June 02, 2005 - New Jersey Workers' Compensation Update - June 2005
The Appellate Division had a moderately busy year tendering decisions that may have a significant impact on future workers' compensation matters. These decisions will not only have an impact on issues concerning the course and scope of employment, but also on how contested medical bills should be addressed by the parties before the conclusion of a claim. This update on the law will summarize these cases and provide an overview of the impact of Medicare Liens in connection with settling New Jersey Workers' Compensation Claims.
I. COURSE & SCOPE OF EMPLOYMENT
We will first address course and scope of employment issues since they often have the most significant impact on the decisions made by all those involved in the Workers' Compensation system.
In Valdez v. Tri-State Furniture, 863 A.2d 1123 (App. Div. 2005), the Appellate Division was presented with the issue of whether injuries sustained by an employee performing activities outside the normal scope of his duties is compensable. Mr. Valdez was employed by the Tri-State primarily as a "wrapper." He was injured while operating a forklift on his own time in an area of the employer's premises in which he normally would not perform his duties and in a manner which arguably could be considered horseplay. While operating the forklift, the forklift tipped over and crushed petitioner's leg. Petitioner claimed he was attempting to learn how to drive the forklift in order to make himself more valuable to his employer. The employer argued that petitioner's activities were not in the scope of his normal duties.
After consideration of all the facts, the Judge of compensation dismissed the claim relying upon, among other things, petitioner's admission that he wanted to make himself more valuable. The Judge ruled that the petitioner had abandoned his job to satisfy his purely personal interests. It was determined that petitioner was engaging in activities completely unrelated to his job in an area away from the site of his employment using equipment that was neither owned, nor was in the control of his employer. Relying upon the decision in Jumpp v. The City of Ventnor, 828 A.2d 905 (N.J. 2003), the Judge ruled that the injuries were not the result of a minor deviation from job responsibilities, but rather an intentional and substantial abandonment of petitioner's job.
On appeal, the Appellate Division disagreed. In a foreboding comment in the beginning of its decision, the Court cited older case law holding that the courts usually take a "flexible" approach on questions involving course of employment issues. The Court noted that an employee need not be working in order to meet this test. It held that if an employee sustained an injury in an area controlled by the employer, the injury is deemed to occur within the course of employment. Accidents occurring outside the areas controlled by the employer are typically not compensable.
The Court employed the Positional-Risk Doctrine to determine if the injuries sustained were compensable. Risks that are directly associated with the employment and result in injuries are compensable. Neutral risks, such as being struck by lightning while on the job are also compensable. Risks that result from a purely personal activity or condition suffered while on the job are not compensable. Applying the risk analysis to the facts of this case, the Court felt that the petitioner's injuries were the direct result of the petitioner operating equipment that was used by his employer for business purposes. The Court was impressed by the fact that the petitioner was experimenting with the equipment in order to learn how to move sheetrock or supplies that may be necessary in completing a duty that he normally performed. The forklifts had been used by Tri-State employees and petitioner's supervisor acquiesced in petitioner's use of the forklift. The employer's witness agreed that the petitioner was permitted to operate the forklift and there was no written policy to the contrary.
Unlike other cases where the petitioner's injuries were sustained during a deviation of activities, such as arm wrestling or playing Russian Roulette, petitioner's curiosity in using the forklift was the direct result of his observation that the equipment was used in the course of the business. As a result, petitioner's injuries did not result from a purely social or recreational activity such as the activity in Jumpp when the petitioner left his automobile to retrieve his personal mail. The Court felt that petitioner's activities, even if a deviation from his normal employment, did not constitute a calculated, substantial departure from his responsibilities. Unfortunately, this language may have somewhat expanded the definition of course and scope of employment.
In a decision related to the September 11, 2001 tragedy, the Supreme Court of New Jersey reversed the Appellate Court and found injuries sustained by a worker who was stuck at his worksite because of the attack as compensable. Sager vs. O.A. Peterson Construction Co., 862 A.2d 1119 (N.J. 2004). When the terrorist attack occurred, there was an emergency closing of all bridges and tunnels between New York and New Jersey. Petitioner and several co-workers were unable to return to their New Jersey homes at the end of a scheduled work day. As a result, the petitioner and his co-workers left the construction site to have an early dinner. On their way back to the construction site, the van in which the petitioner was a passenger was involved in an automobile accident causing injuries to petitioner's leg.
