New Jersey Case: Lepera V. Chagnon


Trenton, NJ (CompNewsNetwork) - Albert L. Lepera (Lepera) appeals from an order entered by the trial court on January 5, 2009, which required that he pay Bergen Risk Managers (Bergen Risk) $58,718.91 to satisfy a workers' compensation lien on the proceeds of his personal injury action against Kirk H. Chagnon (Chagnon) and Hackensack University Medical Center (HUMC). Lepera argues that the court did not have jurisdiction to enter the order and, if it did, erred by ordering him to pay more than $41,134.20. Bergen Risk cross-appeals from the order and argues that the court erred by reducing the amount of its claim. For the reasons that follow, the Superior Court of New Jersey reject these contentions and affirm.

The facts are relatively straightforward. Lepera was a employed by the Borough of Paramus (Borough) as a police officer. On August 29, 2004, Lepera was riding a police motorcycle and escorting other motorcycles in a charity fundraising event sponsored by HUMC. Lepera's motorcycle collided with a motorcycle being driven by Chagnon on the Palisades Interstate Parkway in Alpine, New Jersey. Lepera sustained serious injuries in the accident and filed a claim with the Borough seeking workers' compensation benefits. The Borough is self insured and Bergen Risk administers the Borough's compensation claims.

On August 14, 2006, Lepera filed a civil action against Chagnon and HUMC seeking damages for the personal injuries he sustained in the accident. On August 24, 2006, Bergen Risk filed an action against Chagnon seeking damages on Lepera's behalf, as subrogee, for the purpose of obtaining reimbursement of the workers' compensation benefits that the Borough paid to Lepera. In addition, on August 28, 2006, Chagnon filed an action against Lepera, the Borough and Childrens' Hospital of HUMC seeking damages for the injuries he sustained in the accident. Thereafter, the trial court consolidated the three cases.

By letter dated January 17, 2008, Bergen Risk's attorney, John L. Schettino (Schettino) informed Lepera's attorney that Lepera had been paid $62,665.30 in medical benefits and $33,892.93 in temporary disability payments from August 9, 2004 through August 29, 2005, for a total of $96,558.23. In the letter, Schettino advised Lepera's attorney that Bergen Risk was seeking full payment of its lien "through any settlement of this matter."

The three cases were submitted to arbitration, which took place on May 8, 2008. The arbitrators filed a report, in which they found the following percentages of responsibility for the accident: Chagnon, 30%; HUMC, 40%; and Lepera, 30%. The arbitrators awarded Lepera gross damages of $455,000, less lost wages totalling $255,961 and $41,134.20 to satisfy the workers' compensation lien. Schettino signed the report, as counsel for Bergen Risk. On May 8, 2008, Lepera and Chagnon rejected the award and filed a demand for a trial de novo, pursuant to Rule 4:21A-6(c).

The trial court conducted a settlement conference on July 16, 2008. Schettino asserts that, at the conference, he informed the court that Bergen Risk would not compromise its lien. Lepera, Chagnon and HUMC agreed to settle the cases. It was agreed that Lepera would receive a gross amount of $382,500, with $41,134.20 to be set aside for payment of the workers' compensation lien. However, the terms of the settlement were not placed on the record, nor were they reduced to writing.

On September 5, 2008, Lepera's attorney contacted Schettino to confirm the amount of the workers' compensation lien. By letter dated September 11, 2008, Schettino informed Lepera's attorney that the amount of the lien was $63,729.40. Schettino said that this amount represented two thirds of the total medical bills and the temporary disability payments, minus $750 for third-party litigation expenses.

On September 24, 2008, a stipulation was filed with the court, dismissing Lepera's action with prejudice and without costs. The stipulation was signed by the attorneys for Lepera, Chagnon and HUMC. The settlement monies were released and Chagnon's attorney held $41,134.20 in escrow to pay Lepera's workers' compensation lien.

