 1/3) 667

Total $2,750 $2,750


OSCAR - Calcs Program – 2016

Office of Special Compensation Application Resource


http://lwd.dol.state.nj.us/labor/wc/legal/OSCAR.htm

l

OSCAR - Web Based http://courtsonline.dol.state.nj.us/OscarCalc/PartialTotal.html

http://lwd.dol.state.nj.us/labor/wc/legal/OSCAR.html


OSCAR - Screen ShotFront Page


OSCAR -Screen ShotSection 40 Lien Calculator

The Trouble with OSCAR:Computing Attorney’s Fees

STEP DOWN FEE OR THE AVERAGE FEE?

$1,000,000.00 settlement

1st $ 500,000.00 @ 33 1/3%

2nd $ 500,000.00 @ 30 %

Average overall fee: 31.66%

McMullen v. Maryland Casualty,127 N.J. Super. 239 (App. Div. 1974), aff’d 67 N.J. 416 (1975)


Audit the LienWhat is included for reimbursement?

Respondent entitled to be reimbursed for Medical Benefits

Temporary Disability Benefits

Permanent Disability Benefits

Less attorney’s fees and expenses.

Respondent is NOT entitled to be reimbursed for Section 20 Awards or administrative costs, IME’s, private investigators, etc.


MillisonClaimsDoes Section 40 apply?

Millison vs. E.I. du Pont de Nemours,

101 N.J. 161 (1985)

Calalpa vs. Dae Ryung, Inc.,

357 N.J. Super. 220 (App.Div.2003)


MCLE CODE

Please record this code for your MCLE forms:

injury161411

Title 59 ClaimsDoes Section 40 apply?

No Section 40 lien on 3rd Party recovery

obtained from a public entity.

N.J.S.A. 59:9-2(e)Travelers vs. Collella,

169 N.J. Super. 412 (App. Div. 1979)

Furey vs. County of Ocean,

273 N.J. Super. 300 (App.Div.)

cert denied 138 N.J. 272 (1994) Michael Desmond vs. JafferJee


Motor Vehicle ClaimsDoes Section 40 apply?

John K. Denver vs. New Jersey ManufactuersInsurance Company

Unpublished App Div – October 23, 2013

Lefkin vs. Venturini, 229 N.J. Super 1 (1988)

Talmadge vs. Burns Unpub. App.Div 6/22/16

Lambert vs. Travelers Unpub App Div 8/24/16



UIM ClaimsDoes Section 40 apply?

Utica Mutual Ins. Co. vs. Maran & Maran,

142 N.J. 609 (1995)

Frazier vs. New Jersey Mfrs. Ins. Co.,

142 N.J. 590 (1995)


Dependency ClaimsDoes Section 40 apply?

Roberts vs. All American Engineering,

99 N.J. Super. 291 (App. Div. 1979)

Cert denied 53 N.J. 351


Per Quod ClaimsDoes Section 40 apply?

Weir vs. Market Transition Facility, N.J. Super. 318 N.J. Super 436 (App. Div.)

Cert denied 160 N.J. 477 (1999)

“Accelerated” PaymentWhen 3rd Party Resolves, balance of Comp payable in a lump sum.

Owens v. C.R. Waste, 76 N.J. 584 (1978)

Does not address benefits past 45o weeks or other open ended benefits such as post 2007 Dependency Benefits.


34:15-40(g)Respondent’s Motion to Intervene

What about the statute?

Often filed - with or without Plaintiff’s consent or cooperation

Mixed bag for plaintiff’s attorney

Assist without appearance


34:15-40(d)Who’s responsible for paying the lien?

What about the statute?

Trump Taj Mahal Associates vs. Costruzioni…761 F. Supp 1143 (D.NJ 1991), aff’d. 958 F.2d 365 (3d

Cir. 1992) cert denied 113 S.Ct. 84 (1992)

Selective Insurance Co. v. Ronzo255 N.J. Super. 415 (App. Div. 1992)


Compromising the Lien

Negotiate before 3rd Party settlement, not after.

Argue case weaknesses, not strengths

Audit the lien

Step down v. Average attorney’s fee

Arrange accelerated payment of benefits

Address future benefits in writing –compromising or deferring payment?

Court Order from Comp Judge?

Sexton vs. Insulation Contractors



Section 40 Liens Decoded 2016

DENNIS M. BAPTISTA, ESQCertified Workers Compensation Attorney

For More Info Visitwww.dennis baptista.com

E-Mail: [email protected]: 973 -661-4545

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Dennis Baptista, Esq.

Court Admissions

New Jersey Supreme Court and all other Courts of the State of New Jersey United States District Court – District of New Jersey

Education

Rutgers University – Newark College of Arts & Sciences, B.A. Rutgers University – Newark Law School, J.D.

Professional Memberships

New Jersey Advisory Council on Safety and Health (NJCOSH)

Certifications

Certified by the Supreme Court of NJ as a Workers Compensation Law Attorney

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