(NOTE: The status of this decision is Published.)
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
DOCKET NO. A-0761-17T3
NEW JERSEY TRANSIT
CORPORATION, a/s/o DAVID
MERCOGLIANO, APPROVED FOR PUBLICATION
December 4, 2018
SANDRA SANCHEZ and CHAD
Argued October 30, 2018 – Decided December 4, 2018
Before Judges Hoffman, Geiger and Firko.
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
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).
The opinion of the court was delivered by
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. NJ
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 NJ 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 -
The motion judge, relying primarily on Continental Insurance Co. v.
McClelland, 288 N.J. Super. 185 (App. Div. 1996), held the verbal threshold
barred NJ 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 NJ Transit.
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
NJ 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.
Continental was decided under the Automobile Reparation Reform Act (the
No Fault Act), the precursor to 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, NJ 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, NJ 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 NJ Transit's
claims because NJ Transit, as subrogee, stands in the shoes of the injured
"An injury shall be considered permanent when the body part or organ, or
both, has not healed to function normally and will not heal to function
normally with further medical treatment." N.J.S.A. 39:6A-8(a). Permanency
must be proven "within a reasonable degree of medical probability" by
"objective clinical evidence, which may include medical testing." Ibid.
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 NJ 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'
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 incurred by workers who are injured in work-related motor
vehicle accidents, the judge reasoned:
It is the public policy of the state to have injured
persons secure prompt medical attention with
assurances the bills will be paid if they are in the
course of their employment or if they are involved in
an automobile accident. If the injured person's no-
fault carrier pays PIP benefits, it can seek
reimbursement from the injured person's workers'
compensation carrier once it is established the injured
person was in the course of his or her employment
when the accident occurred. If plaintiff's view here
were accepted, the workers' compensation carrier
would pay the PIP carrier, and then seek
reimbursement from the tortfeasor who is insured
under an AICRA policy. The Legislature specifically
sought to eliminate the expensive and complicated
claims process by creating the "no-fault" automobile
insurance statute in the first place. Said public policy,
a significant underpinning to the automobile no-fault
scheme, would be thwarted if the automobile PIP
carriers secure reimbursement from the injured
person's workers' compensation carrier, and then that
workers' compensation carrier subrogates the
economic loss against a motor vehicle tortfeasor who
is part of the no-fault insurance system. Such a result
would be contrary to a goal of AICRA, i.e. to reduce
the cost of automobile insurance by reducing the
number of litigated claims.
The judge granted summary judgment to defendants and dismissed the
complaint with prejudice. This appeal followed.
NJ Transit argues its right for reimbursement of paid workers’
compensation benefits is governed by the WCA, not AICRA, and the verbal
threshold does not bar its claims for economic loss.
We review the grant or denial of a motion for summary judgment de
novo under the same standard as the trial court. Mem'l Props., LLC v. Zurich
Am. Ins. Co., 210 N.J. 512, 524 (2012). "Summary judgment must be granted
if 'the pleadings, depositions, answers to interrogatories and admissions on
file, together with the affidavits, if any, show that there is no genuine issue as
to any material fact challenged and that the moving party is entitled to a
judgment or order as a matter of law.'" Town of Kearny v. Brandt, 214 N.J.
76, 91 (2013) (quoting R. 4:46-2(c)). Here, no issue of material fact exists and
only a question of law remains. Therefore, we afford no special deference to
the legal determinations of the trial court, and review the trial court's legal
determinations de novo. Templo Fuente De Vida Corp. v. Nat'l Union Fire
Ins. Co., 224 N.J. 189, 199 (2016).
"Workers' compensation benefits must be paid for personal injuries
caused by an 'accident arising out of and in the course of employment.'" N.J.
Mfrs. Ins. Co. v. Pub. Serv. Elec. & Gas, 234 N.J. Super. 116, 118 (App. Div.
1989) (quoting N.J.S.A. 34:15-7). See also Univ. of Mass. Mem'l Med. Ctr.,
Inc. v. Christodoulou, 180 N.J. 334, 346 (2004) ("With certain limited
exceptions, the [WCA] is the exclusive remedy for an employee who suffers a
work-related injury."). As long as the employee's injuries were caused by a
third-party and not the employer, the WCA gives the workers' compensation
carrier an absolute right to seek reimbursement from the tortfeasor for the
benefits it has paid to the injured employee. Lambert, 447 N.J. Super. at 67.