By letter of October 13, 2008, Schettino again informed Lepera's attorney that the lien totaled $63,729.40 and said that Bergen Risk would not compromise the lien. When Lepera refused to pay more than $43,134.20, Bergen Risk filed a motion in the trial court to compel Lepera to pay the full amount of its lien.

The trial court considered the motion on December 5, 2008, and requested the submission of additional information regarding Lepera's medical expenses. On January 5, 2009, the court filed a written opinion in which it concluded that Bergen Risk improperly filed its lawsuit against Chagnon, as subrogee for Lepera.

The court nevertheless found that Lepera was obligated to reimburse Bergen Risk for the workers' compensation lien. The court reduced Bergen Risk's claim by $5,010.49, for lack of substantiation. The court entered an order requiring the release to Bergen Risk of the $41,134.20 being held in escrow, and payment by Lepera of an additional $17,584.71. These appeals followed.

Lepera first argues that Bergen Risk's motion to enforce the lien was not properly before the trial court. According to Lepera, Bergen Risk was not statutorily authorized to bring its lawsuit and it should not have been permitted to seek enforcement of its lien by way of motion.

The Workers' Compensation Act (the Act) provides that when a third person is liable to an employee for a work-related injury, and the injured employee recovers more than the liability of the employer and its insurer under the Act, the employer and its insurer are entitled to reimbursement for the medical expenses and compensation payments made to the injured employee, less the employee's expenses of suit and attorney's fee. N.J.S.A. 34:15-40(b). The Act additionally provides that that the "expenses of suit" means the expenses incurred, "but not in excess of $750[,]" and the attorney's fee is the fee, "not in excess of" one-third of "the sum paid in release or in judgment to the injured employee[.]" N.J.S.A. 34:15-40(e).

The Act also states that when an injured employee fails:

within [one] year of the accident to either effect a settlement with the third person or his insurance carrier or institute proceedings for recovery of damages for his injuries and loss against the third person, the employer or his insurance carrier, [ten] days after a written demand on the injured employee . . ., can either effect a settlement with the third person or his insurance carrier or institute proceedings against the third person for the recovery of damages . . .

    [N.J.S.A. 34:15-40(f).]

In addition, the Act states that, when the injured employee effects a settlement or commences a lawsuit against the third person or that person's insurer prior to the service of the notice prescribed by N.J.S.A. 34:15-40(f), the employer or its insurer "is barred from instituting any action or proceedings against the third person for the injuries and loss sustained by such employee or his dependents." N.J.S.A. 34:15-40(g).

The Superior Court of New Jersey agree with Lepera that N.J.S.A. 34:15-40(g) barred the Borough and Bergen Risk from filing a lawsuit against Chagnon as Lepera's subrogee. Bergen Risk never served the notice required by N.J.S.A. 34:15-40(f). Moreover, when Bergen Risk commenced its action against Chagnon, Lepera's lawsuit against Chagnon and HUMC was already pending. Thus, the trial court correctly determined that Bergen Risk did not have statutory authority to commence its lawsuit on Lepera's behalf.

The trial court also correctly determined that the improper filing of the lawsuit did not preclude Bergen Risk from seeking reimbursement from Lepera for the medical payments and temporary disability payments that it made on behalf of the Borough. In this regard, the Superior Court of New Jersey note that before these cases were settled, Lepera never sought the dismissal of Bergen Risk's complaint on the ground that it was barred by N.J.S.A. 34:15-40(g).

Moreover, Bergen Risk was entitled under N.J.S.A. 34:15-40(b) to reimbursement of its workers' compensation benefits paid to Lepera from the proceeds Lepera received in his action against Chagnon and HUMC. Furthermore, the record makes clear that Lepera, Chagnon and HUMC reached the settlement with the understanding that the compensation lien would be paid from the settlement proceeds. The Court is satisfied that under the circumstances, Bergen Risk was not precluded from seeking to enforce the terms of the settlement.

Lepera argues, however, that the trial court erred by allowing Bergen Risk to modify the terms of the settlement reached by the parties. Lepera insists that he settled his claims with the understanding that the amount of the compensation lien was $41,134.20. Lepera asserts that Bergen Risk should have been estopped from seeking more than $41,134.20 to satisfy the compensation lien because Schettino signed the arbitrator's report which stated that the lien was in that amount.

