JOSE MOREIRA and ROSA GOMES v. CARLOS PEIXOTO

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

JOSE MOREIRA and ROSA GOMES,

Plaintiffs,

v.

CARLOS PEIXOTO, CHRISTINE PEIXOTO,

BARRY TERACH, PENDERGAST & TERACH, P.C.,

ALEXANDER HEATING & COOLING, INC.,

ACE ELECTRIC SERVICES, INC., JERSEY

MECHANICAL CONTRACTORS INC., and MACEDOS

CONSTRUCTION COMPANY, INC.

OF NEW JERSEY,

Defendants,

and

CARLOS PEIXOTO and CHRISTINE PEIXOTO,

MACEDOS CONSTRUCTION COMPANY, INC. OF

NEW JERSEY,

Third-Party Plaintiffs,

v.

VIRGINIA SURETY COMPANY, CAMBRIDGE

INTEGRATED SERVICES, and CLARK &

MORRISON INSURANCE AGENCY, INC.,

Third-Party Defendants,

and

VIRGINIA SURETY COMPANY,

Fourth-Party Plaintiff-Respondent,

v.

JOSE MOREIRA,

Fourth-Party Defendant-Appellant,

and

JACK MACEDO, SANDRA MACEDO-BILYNSKY,

and C.C.S. SERVICES OF EAST HANOVER,

INC.,

Fourth-Party Defendants.

________________________________________

September 10, 2015

Argued February 23, 2015 Decided

Before Judges Simonelli, Guadagno and Leone.

On appeal from the Superior Court of New Jersey, Law Division, Hunterdon County, Docket No. L-0464-07.

Thomas E. Hastings argued the cause for appellant (Smith, Stratton, Wise, Heher and Brennan, L.L.P., attorneys; Mr. Hastings and Patrick J. Dwyer, on the briefs).

Richard S. Mills argued the cause for respondent (McElroy, Deutsch, Mulvaney and Carpenter, L.L.P., attorneys; Mr. Mills, of counsel and on the brief; Jonathan D. Martin, on the brief).

PER CURIAM

This appeal involves the enforcement of a workers' compensation lien pursuant to N.J.S.A. 34:15-40 against settlement proceeds obtained by plaintiff/fourth-party defendant Jose Moreira. For the reasons that follow, we affirm in part and remand in part.

I.

We derive the following facts from the record. Moreira was injured while working privately on a house owned by a manager of Macedos Construction Company, Inc. of New Jersey (Macedos). Macedos falsely reported to its workers' compensation insurance carrier, respondent Virginia Surety Company (VSC), that Moreira was its full-time employee. Moreira, in turn, signed and submitted a written statement to VSC's adjuster stating he was a full-time employee of Macedos who had been hired and injured on October 1, 2005. Moreira also signed and submitted to the Division of Workers' Compensation a notarized "Employee's Claim Petition" for workers' compensation benefits, naming Macedos as his employer, and stating he "sustained an injury by an accident arising out of and in the course of [his] employment with [Macedos]." VSC paid a total of $260,864.96 in workers' compensation benefits to, or for the benefit of, Moreira.

Moreira filed a complaint against Macedos and others, alleging he was a "business invitee" of Macedos on the day of the accident and seeking damages for his injuries. VSC, who was later joined as a third-party defendant in that action, asserted a counterclaim against Macedos and its principals for insurance fraud under the Insurance Fraud Prevention Act (IFPA), N.J.S.A. 17:33A-1 to -30, and the Workers' Compensation Fraud Act (WCFA), N.J.S.A. 34:15-57.4. VSC later filed a fourth-party complaint against Moreira and others, alleging fraud under the IFPA and WCFA. VSC sought damages in the amount of the workers' compensation benefits it paid to, or for the benefit of, Moreira.

Moreira settled his personal injury action against Macedos for $3.7 million. The trial judge severed the workers' compensation issue for his review. The remaining fraud claims were tried to a jury. The jury was asked, in part, to determine whether Moreira, Macedos, and/or other parties violated the IFPA and/or the WCFA and, if so, what damages to award for those violations. The jury found that Macedos and other parties, but not Moreira, violated the IFPA and WCFA; however, the jury awarded VSC no damages for those violations. The judge subsequently awarded VSC the sum of $1,031,330.89 for counsel fees and investigative expenses pursuant to N.J.S.A. 17:33A-7(a).1 In accordance with N.J.S.A. 17:33A-7(b),2 the judge trebled the amount and entered judgment against Macedos and other parties in the amount of $3,093,992.67.

Upon discovering that Moreira had settled, VSC asserted a workers' compensation lien against Moreira's settlement pursuant to N.J.S.A. 34:15-40(b), which provides as follows in pertinent part

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.

