BEFORE:

HONORABLE EMILLE R. COX
Supervising Judge of Compensation

APPEARANCES:

            STARK & STARK
By:       KEVIN M. BRADWAY, ESQ.
            For the Petitioner

            PAULA T. DOW
            ATTORNEY GENERAL OF NEW JERSEY
By:       STEPHANIE L. MEREDITH
            DEPUTY ATTORNEY GENERAL
            For the Respondent

The facts of this case have been previously outlined in an opinion of this Court dated November 25, 2008.  In that opinion I held that the Section 40 subrogation rights of Respondent State of the New Jersey does attach to the proceeds of Petitioner’s personal uninsured motorist coverage from a personal automobile policy issued in Pennsylvania.  Petitioner appealed.  The Appellate Division remanded the matter for this Court’s consideration of Petitioner’s conflict of laws assertion and, specifically, whether the proceeds received pursuant to Petitioner’s Pennsylvania personal automobile policy constitute a double recovery as contemplated by New Jersey Workers Compensation law.

The remand sets forth much of the required conflict of laws analysis in this case.  I need only to recap it briefly.  The first of the two pronged analysis requires consideration of whether there is an actual conflict between the laws of the respective states.  The opinion concedes that there is a clear conflict between the laws of New Jersey and Pennsylvania in this case since New Jersey recognizes that uninsured motorist proceeds constitute a third party recovery subject to Respondent’s rights to subrogation while Pennsylvania does not.  The second prong of the analysis requires the identification of the governmental policies behind each state’s interest.  As pointed out in the remand, and reiterated by Respondent’s counsel at oral argument before this Court, New Jersey has a significant interest in protecting the state’s compensation lien in this instance since Petitioner was employed in New Jersey, was injured here while driving a state-registered vehicle, and voluntarily availed himself of this state’s workers’ compensation scheme.

Also addressed in the remand, and emphasized by Petitioner’s counsel at oral argument, is the fact that Pennsylvania does have an interest in ensuring that its injured resident motorists reap the benefits of their insurance policies issued in accordance with Pennsylvania law.  As stated in the remand, the analysis requires application of the law of the state with the greatest interest in resolving the particular issue that is raised in the underlying litigation.  Gantes v. Kason Corp., 145 N.J. 478 (1996).

The sole issue remaining for this Court’s determination is whether, if New Jersey law is applied, Petitioner did in fact receive a double recovery.  Having heard and considered the  additional arguments of counsel, I find that Petitioner did indeed receive a double recovery and that Respondent can properly exercise its subrogation lien rights in accordance with N.J.S.A. 34:15-40 (Section 40 lien). 

As stated in my earlier opinion, Petitioner’s argument that Section 40 does not apply to his recovery from his personal insurance policy was specifically addressed and rejected in Midland v Colatrella, 102 N.J. 612 (1986).  Petitioner maintains, however, that it is the contract provisions within his personal automobile insurance policy that determines which state law applies.  Since the policy under which Petitioner recovered the uninsured benefits was issued in Pennsylvania, he argues, that state’s law controls.  Pennsylvania does not permit subrogation in such instances, he contends, therefore Respondent is precluded in this case from asserting any Section 40 lien rights in New Jersey.  Furthermore, Petitioner emphasizes, the proceeds from his uninsured motorist coverage represents payment in accordance with the contract provisions of Petitioner’s personal automobile policy and is not a tort recovery.  That contract was entered into in Pennsylvania.  The state of Pennsylvania has an interest in protecting the financial wellbeing of its residents in instances such as these by making these payments not subject to subrogation.  I disagree with that contention.

It is significant to note that Pennsylvania does not prohibit the application of another jurisdiction’s statutory provisions to events within that state.  In Davish v. Gidley, 417 Pa. Super.145, the Pennsylvania Appellate Court addressed this very issue.  In that case Petitioner, a Pennsylvania resident, was an employee of a New Jersey employer who conducted business in Pennsylvania.  While engaged in the course of his employment, Petitioner was involved in a motor vehicle accident in Pennsylvania.  Petitioner received workers' compensation benefits pursuant to the New Jersey Workers' Compensation Act.  He was awarded temporary and permanent disability benefits and had all medical expenses paid by his employer’s New Jersey carrier.  As noted by the Pennsylvania Appellate Court:

…… Significantly,(Petitioner) could have chosen to apply for workmen's compensation benefits pursuant to the Pennsylvania Workmen's Compensation Act, 77 Pa.S.A. § 1 et seq., but chose to pursue the greater recovery offered under the New Jersey Workers' Compensation Act …….