The trial court held the accident compensable, however, the Appellate Division later dismissed the claim finding that the petitioner was neither required by his employer to be away from his place of employment nor was engaged in the direct performance of his job duties at the time of the accident. The Supreme Court, however, found that the employer directed or required the petitioner to undertake the activity and as a result, petitioner's injuries which may have been otherwise unrelated to work came within the course and scope of employment. The facts revealed that the petitioner's supervisor had told the workers to go out for an early dinner and return to the work site to continue working until the roadways were reopened.
The facts of this case seem far more consistent with compensability than the Valdez decision. In Sager, the petitioner was scheduled to work from 7:00 am to 3:30 p.m. Instead of being able to return home, however, Sager and his co-employees were unable to do so as the result of the bridge closings. Accordingly, the petitioner and fellow employees used a van owned and operated by one of the workers and drove to a local diner. September 11th was the only occasions when the petitioner had ever left a job site to obtain food at the end of a work day with the intention to return to work. The job supervisor confirmed this fact and testified that there was no alterative due to the emergent situation. The supervisor testified that neither the petitioner, nor any of the other co-workers objected to working the overtime and that the company would pay overtime at his direction.
II. PAYMENT OF CONTESTED MEDICAL BILLS
In University of Massachusetts Memorial Medical Center, Inc. v. Christodoulou, 851 A.2d 636 (N.J. 2004), the plaintiff, a hospital and medical group, filed a collection action in the Law Division seeking payment of medical bills against the defendant/employers in a workers' compensation matter involving the death of an employee. While the Law Division held that the medical providers were not bound by the settlement, the Appellate Division barred the action because the medical providers did not intervene timely in the compensation action. On appeal, the Supreme Court reversed the Appellate Division and held that those medical providers are not bound by a settlement of which they had no notice and to which they were not a party.
The facts revealed that the decedent's father filed a workers' compensation claim petition on behalf of his son who was killed during the course and scope of his employment. The plaintiff hospital was listed as a medical provider on the employee claim petition. The facts of the case reveal that the medical providers allegedly relied upon repeated representations of the parents' attorney that the bills for the medical services would be presented to the compensation court. The workers' compensation claim was eventually settled pursuant to N.J.S.A. 34:15-20 with a lump sum settlement that did not provide for payment of the medical bills. Rather, the workers' compensation carrier agreed to hold decedent's father harmless for the medical bills. It did not, however, agree to hold the decedent's estate harmless for these expenses. Subsequent to the approval of the settlement, the medical bills were presented to the workers' compensation insurance carrier for payment. The carrier refused to provide payment stating that they had only agreed to hold the father harmless and not the decedent's estate. Since the father was not responsible for payment of the bills of his son, the carrier declined to reimburse the medical providers.
The Court noted that there was nothing in the Workers' Compensation Act to suggest that a medical provider must file a Petition in the Division of Workers' Compensation, or intervene in a pending action, in order to preserve its right to a contractual remedy against a patient who received treatment from a work-related injury. If this were the case, every physician who rendered treatment would be required to pursue relief in the Division in every case resulting in excessive and needless litigation. The Court did not believe that the medical providers acted unreasonably by not filing an action of their own in light of the multiple representations by petitioner's counsel that the medical bills would be presented to the compensation court. At the time of the Section 20 settlement, there was no agreement by the parties that the medical providers' rights were extinguished. Rather, the employer agreed to hold the father of the deceased harmless for any medical bills or hospital bills arising out of the accident. In fact, petitioner's counsel wrote to the attorney on behalf of the hospital to advise that their rights had been preserved and that they could proceed to collect the outstanding medical bills from the workers' compensation carrier. Accordingly, the providers were not given an opportunity to appear in court since there was no notification that the medical bills would be rejected. Based upon the decision of the court, we advise that great care should be taken in addressing outstanding medical bill issues before the closure of a case.