Under Section 40, "the workers' compensation carrier is entitled to
reimbursement whether or not the employee is fully compensated." Utica Mut.
Ins. Co. v. Maran & Maran, 142 N.J. 609, 613 (1995).
AICRA's collateral source rule, N.J.S.A. 39:6A-6, "places the primary
obligation to pay benefits covered by both workers' compensation and PIP on
the employer rather than the PIP insurer." Portnoff v. N.J. Mfrs. Ins. Co., 392 N.J. Super. 377, 383 (App. Div. 2007) (citing Lefkin, 229 N.J. Super. at 12).
Therefore, "workers' compensation benefits are the primary source of recovery
for injuries suffered by employees in a work-related automobile accident, and
PIP insurers are relieved from the obligation to pay medical expenses under
N.J.S.A. 39:6A-6." Lambert, 447 N.J. Super. at 71.
This matter does not involve the respective responsibility of the workers'
compensation carrier and the injured employee's PIP insurer. Instead, the issue
is whether the workers' compensation carrier may obtain reimbursement from
the tortfeasor for the benefits paid to the injured employee for his economic
damages. If so, the tortfeasors' automobile liability coverage would indemnify
the tortfeasors, not their PIP coverage.
First, we discuss the case relied upon by the motion judge. In
Continental, the plaintiff workers' compensation carrier brought a subrogation
action against the defendant, Blanche McClelland, to recover workers'
compensation benefits it paid to injured employee Scott McLaughlin as a result
of injuries he sustained in a work-related automobile accident caused by the
defendant's negligence. 288 N.J. Super. at 187. The trial court held
McLaughlin's election of the verbal threshold in his own insurance policy did
not deprive the workers' compensation carrier of its right to recover the
amounts it had paid to him. The defendant appealed the partial summary
judgment ruling that struck her verbal threshold defenses.
On appeal, the workers' compensation carrier argued the trial court
properly found its right to reimbursement under Section 40 was unaffected by
the collateral source rule, N.J.S.A. 39:6A-6, the evidence bar of N.J.S.A.
39:6A-12, or the verbal threshold statute, N.J.S.A. 39:6A-8, when workers'
compensation payments are made as a result of an automobile accident. Id. at
188. The Continental court concluded the sole issue was whether
McLaughlin's election of the verbal threshold barred the employer's claim for
reimbursement pursuant to Section 40. Ibid.
The panel recognized Section 40 "reserves to the injured employee a
cause of action against the third party and creates a right of reimbursement in
the employer or its insurance carrier." Id. at 189 (citations omitted). Thus it is
"immaterial to an action against a defendant tortfeasor" whether an injured
employee who is subject to the verbal threshold by his own insurance policy is
able to recover workers' compensation benefits. Id. at 189-90. However, the
panel then reasoned:
Defendant'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. Plaintiff was clearly entitled to
receive PIP benefits for his economic loss. Whether
he received them is immaterial.
Although N.J.S.A. 34:15-40 authorizes an
employer to institute the action against the tortfeasor
if the injured person does not do so, the third party
shall be liable only to the same extent as he would
have been liable had the employee himself instituted
suit within a year of the accident. Thus, since
McLaughlin was subject to the verbal threshold, his
workers' compensation carrier is subject to that
defense in an action seeking recovery from defendant.
[Id. at 190 (citations omitted).]
The Continental panel relied on the fact the employee "could not have
recovered any medical payments from defendant" under the No Fault Act to
bar the workers' compensation carrier from recovering those monies from
defendant. Id. at 189-90. The panel further reasoned:
In the trial court, plaintiff argued that its loss
was entirely economic and therefore outside the scope
of N.J.S.A. 39:6A-8(a), which bars recovery for
noneconomic loss unless its criteria are met. There is
merit to plaintiff's claim because N.J.S.A. 39:6A-12
specifically states that the New Jersey Automobile
Reparation Reform Act, N.J.S.A. 39:6A-1 to -35, does
not limit "the right of recovery, against the tortfeasor,
of uncompensated economic loss sustained by the
injured party." Had McLaughlin not had a work-
related accident, he could have received medical
payments and income continuation benefits under his
automobile insurance policy. McLaughlin could not
have recovered any medical payments from defendant.