After recovering his New Jersey workers' compensation benefits, Petitioner filed suit in Pennsylvania against the tortfeasors involved in the motor vehicle accident.  The New Jersey carrier sought to intervene in the action in order to protect its Section 40 lien rights.  The trial court denied the petition on the basis that subrogation is not permitted under Pennsylvania law.  I quote from the Pennsylvania Appellate Court’s reversal:

Under Pennsylvania's choice-of-law standard, the jurisdiction having more interest in the problem and which is more intimately concerned with the outcome, is the forum whose law should apply……

…… (L)ooking at the interests and contacts of New Jersey, we find that New Jersey has a significant interest in payments under its Workers' Compensation Law and the subrogation by New Jersey employers to monies paid to its employees by third-party tortfeasors ……

…… We find that New Jersey is the state with the most significant interest in determining the right of a New Jersey employer to subrogate where it has made workers' compensation payments to a Pennsylvania employee pursuant to the New Jersey Workers' Compensation Law.

Similarly in Van Den Heuval v. Wallace, Appeal of Rockwood Insurance Company, 382 Pa. Super 242, the Superior Court of Pennsylvania addressed the issue of the right of a workmen's compensation insurance carrier, who paid benefits in accordance with the Workmen's Compensation Law of Delaware, to intervene in an employee's third party tort action in Pennsylvania. Appellant insurance company paid workman's compensation benefits to the employee pursuant to the Workmen's Compensation law of Delaware for traffic accident injuries that the employee received in the course and scope of his employment while he was in Pennsylvania.  The employee commenced a third party tort action against the negligent driver in Pennsylvania. Appellant petitioned to intervene, which the trial court denied. The trial court held that, pursuant to the Pennsylvania Motor Vehicle Financial Responsibility Law, there was no right of subrogation for workmen's compensation benefits paid as a result of injuries sustained in a vehicular accident.  The Pennsylvania appellate court reversed the denial and remanded the case to the trial court instructing it to allow the intervention.  It held that Delaware law was controlling in the Pennsylvania action because Delaware was the state that had the most significant contacts with the workman's compensation aspect of the case.  Like New Jersey, the Delaware statute mandated that any recovery received by the employee against the third party, after deducting the expenses of recovery, must first be used to reimburse the workmen's compensation carrier for amounts paid or payable under the Delaware Workmen's Compensation law.  The Court held that in such an instance the appellant had a clear subrogation right and concluded that appellant should be allowed to intervene in order to protect that important right.

It is clear to this Court that the State of New Jersey could have intervened in Petitioner’s Pennsylvania third party action in order to protect its Section 40 lien rights.  It would be illogical to deny Respondent the right to seek subrogation against proceeds available to it in this state based on the same accident because of a provision in an insurance contract, as Petitioner asserts, entered into in Pennsylvania, a state that permits intervention for that very purpose.

Finally, I find that there is a double recovery in this case.  At oral argument Petitioner’s counsel insisted that the $52,000.00 received by his client should not be considered a tort recovery but was instead an amount paid by State Farm pursuant to a contract and that contract was entered into in Pennsylvania.  I am unable to appreciate the logic of that argument.  At oral argument counsel admitted that Petitioner incurred no additional medical or property damage expenses in this case other than the amounts paid by the State of New Jersey.  I find it no mere coincidence that the correspondence between counsel and the adjuster in arriving at the $52,000.00 tender made reference to “WC payment of approximately $27,000 which has already been factored into my evaluation of the claim”.  I take judicial notice of the fact that Petitioner settled his workers’ compensation claim with another attorney of the same firm for a permanent partial disability 71/2 % of the lumbar spine, reflecting a relatively minor sprain and/or strain injury.  As noted earlier, there were no additional medical or other expenses.  Absent a provision in Petitioner’s automobile policy of insurance reflecting an obligation by State Farm to pay a minimum of $52,000.00 or some similar amount regardless of the severity of the accident, I can only conclude that the amount received by Petitioner from his insurance carrier was determined to a large degree by the workers’ compensation payments made by the State of New Jersey.  I note also that counsel at oral argument informed the Court that the question of additional recovery in Pennsylvania is still pending.  The $52,000.00 received to date represents a good faith offer of the minimum that Petitioner will recover.

Based on the New Jersey precedent cited in my earlier opinion, the Pennsylvania case law referred to above and my assessment of the insurance payments received by Petitioner in this case, I am constrained to conclude that that the State of New Jersey does retain its Section 40 subrogation rights against this Petitioner.  My previous opinion is undisturbed.

Honorable Emille R. Cox

Supervising Judge of Compensation

OCTOBER 18, 2010.