The New Jersey Superior Court, Appellate Division, ruled that a third-party lien can remain unresolved until the workers’ compensation claim is adjudicated.

Background

On October 23, 2019, the defendant, Darshelle Joseph, was injured during the course of his employment with the plaintiff, New Jersey Transit Corp. (NJ Transit).

Joseph filed a workers’ compensation action against NJ Transit and a third-party action against the tortfeasor involved in the accident (the “underlying action”).

NJ Transit’s workers’ compensation insurance carrier notified Joseph of its legal right to recover all money paid on his workers’ compensation claim from the third-party potentially liable for his injuries.

Issue

The employer (NJ Transit) challenged a trial court order that denied its application for satisfaction of its worker’s compensation lien upon settlement of Joseph’s action against the third-party tortfeasor. N.J.S.A. 34:15-40.

The central question was whether NJ Transit’s application was premature.

Court’s Decision

The Appellate Division vacated and remanded the order.

The court held that NJ Transit’s application for satisfaction of its worker’s compensation lien was premature.

“There is no requirement the employer's lien must be paid following recovery from a third-party tortfeasor. Indeed, it cannot be fully satisfied until any associated worker's compensation action is finalized and the employer's liability under the Act is determined. Thus, an employer's unperfected statutory lien is not required to be satisfied immediately upon the injured employee's recovery from a third-party tortfeasor.”

“…The matter is remanded to the trial court to ensure the worker's compensation lien is protected until the worker's compensation action is resolved. As long as the funds to pay the lien are protected—either deposited into court or deposited in an attorney trust account—there is no prejudice to NJ Transit.”

Amount in Controversy

NJ Transit had paid Joseph a total of $7,112.90 in workers’ compensation benefits, including wage loss payments and medical expenses.

Joseph settled with his uninsured motorist (UM) insurance carrier for $14,000 in the underlying action.

Conclusion

The case highlights the complexity of coordinating worker’s compensation claims with third-party actions.

Employers and injured employees need to navigate these situations carefully to ensure fair resolution.