III. VOLUNTARY TENDER OFFERS
In the case of Gorman v. Superior Court of New Jersey, 865 A.2d 735 (App. Div. 2005), the Court affirmed the 26-week rule contained in N.J.S.A. 34:15-16 regarding the voluntary payment of permanent disability benefits. The facts of the case made it clear that the voluntary payment by the employer's insurance carrier was untimely. The payment was made in the 27th week following the injured workers' discharge from medical care. The court stated that Section 16 clearly requires that the payment be made within 26 weeks of one of the statutorily enumerated events. That is, when petitioner has returned to work or when the petitioner has received his or her final active medical treatment. Since the employer did not make the voluntary tender offer within 26 weeks after the final active medical treatment, there would be no credit afforded to the respondent/carrier towards their share of petitioner's counsel's attorney's fees based upon the voluntary payment of permanent disability benefits.
IV. COMMUTATION OF AWARD
Frequently, insurance carriers and self-insured employers alike would prefer to make a lump sum payment of the award of permanent partial disability benefits made by the court. The decision in Harrison v. A&J Friedman Supply Co., 858 A.2d 567 (App. Div. 2004), makes it clear that such commutations can only be entered consistent with the terms of the Act.
A commutation of an award is permitted if it meets the criteria set forth in N.J.S.A. 34:15-25. That section states:
Compensation may be commuted by the Bureau at its present value, when discounted at five percentum (5%) simple interest, upon application of either party, with due notice to the other, if it appears that such commutation will be for the best interest of the employee or the dependents of the deceased employee, or that it will avoid undue expense or undue hardship to either party, or that the employer dependent has removed or is about to remove from the United States, or that the employer has sold or otherwise disposed of the greater part of his business or assets. Unless so approved, no compensation payments shall be commuted. In determining whether commutation will be to the best interest of the employee or the dependents of the deceased employee, or that it will avoid undue expense or undue hardship on either party, the Bureau and the Superior Court will regard the intention of this chapter that compensation payments are in lieu of wages, and are to be received by the injured employee or his dependents in the same manner in which wages are ordinarily paid. Commutation is to be allowed only when it clearly appears that an unusual circumstance warrants a departure from the normal manner of payment and not to enable the injured employee or dependents of the deceased employee to satisfy a debt, or to make payment to physicians, lawyers, or others.
In this case, the 73-year-old dependent wife of a deceased worker filed a Commutation Application. In the Application, the petitioner simply stated that the building in which she resides in the City of New York was in default to the City of New York thus permitting her to purchase her residence for the sum of $370,000. She claims she could obtain a mortgage for approximately half that amount and sought a commutation in order to raise the balance of the purchase price.
The compensation judge denied the Application without conducting a plenary hearing or even permitting oral argument. The Appellate Court had to rely on limited facts in the record. Relying upon the Act, the Court stated that a commutation of benefits can be permitted either to an injured worker or to a dependent receiving benefits so long as they meet the criteria of Section 25. The Court remanded the matter back to the workers' compensation judge for further proceedings. The court suggested that upon remand, the parties should be afforded an opportunity to present information regarding the appellant's financial status, her ability to maintain her lifestyle in the absence of weekly benefits, the value of the property appellant was desirous of purchasing, the availability of other funds other than the dependency benefits and the availability of other financing that might render commutation unnecessary.
As the reader can see, it is certainly possible to commute an award, however, since the criteria of Section 25 must be met, commutations are rarely requested. If both parties agree and the circumstances warrant a commutation, that would certainly be the most likely scenario where a judge would approve that practice. It is clear from the statute, that the payment of the award is akin to wage replacement benefits and should be paid in a similar manner, i.e., periodically.
V. OFFSET OF DISABILITY PENSION BENEFITS FOR A PUBLIC EMPLOYEE
While the facts of this case specifically involve an employee of the State of New Jersey, the possibility that the holding could be extended to other cases involving the receipt of disability pension benefits is certainly of great interest.