Furthermore, PIP benefits are paid by the injured
party's automobile insurance carrier (or workers'
compensation carrier as in this case), not by the
tortfeasor's insurance company.
[Id. at 190 (citations omitted).]
The panel remanded the case to the trial court to determine whether
McLaughlin actually suffered an uncompensated income loss. Id. at 191.
Subsequent published opinions have not adopted the reasoning of
Continental; they have followed the holding of Lefkin. See, e.g., Talmadge v.
Burn, 446 N.J. Super. 413 (App. Div. 2016). We recognize Lefkin was
decided before AICRA was enacted. However, "nothing in AICRA changed
the statutory provisions on which Lefkin relied. Importantly, both N.J.S.A.
39:6A-12 and N.J.S.A. 39:6A-6 predated AICRA and neither of those
provisions were substantively changed by AICRA so as to require a result
different from the conclusion reached in Lefkin." Lambert, 447 N.J. Super. at
In Lefkin, the plaintiff was injured in a work-related automobile
collision and all of his medical expenses were paid by his employer's workers'
compensation carrier who then asserted a Section 40 lien against the settlement
the plaintiff received from the tortfeasors. 229 N.J. Super at 5-7. The plaintiff
then sued his automobile insurer seeking to have it pay the portion of the
Section 40 lien related to his medical expenses since it had not paid any PIP
benefits. Id. at 7-9. The plaintiff argued his automobile insurer should be
liable for the portion of the Section 40 lien related to medical expenses
because such a recovery was barred by the No Fault Act. Id. at 6-7. Thus, the
plaintiff reasoned his settlement with the tortfeasors could not have included
remuneration for his medical expenses. Id. at 7-8. The trial court dismissed
plaintiff's claims against his PIP carrier.
On appeal, the Lefkin panel rejected the plaintiff's argument, holding:
there is no bar against recovery of the medical
expenses collected or collectible in workers'
compensation from the tortfeasor. This is so because
PIP benefits are not available to an insured if workers'
compensation benefits are also available to him.
Consequently, PIP benefits in that situation are neither
collectible nor paid. Hence, . . . there is no other
impediment to the plaintiff-insured-employee
recovering his medical expenses from the tortfeasor
even though that recovery will ultimately be subject to
the compensation lien.
[Id. at 9.]
There are three potential sources of reimbursement of medical expenses
and wage loss incurred by an employee injured in a work-related motor vehicle
accident: "workers' compensation benefits, PIP benefits, and recovery from the
tortfeasor." Id. at 8. Here, Mercogliano recovered those losses solely through
workers' compensation benefits. He did not seek or obtain recovery from his
PIP insurer or the tortfeasor.
"Where only workers' compensation benefits and PIP benefits are
available, the primary burden is placed on workers' compensation[,]" pursuant
to the collateral source rule of N.J.S.A. 39:6A-6. Id. at 9. "[W]hen only PIP
benefits and tortfeasor liability are involved, the primary burden is placed . . .
on the PIP carrier by N.J.S.A. 39:6A-12." Ibid. However, "where both
workers' compensation benefits and the proceeds of a tort action have been
recovered, the tort recovery is primary" pursuant to Section 40. Id. at 8-9. In
turn, we hold where workers' compensation benefits have been paid, but the
injured employee has not sought or obtained recovery from the tortfeasor, the
primary burden is placed on the tortfeasor.
This court reached a similar conclusion in Lambert, where we
considered three consolidated appeals, which all presented similar material
facts. Each plaintiff was injured in a work-related automobile accident.
Lambert, 447 N.J. Super. at 67. Each plaintiff's insurance policy provided PIP
coverage. Ibid. Each plaintiff received medical expense and indemnity
benefits from his or her employer's workers' compensation carrier. Ibid. Each
plaintiff settled their claims against the third-party tortfeasor in an amount that
exceeded the amount of benefits he or she had received from the workers'
compensation carrier. Id. at 67-68. The workers' compensation carriers then
asserted Section 40 liens against each of the plaintiff's third-party recoveries.