. . . .

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.

Moreira filed a motion to discharge the lien, arguing, in part, that the statute did not apply because he was not an employee of Macedos. The judge denied the motion, concluding the statute applied because Moreira received workers' compensation benefits based on the claim that he was an employee of Macedos.

VSC filed a motion to enforce the lien and submitted evidence supporting the lien amount. Moreira filed a cross-motion for an order dismissing the lien. He also challenged the lien amount and requested a plenary hearing. He argued that: a portion of VSC's claimed lien costs did not qualify as necessary for the cure and relief of his injuries pursuant to N.J.S.A. 34:15-15; VSC did not establish that it actually paid each medically-related payment for which it sought reimbursement; and VSC presented no one who possessed personal knowledge necessary to meet its evidentiary burden.

Without holding a plenary hearing, the judge granted VSC's motion and denied Moreira's cross-motion. In a written opinion, the judge found that because Moreira was believed to be an employee of Macedos and actually received the workers' compensation benefits, the lien was valid even though Moreira was not an employee. The judge determined that under those circumstances, N.J.S.A. 34:15-40(b) applied when Moreira entered into the settlement agreement. The judge emphasized that his decision adhered to the strong public policy against allowing a claimant to collect a double recovery under the Workers' Compensation Act (WCA), N.J.S.A. 34:15-1 to -142.

The judge also rejected Moreira's argument that VSC had not proven the precise amount of its lien, finding there was no question that VSC paid workers' compensation benefits to, of for the benefit of, Moreira. The judge accepted at face value most of the evidence VSC submitted showing the payments, except for $14,257.25 in legal expenses. Reducing the lien by that amount, the judge concluded that VSC had an enforceable lien in the amount of $172,877.95.

II.

On appeal, Moreira reiterates that VSC cannot assert a lien against his settlement proceeds pursuant to N.J.S.A. 34:15-40(b) because he was not an employee of Macedos. He also argues that the jury's verdict awarding no damages to VSC collaterally estopped VSC from pursuing a lien claim. We disagree with these contentions.

N.J.S.A. 34:15-40(b) "imposes a lien in favor of the workers' compensation carrier against the proceeds of a third-party recovery obtained by an injured worker." Raso v. Ross Steel Erectors, Inc., 319 N.J. Super. 373, 381 (App. Div.), certif. denied, 161 N.J. 148 (1999). The carrier is entitled to repayment of "medical expenses incurred and compensation payments theretofore paid to the injured employee . . . less [the] employee's expenses of suit and attorney's fees[.]" N.J.S.A. 34:15-40(b).

"The underlying purpose of N.J.S.A. 34:15-40 is to prevent double recovery." Primus v. Alfred Sanzari Enters., 372 N.J. Super. 392, 401 (App. Div. 2004), certif. denied, 182 N.J. 430 (2005); see also Schweizer v. Elox Div. of Colt Indus., 70 N.J. 280, 287 (1976). The clear intent of the policy against double recovery set out in N.J.S.A. 34:15-40(b) is "to prevent an injured employee from recovering and retaining workers' compensation payments, while at the same time recovering and retaining full damages resulting from a third-party tort suit." Greene v. AIG Cas. Co., 433 N.J. Super. 59, 64 (App. Div. 2013).

Our courts have routinely upheld the policy of precluding impermissible double recoveries for the same injuries. See, e.g., Pool v. Morristown Mem. Hosp., 400 N.J. Super. 572, 576 (App. Div. 2008) (holding that "[t]he policy of avoiding double recovery is a strong one[.]"); Rosales v. State Dept. of Judiciary, 373 N.J. Super. 29, 38 (App. Div. 2004) (holding that New Jersey adheres to a "longstanding public policy" under the WCA precluding double recovery for the same injury), certif. denied, 182 N.J. 630 (2005); Calalpa v. Dae Ryung Co., Inc., 357 N.J. Super. 220, 228 (App. Div.) (holding that the prohibited "double recovery . . . within the context of an injured employee's receipt of both worker's compensation benefits and civil damages for the same injuries focuses upon the notion that an employee cannot have both"), certif. denied, 176 N.J. 278 (2003).

Importantly, our Supreme Court has held that "[o]ur courts have not hesitated in the past to construe the [WCA] so as to comport with its . . . remedial objectives . . . rather than be bound by its coldly literal import." Paul v. Baltimore Upholstering Co., 66 N.J. 111, 136 (1974). We have held that "[t]he policy of avoiding double recovery is a strong one, and has on occasion been invoked to override a result that might be thought required by a literal or technical interpretation of statutes." Pool, supra, 400 N.J. Super. at 576. We have also held that a claimant "cannot pick and choose which provisions of [the WCA] appl[y]." Greene, supra, 433 N.J. at 62.

