DEPARTMENT OF LABOR
DIVISION OF WORKERS' COMPENSATION
Docket No. 1996-14113, 1997-11721, 1997-28713

 LAURA JOHNSON, Petitioner,
v.
UNITED PARCEL SERVICE, Respondent

DECISION ON MOTION TO FIX
RESPONDENT'S LIEN PURSUANT TO N.J.S.A.34:15-40

Appearances:

Baer, Arbeiter, Ploshnick, Tanenbaum & Weiss, Esqs. by Leonard D. Weiss, Esq. for Petitioner;
Joan B. Sherman, Esq. by Thomas E. Miller, Esq. for respondent.

This is the court's decision fixing the amount of respondent's lien pursuant to N.J.S.A. 34:15-40 in the claims of Laura Johnson v. United Parcel Service, Claim Petitions 1996-14113, 1997-11721 and 1997-28713.

Laura Johnson filed three claim petitions against United Parcel Service. Claim Petition 1996-14113 involved a motor vehicle accident of August 31, 1995 with Vieva Banks-Halsey in which Ms. Johnson injured her left shoulder. Claim Petition 1997-11721 involved a slip and fall on ice at the residence of Jacqueline and Lee Fawcett on December 15, 1995 when Ms. Johnson aggravated the injury to her left arm. Claim Petition 1997-28713 was filed on or about February 5, 1997 when Ms. Johnson's complaints to the right shoulder became pronounced. Subsequently the two earlier claim petitions were amended to allege that petitioner's right shoulder problems were related to the accident of August 31, 1995. Petitioner underwent surgery to both shoulders.

On October 29, 1998 Laura Johnson and United Parcel Service entered into an agreement in her Workers' Compensation action. This agreement awarded her 37½% of permanent partial disability for the following claims: residuals of strains of the right and left shoulder; status post glenoid labrum tear of the left shoulder; status post arthroscopy and stabilization of the slap lesion left glenoid labrum; status post rotator cuff tear right shoulder; status post arthroscopy of right shoulder, subacromial decompression, right rotator cuff repair; residuals of strains to right and left shoulders; bilateral shoulder fibromyositis; post traumatic right and left shoulder internal derangement and post operative changes with cutaneous neuropathy; adjustment disorder with depressed mood. This settlement entitled Ms. Johnson to 225 weeks of benefits at $250.00 per week or $56,250.00. It was further agreed that this disability arose from the motor vehicle accident and the aggravation of the disability from that accident in the subsequent slip and fall on ice. Thus the disabilities from the right shoulder, the left shoulder and the adjustment disorder were "stacked" giving rise to a higher weekly rate than if these disabilities were allocated between the two accidents.

A Third Party Complaint was filed against Vieva Banks-Halsey (for the August 31, 1995 motor vehicle accident) and Jacqueline and Lee Fawcett (for the December 15, 1995 slip and fall accident). Laura Johnson settled her case against the Fawcetts on June 3, 1998 for $27,500.00. The remaining aspect of the third party claim was called in for trial before the Honorable Helen E. Hoens, J.S.C. in May 1999. At the commencement of that trial defense counsel raised an in limine Motion before Judge Hoens to bar the petitioner from recovering any monies against Vieva Banks-Halsey for injuries to the right shoulder. Judge Hoens granted the defense Motion. Following Judge Hoens' ruling the claim against Vieva Banks-Halsey settled for $55,000.00 bringing the total third party recovery to $82,500.00 exclusive of costs and counsel fees.

Petitioner contends that none of the $55,000.00 she recovered from Vieva Banks-Halsey should be used to satisfy the lien claim of respondent pertaining to the right shoulder injury and seeks to reopen the Workers' Compensation award to allocate that portion of partial permanent disability attributed to the right shoulder.

The Supreme Court, in two opinions decided on the same day in December 1995, considered the history and application of N.J.S.A. 34:15-40, Frazier v. New Jersey Manufactures Insurance Company, 142 N.J. 590, (1995) and Utica Mutual Insurance Company v. Maran & Maran, 142 N.J. 609, (1995). In Frazier, where the issue was whether, pursuant to N.J.S.A. 34:15-40, a workers' compensation lien attaches to the proceeds of a malpractice suit brought to recover damages from an attorney who failed to institute an action against the third-party tort-feasor responsible for the workers' injuries, the Court set out the history and legislative intent of Section 40.

