Court Confirms Workers’ Compensation Carrier’s Priority Lien Against The Proceeds Of An Injured Worker’s Third Party Recovery

By Gary E. Adams

The Superior Court of New Jersey, Appellate Division, recently upheld a workers’ compensation judge’s decision holding that the workers’ compensation insurance carrier is entitled to receive most of an injured worker’s settlement proceeds from a civil lawsuit he had filed against the manufacturer of the machine that had caused his injury while at work.

New Jersey Workers’ Compensation Law provides that when an injured worker pursues a workers’ compensation claim for an injury at work, and also pursues a civil lawsuit against a third party (in this case, a machine manufacturer), the workers’ compensation carrier is entitled to receive reimbursement of two-thirds of any benefits it paid to the injured worker, less up to $750.00 in costs incurred by the attorney in pursuing the third party claim.

In this recent claim (Cabrera v. Cousins Supermarket), the attorney pursuing the claim against the machine manufacturer spent over $15,000.00 in costs to attempt to establish that the machine that caused Mr. Cabrera’s injury was defective. Unfortunately, the attorney was only able to recover $25,000.00 on Mr. Cabrera’s behalf. After reimbursing the attorney’s costs and paying the attorney’s fee, Mr. Cabrera received nothing. Nevertheless, the workers’ compensation carrier demanded repayment of the amounts it had paid on Mr. Cabrera’s behalf.

The Court ruled that even though Mr. Cabrera had received nothing from the third party recovery, the workers’ compensation carrier was entitled to the return of two-thirds of the amount of benefits it had paid out on Mr. Cabrera’s behalf. According to the Court’s ruling, the workers’ compensation carrier’s lien takes priority over the worker’s right to receive a third party recovery, as well as his attorney’s right to receive reimbursement of costs incurred in pursuing the third party claim.

The inequity in this outcome is obvious. The workers’ compensation carrier, which did nothing to pursue the manufacturer, gets paid before the injured worker and his workers’ compensation attorney. The end result – the worker ends up with nothing and the third party attorney eats his costs. This inequity, unfortunately, will be not cured until the New Jersey Workers’ Compensation Statute is amended to limit how much the carrier can take from a worker’s third party recovery. Until that happens, this decision will only discourage attorneys from pursuing third party claims, especially in cases that require the use of specialized experts, as was the case here.

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