The Court disagree. Although Schettino signed the arbitrator's report, the report was not binding upon Bergen Risk because Lepera and Chagnon had filed a demand for a trial de novo pursuant to Rule 4:21A-6(c). Moreover, there is nothing in the record indicating that Schettino ever agreed to accept $41,134.20 as full payment for Bergen Risk's lien. Indeed, in his letter of January 17, 2008, Schettino informed Lepera's attorney that Lepera had been paid a total of $96,558.23 and Bergen Risk would not compromise the lien.

Furthermore, as the Court pointed our previously, the terms of the settlement were not placed on the record and there was no written agreement memorializing the terms. Indeed, Schettino says that he left the settlement conference before Lepera, Chagnon and HUMC reached their agreement to settle the lawsuits. The Court therefore conclude that Bergen Risk was not barred from seeking more than $41,134.20 to satisfy the compensation lien.

Lepera additionally argues the trial court erred by ordering him to pay the additional $17,584.71. Lepera contends that the order is inconsistent with the Borough's collective bargaining agreement (CBA), which states in pertinent part:

    If an injury is suffered by an Employee which is determined to be compensable under the Workmen's Compensation Laws of the State of New Jersey, the Borough shall continue such Employee's full pay as the Employee continues to receive temporary disability benefits for a period not exceeding one (1) year. Payment made to any Employee of Workmen's Compensation as temporary disability benefits shall be deducted from any salary payments made by the Employe[r] under the provisions of this Section, or, if the Borough has made such full salary payments prior to receipt of the temporary disability payments by the Employee, the Employee shall assign or pay said benefits to the Borough when they are received. It is understood that the intent of the paragraph is that no Employee shall receive less than full pay while suffering from a compensable temporary disability, but that no such Employee shall receive more than full pay for such a period of time lost excluding the Employee's personal insurance programs.

Lepera contends that the temporary disability payments of $33,392.92 represent the payment of his salary as required by the CBA. He contends that the CBA precludes the Borough from seeking reimbursement of those payments. Again, The Court disagree.

In Gorski v. Town of Kearny, 236 N.J. Super. 213 (App. Div. 1989), the petitioner was a police officer who was injured in an auto accident during the course of his employment. Id. at 214. The employer paid the petitioner his full salary during the nine and one-half weeks that he was on leave due to his injuries. Ibid. During that time, the petitioner also received temporary disability benefits payable under the Act. Ibid. Petitioner brought an action against a third party and recovered damages. Ibid.

The employer sought reimbursement from the third-party recovery for the portion of the petitioner's salary "equivalent to the temporary disability benefits[.]" Ibid. The employee argued that reimbursement was not permitted because the collective bargaining agreement stated that he would receive full salary when out of work for a work-related injury. Id. at 214-215. The Court rejected this argument and stated that:

    [a]lthough [the employer] was obligated under its collective bargaining agreement with petitioner's representative to pay full salary to an employee injured in a work related accident, respondent was also statutorily obligated, regardless of the terms of the collective bargaining agreement, to pay temporary disability benefits to an employee injured in the course of employment. Consequently, the only benefit petitioner received from the collective bargaining agreement was the portion of his salary which exceeded the temporary disability payments to which he was statutorily entitled.

    [Id. at 215.] The Court held that "the employer was entitled to reimbursement from the proceeds of the third-party suit for the portion of the salary paid to petitioner equivalent to the temporary disability" payments. Id. at 215-16. The same conclusion applies in this case.

The Court turn to Bergen Risk's cross-appeal. Bergen Risk argues that the trial court erred by reducing the amount of its claim from $22,595.20 to $17,584.71. However, the court found that Bergen Risk had not substantiated $5,010.49 of its claim. Bergen Risk has not established that court's finding was in any way erroneous.

Affirmed on the appeal and the cross-appeal.

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