In Rosales v. State Department of Judiciary, 860 A.2d 929 (App. Div. 2004), the petitioner was a state employee. She was awarded total and permanent disability benefits. She also filed an application with her employer for ordinary disability pension benefits. She received those benefits as well as the award for total and permanent disability with a contribution from the Second Injury Fund as a result of the fact that her disability was due to a combination of pre-existing disability and her last exposure at work. It should be noted that petitioner contributed to a portion of her ordinary disability benefit plan which yielded a monthly annuity of $79.34. The public employee retirement system funded portion was $594.56 per month.
The State requested an offset of the workers' compensation benefits, however, this request was rejected by the trial judge. The judge concluded that it was the clear intent of the pension statute that an offset of workers' compensation benefits be for an accidental disability pension only.
The Appellate Court reversed the judge's decision. At the outset, they noted the longstanding public policy of N.J.S.A. 34:15-43 prohibiting the dual recovery of both pension benefits and workers' compensation benefits for the same disability. The court noted that one of the basic concepts of the workers' compensation systems barred double recoveries. Although there was a statutory argument to be made based upon amendments to the statute that the offset would only apply to an accidental pension as opposed to a disability pension, the court felt that this was a far too literal interpretation of the amendment and that it was counterproductive to the workers' compensation scheme preventing double recoveries. The court held that Section 43 of the Act prevented the receipt of both a workers' compensation award and an ordinary disability retirement based upon the same injury and resulting in disability.
The matter was remanded to the judge for appropriate calculations. In April 2005, an administrative law judge decision was rendered. The judge did conclude that the portion of the pension benefits funded by the employer were certainly not subject to the offset clearly applying the collateral source rule that the injured worker had provided those benefits for herself by paying the premiums.
Whether this decision can be applied to disability pension benefits received by injured workers other than State workers remains to be seen, but the argument certainly should be made.
VI. EMPLOYER IMMUNITY
Two recent decisions upheld the concept of employer immunity provided by N.J.S.A. 34:15-8. In Galvao vs. G.R. Robert Construction Co., 846 A.2d 1215 (N.J. 2004), the court was asked to determine whether a general employer may be held liable in a negligence action for injuries caused by the alleged negligence of a borrowed or special employee engaged in the business of a special employer. The Court went through the tests previously set forth in order to make the determination of whether a special employment relationship exists and use the facts of this case to make the application of those tests clear. The facts of the case revealed that the respondent employer controlled the direction and supervision of all workers at the job site. The subsidiary companies did not hire or appointment any of the supervisors although the supervisors were paid through subsidiary payroll accounts. The court concluded that if there was any control exercised by any subsidiary employer and, therefore, there could be no vicarious liability and, as a result, no third-party action.
In Gonzales v. Ideal Tile Importing Co. and Komatsu Forklift, 853 A.2d 298 (App. Div. 2004), the petitioner was injured when he was struck by a forklift that was being operated in reverse by a co-worker. The Appellate Division affirmed the trial court's grant of summary judgment. The court found that the employer was insulated from liability pursuant to Section 8 since it was undisputed that the parties involved in the accident were in an employee/employer relationship. Further, the forklift company was entitled to summary judgment as to the employee's tort products liability claim since it was pre-empted because the forklift, as an allegedly defective product, was manufactured in compliance with regulations under OSHA. The specific allegation by the employee of a warning device while the forklift was in reverse was in direct conflict with the standards under the OSHA Act, therefore, the complaint was dismissed.
VII. HORSERACING INDUSTRY EMPLOYEES
In Fitzgerald v. Tom Coddington Stables and The New Jersey Horseracing Insurance Compensation Board, 851 A.2d 778 (App. Div. 2004), the employee, who worked for a horse trainer, was injured when transporting a horse the trainer did not own when the horse bolted. The Appellate Court found compensability and assessed responsibility for providing benefits upon the Horseracing Compensation Board concluding that the definition of a horseracing industry employee did not only apply to the employees of an owner of a horse. Those employed by the horse's trainer were also covered by the Statute even if the trainer was not an employee of the horse's owner.
