New Jersey Rules Per Quod Claims Are Not Lienable
In an important decision affecting the rights of employers in New Jersey, the Appellate Division ruled that a per quod claim is not lienable in Weir v. Market Transition Facility, 318 N.J.Super. 427 (App.Div. 1999). Before discussing the details of this case, it is important to understand the basic principles of liens and reimbursement rights in New Jersey. This state has a strong policy against double recoveries. Thus, if a worker has an accident which gives rise to a workers’ compensation award and a civil award, the employer or its carrier/third party administrator has a lien against the third party defendant and carrier and can often recover two thirds of what it has paid in workers’ compensation benefits where the third party award exceeds the amount of the workers’ compensation payments.
In the Weir case, Mr. Weir suffered a comminuted fracture in a car accident which arose out of work. He underwent surgery and then developed an infection which led to further surgeries. The workers’ compensation case was accepted and all benefits were paid. Mr. Weir brought a civil suit against the other driver who caused the car accident and his wife joined him in that suit. She sued for loss of the services of her husband. This is known as a per quod claim. The Weirs recovered $252,500 in the third party settlement. However, after paying his attorney and costs in the case, Mr. Weir realized that he would not have much money left when he reimbursed the workers’ compensation carrier, Liberty Mutual, for its workers’ compensation lien, which was substantial. Mr. Weir then sued his wife and Liberty Mutual asking the court to allocate the $252,500 settlement between him and his wife. Whatever amount was allocated to his wife for her claim for loss of services, he argued, should not be subject to the lien of Liberty Mutual.
The Appellate Division agreed with Mr. Weir and held that the employer’s lien does not attach to the amount of a per quod claim. The Appellate Division did criticize the method chosen by Mr. Weir to obtain this allocation, i.e. suing his wife. It pointed out that the lawyer who represented Mr. Weir in the civil suit against the other driver simply turned around and represented Mrs. Weir in the suit against her by Mr. Weir. In other words, the Appellate Division pointed out that Mr. and Mrs. Weir were not really adverse parties at all because they both wanted as much money as possible from the third party suit to be allocated to Mrs. Weir’s claim since none of that money would have to go back to Liberty Mutual.
This problem is going to vex employers, carriers, and third party administrators for a long time to come. Not having a lien on the per quod claim can mean the loss of a great deal of money to employers. For example, if the workers’ compensation benefits in a given case equal $100,000 and the third party settlement is $100,000, the employer would normally get back two thirds or $67,000 minus $200 in costs, but not if some of the $100,000 civil recovery is allocated to the spouse’s per quod claim. If the parties were to agree that the spouse’s claim was worth $40,000, then the workers’ compensation carrier would only have a lien on $60,000 ($100,000 civil recovery minus $40,000 payable to the spouse).
The Weir case does not spell out how employers are to work out this dilemma where a spouse’s claim is blended with the settlement funds which go to the worker in a civil case. How are employers, their carriers, and third party administrators to know how much of the third party settlement is to go to the spouse for a claim of loss of services? Certainly, employers cannot leave that to the plaintiff’s lawyer to decide. If that were the case, an inordinate percentage of the settlement will be allocated to the spouse’s claim simply to avoid paying back the lien. The Weir court does say the following: “We are confident that the vast majority of such matters will continue to be handled in the same manner as they are now -- by mutually agreeable resolution.” Id at 448. In other words, the Appellate Division is recommending that the parties work out a fair allocation to the spouse and the injured worker. The court went on to say that it would be a rare case which would require a civil judge to conduct a hearing on how much money should be allocated to the spouse.
Clients should follow these steps: obtain as much information as possible about the alleged per quod claim by way of discovery. The file of the attorney representing the spouse in the per quod claim needs to be subpoenaed to review the alleged damages. Of course, it is also necessary to obtain the medical records of the injured worker to see the extent of the injuries. Usually the carrier has this information as part of the workers’ compensation file. Clients should not simply defer to the plaintiff’s lawyer in his or her attempt to allocate the amount of the per quod claim. There should be an active negotiation to the end of establishing a fair value of the spouse’s claim for loss of services as against the worker’s claim for injuries. It should be obvious that the per quod claim should generally be worth only a fraction of the claim of the injured worker. If all else fails, a suit can be brought for declaratory judgment with the civil judge conducting a full hearing to establish the value of the per quod claim.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.