When the Workers' Compensation Act was enacted in 1911 it did not provide for the employer's recovery from the third party alleged to be responsible for the injuries sustained. So an employee who recovered against a liable third party was entitled to keep 100% of the workers' compensation benefits as well as 100% of any third-party recovery, in some instances permitting a double recovery. To overcome this inequity the Legislature amended the Act in 1913 by adding N.J.S.A. 34:15-40. There were subsequent minor changes to that section. The Court set forth what it considered to be the relevant part of this section as follows:

Where a third person is liable to the employee ... for an injury ... 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 ..., nor be regarded as establishing a measure of damages therein. In the event that the employee ... 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 ... the liability of the employer under this statute thereupon shall be only as in hereinafter in this section provided.

* * * * * *

(b) 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 heretofore paid to the injured employee or his dependents less employee's expenses of suit and attorney's fee as hereinafter defined.

(c) If the sum recovered by the employee or his dependents as aforesaid is less than the liability of the employer or his insurance carrier under this statute, the employer or his insurance carrier shall be liable for the difference, plus the employee's expenses of suit and attorney's fee as hereinafter defined, and shall be entitled to be reimbursed, as hereinafter provided for so much of the medical expenses incurred and compensation payments theretofore paid to the injured employee or his dependents as exceeds the amount of such difference plus such employee's expenses of suit and attorney's fee.

(emphasis added by the Court).

The Court then went on to say,

"Thus, section 40 provides than an employee will be guaranteed recovery for his common-law damages against contributing third-party tortfeasors or for his (workers') compensation award, whichever is greater, but he may not duplicate these recoveries. Schweizer v. Elox Div. of Colt Indus. 70 N.J.280 (1976). Hence, for every dollar of the employee's recovery from the third party, the carrier's lien under section 40 (section 40 lien) entitles it to reimbursement of one dollar (less legal cost) of workers' compensation benefits. Otherwise, the tort recovery would be duplicating the workers' compensation benefits."

The Court then went on to impose the section 40 lien against a malpractice recovery finding that the malpractice recovery was the "functional equivalent of a recovery from the actual third-party tortfeasor" and not to impose the lien would be inconsistent with a "very strong determination that injured workers are not entitled to double recovery."

The petitioner in Frazier also argued to the Court that if section 40 attached a lien to the third-party recovery, then it should only attach if the worker is fully compensated for his injuries. The Court answered that there is no full compensation rule in the statute and pointed out that the section specifically provided for the situation where a recovery is less than the compensation liability finally holding,

"The Legislature did not intend for reimbursement to be in direct ratio to the amount of common-law damages recovered or collected from the third party tortfeasor or his or her carrier, the reimbursement lien attaches to that sum and the employer is to be reimbursed under N.J.S.A. 34:15-40(c) cases to the full extent of the payment less N.J.S.A. 34:15-40 (e) deductions of up to one third for attorney's fees and up to $200 in litigation expenses."

Therefore it is clear that the Court has told us that the entire third-party recovery is subject to section 40 lien amounts.

The petitioner cites Brum v. International Terminal Operating Co., Inc., 125 N.J. Super. 558, (App. Div. 1973) in support of her position. In that case the Appellate Division remanded to the Division of Workers' Compensation to determine what portion of an award of compensation was to compensate for disability due to an accident and what portion was attributable to subsequent medical malpractice before allowing section 40 credit against the medical malpractice recovery. In light of the Supreme Court opinions in Frazier and Utica Mutual, the Brum case is no longer persuasive authority.

Therefore I find that the entire recovery of Laura Johnson of $82,500.00 is subject to respondent's lien.

Respondent has provided medical treatment to Laura Johnson costing $26,512.36, temporary disability benefits of $27,455.10 and permanent partial disability benefits of $56,250.00, a total of $110,217.46. This is in excess of the third party recovery of $82,500.00. To calculate the reimbursement due to United Parcel Service I assume a counsel fee in the third party recovery of 33_% and costs in excess of $200.00 as well as the completion of payment of the award of permanent partial disability. The amount due to respondent is $54,800.00 (_ of $82,500.00 or $55,500.00 minus $200.00). Any future workers' compensation benefits to which the petitioner becomes entitled as the result of the accidents of August 31, 1995 and December 15, 1995 shall be paid at the full workers' compensation rate.

Stenographic Fee for the hearing of January 13, 2000, $75.00 to John F. Trainor, Inc. payable by the respondent.

August 31, 2000 __________________________________________________

Joan L. Mott,
Supervisory Administrative
Judge of Compensation