Here, Moreira held himself out as an employee of Macedos when he submitted the written statement to VSC's adjuster and applied for workers' compensation benefits. Although the jury found he did not act fraudulently, he still received workers compensation benefits based on his representations. Thus, permitting Moreira to retain the workers' compensation benefits paid by VSC would allow him to obtain a double recovery to which he had no more right than if he was a legitimate employee of Macedos. Accordingly, we conclude that VSC has a valid lien on the settlement proceeds.

This result is not inconsistent with the jury's verdict awarding no damages to VSC. The jury was only asked to consider whether there was a violation of the IFPA and/or the WCFA, not whether VSC was entitled to a lien. The jury did not find any violation by Moreira, which left him in the same position as a real employee receiving workers' compensations benefits. The jury did not award damages against Macedos, but the company did not receive the workers' compensation benefits. Because the judge severed the workers' compensation issues for his own review, the jury was not asked to decide whether a person who non-fraudulently received workers' compensation benefits should reimburse the insurer using his recovery against others, as required by N.J.S.A. 34:15-40(b). Because the jury was not asked to resolve that issue, collateral estoppel does not apply. VSC is entitled to reimbursement of the workers' compensation benefits paid to, or on behalf of, Moreira from Moreira's settlement proceeds.

III.

Moriera contends VSC did not prove that the workers' compensation benefits it paid were reasonable and necessary to cure and relieve his injury. Moreira also contends that in calculating the amount of the lien, the judge improperly included non-reimbursable payments made to VSC's claims administrator and a medical case management company in calculating the lien amount.

N.J.S.A. 34:15-40 imposes a lien on the proceeds the injured worker recovered from a third-party. "The lien secures reimbursement of 'the medical expenses incurred and compensation payments theretofore paid to the employee,' less the lienor's share of attorneys' fees not in excess of 33 1/3%, plus 'expenses of suit' not in excess of $200." Raso, supra, 319 N.J. Super. at 381. As we stated in Raso

The statute does not define the term medical expenses. [N.J.S.A. 34:15-15] however, provides some guidance in determining what constitutes reimbursable medical expenses. It defines the type of treatment an employer, or its insurance carrier, must provide to an injured worker. Under [N.J.S.A. 34:15-15], carriers are required to provide medical, surgical and other treatment . . . as shall be necessary to cure and relieve the worker of the effects of the injury.

[Ibid. (quoting N.J.S.A. 34:15-15) (internal quotation marks omitted).]

Moreira cannot argue that the workers' compensation payments VSC made directly to him or to health care providers he selected were not reasonable and necessary to cure or relieve his injuries. However, payments to health care providers selected by VSC may be treated differently under Raso. There, the insurer assigned the plaintiff a rehabilitative nurse with the plaintiff's attorney's consent, and then sought lien reimbursement for the nurse payments, which the plaintiff contested. Id. at 376-77, 384. We concluded that these expenses were recoverable "if the carrier demonstrates that such expenses are necessary to provide "medical, surgical and other treatment . . . as shall be necessary to cure and relieve the worker of the effects of the injury" under N.J.S.A. 34:15-15. Id. at 375. Because N.J.S.A. 34:15-15 addresses the different issue of what an insurer can be forced to pay, and because an employee should not be able to select treatment providers and accept treatment and then claim it was unnecessary, we decline to extend Raso beyond insurer-selected medical providers. Moreover, we do not require the insurer to carry its burden regarding insurer-selected providers until the plaintiff provides some evidence, such as a medical report or medical witness as in Raso, that treatment was unnecessary, which Moreira did not do here.

However, we remand based on Moreira's argument that the judge improperly included non-reimbursable payments made to VSC's claims administrator and a medical case management company in calculating the lien amount. Just as "medical expenses" under N.J.S.A. 34:15-40(b) should not include the salaries an insurer pays its employees for administrative work, it also should not include the fees the insurer pays an outside entity to do outsourced administrative work. If a hearing is necessary to resolve this issue, the court must rely on competent evidence.

Affirmed in part, and remanded in part for further proceedings consistent with this opinion. We do not retain jurisdiction.

1 N.J.S.A. 17:33A-1(a) provides that "[a]ny insurance company damaged as the result of a violation of any provision of this act may sue therefor in any court of competent jurisdiction to recover compensatory damages, which shall include reasonable investigation expenses, costs of suit and attorneys fees."

2 N.J.S.A. 17:33A-1(b) provides that "[a] successful claimant under [N.J.S.A. 17:33A-1(a)] shall recover treble damages if the court determines that the defendant has engaged in a pattern of violating this act."