Clearly, the rules involving the racing commission provide broad compensation coverage. Although there was no question that the petitioner had been employed by the Coddington Stables for three months in the position of a second trainer and groomer, she was injured while in the process of returning two horses to the Coddington Stables although the Coddington Stables did not own either horse. It was clear that the petitioner was performing services for a trainer in the connection with the racing of a horse in New Jersey and, therefore, the Compensation Board was responsible for providing benefits.
UPDATE ON MEDICARE SECONDARY PAYER STATUTE ISSUES
As many readers are painfully aware, the Medicare Secondary Payer Statute (MSPS) has caused significant difficulty for the parties involved in workers' compensation matters throughout the country. New Jersey is certainly no exception. The following is a brief overview of the current status of the interplay between MSPS and the New Jersey Workers' Compensation System.
The first question that should be asked by the parties is whether Medicare needs to be considered at all with respect to the resolution of a New Jersey Workers' Compensation case. Medicare must be considered in the following circumstances:
- If the petitioner is 65 years of age or older (assuming sufficient work quarters);
- If the petitioner is on Social Security Disability (SSD) for 24 months or longer;
- If petitioner is suffering from end stage renal disease; or
- Petitioner has a reasonable expectation of becoming a Medicare beneficiary within 30 months of a settlement date and the settlement totals more than $250,000.
There are two separate issues that the parties must consider with respect to one of the above scenarios involving Medicare. The first consideration is whether Medicare has made any conditional payments on behalf of the injured worker. This inquiry applies to every settled workers' compensation matter whether or not the settlement involves an Order Approving Settlement (with future medical treatment rights being preserved) or a Section 20 settlement involving a settlement with prejudice (extinguishing the right to future medical treatment) so long as the petitioner is Medicare eligible.
For example, if a petitioner sustains a compensable injury to his shoulder and at the time of the injury the petitioner is over 65 years of age, a Medicare inquiry with respect to conditional payments must be made. This is so even if the claim was accepted as compensable and all appropriate temporary and medical benefits were provided. Medicare must be contacted to determine whether they have made any payments relative to the compensable date of injury - presumably due to some type of inadvertence or oversight. If so, those payments should be reimbursed.
The second inquiry that must be made in cases that fall under the MSPS guidelines are those cases involving a settlement with a waiver of future entitlement to medical treatment. In New Jersey, these cases are those settled pursuant to N.J.S.A. 34:15-20; a settlement with prejudice closing out all future rights. In a Section 20 settlement, if the injured worker is 65 years or older; on Social Security Disability for 24 months or longer; suffering from end stage renal disease; or is obtaining a settlement of greater than $250,000 and has a reasonable expectation of becoming a Medicare beneficiary within 30 months, a Medicare wavier or set aside must be obtained. This requires that the parties contact Medicare in order to obtain a Workers' Compensation Medicare Set-Aside Arrangement (WCMSA). The parties can request a complete waiver of any set-aside amount if the facts and circumstance of the case justify same or, alternatively, offer a set-aside amount if they believe that is necessary for Medicare approval.
Where a judge issues a Decision on the merits of the claim as supported by the record, Medicare has advised that they will accept the judge's findings and conclusions and no set-aside allocation review is required addressing future treatment. Similarly, no Medicare set-aside allocation review is necessary where all of the injuries or disabilities alleged in the claim petition are covered by the settlement.
If a claim petition is amended to dismiss one or more injuries or disabilities where the remainder of the claim is settled by an Order Approving Settlement, a set-aside allocation review is not required so long as the judge has conferenced the case and found good cause on the record to amend the claim petition and dismiss those areas of injury or disability.
It is important to remember that in every case involving Section 20 settlement and a petitioner who is Medicare entitled, regardless of the settlement amount, the WCMSA must be reviewed and approved by Medicare.
We hope this discussion provides the reader with some insight as to the complications regarding this constantly changing issue and interplay between the Federal Statute and our State Workers' Compensation Regulations. Obviously, the request for information regarding conditional payments and future set-asides has caused a significant delay in resolving many cases including those involving minimal Section 20 settlements. The parties are becoming more adept at handling these issues and, as a result, some of these files are slowly starting to move towards closure.
- Jeffrey D. Newby