14 Id. at 68-70. Each plaintiff then moved to reduce the Section 40 liens to
exclude medical benefits, arguing reimbursement of the medical expenses was
precluded because PIP medical expense benefits would not have been
recoverable from the tortfeasors under AICRA. Id. at 67-70.
The motion judge ruled the workers' compensation carriers were not
entitled to recover the medical expenses because the injured workers were not
entitled to recover such expenses from the tortfeasors under N.J.S.A. 39:6A- -
12. Id. at 67. The judge reasoned that the injured workers were limited by the
no-fault system established by AICRA; the workers' compensation carrier
"effectively stepped into the shoes" of the automobile insurer, and "the normal
recovery provisions of the [WCA] did not apply." Id. at 67.
The Lambert panel rejected that interpretation of the interplay between
AICRA and the WCA, holding:
that when a worker is injured in the course of his or
her employment in a motor vehicle accident and
workers' compensation coverage is available, the right
of the injured worker to pursue claims against the
third-party tortfeasor and the right of the workers'
compensation insurer to be reimbursed are governed
by the WCA and not AICRA. Accordingly, the
injured worker may recover medical expenses from
the third-party tortfeasor and N.J.S.A. 39:6A-12 does
not apply. The workers' compensation insurer, in turn,
has a right to be reimbursed for the appropriate
portion of the medical expenses it has already paid
under N.J.S.A. 34:15-40 (Section 40).
The Lambert panel found it significant that nothing in AICRA's statutory
language or legislative history
suggests the Legislature meant to treat workers, who
are injured in a work-related automobile accident, as if
they were limited by AICRA's no-fault system. Nor is
there any suggestion that the Legislature intended to
treat workers' compensation insurers as if they were
PIP insurers. Indeed, there is simply no discussion of
such an incorporation. It is fair to assume that had the
Legislature intended to effectuate such a major
change, it would have used express language in the
statute and discussed that incorporation in AICRA's
[Id. at 75.]
We concur with this analysis. AICRA was enacted eighty-seven years
after the WCA. If the Legislature had intended to treat workers injured in
automobile accidents differently from workers injured in any other manner, it
would have unambiguously expressed such an intent. We find the same to be
true with respect to rights of workers' compensation carriers to seek recovery
pursuant to Section 40, which long pre-dated AICRA's enactment.
We also note NJ Transit seeks to recover benefits paid to Mercogliano
for economic loss comprised of medical expenses and wage loss, not
noneconomic loss. See N.J.S.A. 39:6A-2(k). The verbal threshold does not
apply to economic loss. Haywood v. Harris, 414 N.J. Super. 204, 211-12
(App. Div. 2010). An "injured worker may recover medical expenses from the
third-party tortfeasor and N.J.S.A. 39:6A-12 does not apply." Lambert, 447 N.J. Super. at 67. "The compensation lien attaches to all sources of third-party
recovery . . . ." Primus v. Alfred Sanzari Enters., 372 N.J. Super. 392, 401
(App. Div. 2004). A workers' compensation carrier has an independent right to
seek reimbursement from the tortfeasor pursuant to N.J.S.A. 34:15-40(f).
To be clear, Mercogliano's automotive insurer paid him no benefits and
incurred no costs, and the workers’ compensation carrier does not seek
reimbursement from Mercogliano's automotive insurer. On the contrary, NJ
Transit seeks reimbursement from the negligent third-party tortfeasors
pursuant to Section 40. If successful, NJ Transit's workers' compensation
carrier would be reimbursed by the tortfeasors, subject to their right to
indemnification from their own automotive insurers. Therefore, allowing NJ
Transit to pursue reimbursement does not conflict with AICRA's collateral
source rule, N.J.S.A. 39:6A-6.
For these reasons, we hold NJ Transit's workers’ compensation carrier is
permitted to pursue its claim for reimbursement of the worker's compensation
benefits paid to the injured employee against the third-party tortfeasors. We
reverse the summary judgment granted to defendants and remand this matter to
the trial court for entry of partial summary judgment in favor of NJ Transit.
Reversed and remanded. We do not retain jurisdiction.