DECODING SECTION 40
LIENS: Understanding the
Reimbursement of Workers
Compensation Benefits
from the Proceeds of a
Third-Party Claim
Dennis Baptista, Esq. Ginarte, O’Dwyer, Gonzalez,Gallardo, Winogard,LLP (Newark, Clifton, Union City, Perth Amboy, Elizabeth NJ and Jackson Heights, NY)
WCP008116
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SECTION 40 LIENS DECODED: UNDERSTANDING THE REIMBURSEMENT OF WORKERS
COMPENSATION BENEFITS FROM THE PROCEEDS OF A THIRD PARTY CLAIM
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SECTION 40 LIENS DECODED 2016
DENNIS M. BAPTISTA, ESQ.Certified Workers’ Compensation Law Attorneywww.dennisbaptista.com
34:15-40Liability of a third party
Comp Lore vs. Comp Law
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34:15-40 Liability of third party
Where a third person is liable to the employee or his dependents for an
injury or death, 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 or his dependents, nor be regarded as
establishing a measure of damage therein. In the event that the
employee or his dependents 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 or his
dependents, the liability of the employer under this statute thereupon
shall be only such as is hereinafter in this section provided.
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34:15-40(a)Comp payments continue until 3rd party award is paid
(a) The obligation of the employer or his insurance carrier under this
statute to make compensation payments shall continue until the
payment, if any, by such third person or his insurance carrier is made.
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34:15-40(b)Reimbursement when 3rd party award equals or exceeds Comp award
(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 theretofore
paid to the injured employee or his dependents less employee’s
expenses of suit and attorney’s fee as hereinafter defined.
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34:15-40(c)Reimbursement when 3rd Party awardis less than the Comp award
(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.
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34:15-40(d) “Perfecting the lien”
(d) If at any time prior to the payment by the third person or his
insurance carrier to the injured employee or his dependents, the
employer or his insurance carrier shall serve notice, as hereinafter provided,
upon such third person or his insurance carrier that compensation has been
applied for by the injured employee or his dependents it shall thereupon
become the duty of such third person or his insurance carrier, before
making any payment to the injured employee or his dependents, to inquire
from such employer or his insurance carrier the amount of medical
expenses incurred and compensation theretofore paid to the injured
employee or to his dependents. Where such notice shall have been served,
it shall further become the duty of such third person or his insurance carrier,
before making any payment as aforesaid, to inquire from such injured
employee or his dependents the amount of the expenses of suit and attorney’s fee
or either of them in the action or settlement of the claim against such third person or
his insurance carrier.
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Thereafter, out of that part of any amount about to be paid in
release or in judgment by such third person or his insurance carrier
on account of his or its liability to the injured employee or his dependents,
the employer or his insurance carrier shall be entitled to receive from such
third person or his insurance carrier so much thereof as may be due the
employer or insurance carrier pursuant to subparagraph (b) or (c) of this
section. Such sum shall be deducted by such third person or his insurance
carrier from the sum to be paid in release or in judgment to the injured
employee or his dependents and shall be paid by such third person or his
insurance carrier to the employer or his insurance carrier. Service of notice,
hereinbefore required to be made by the employer or his insurance carrier
upon such third person or his insurance carrier, shall be by registered mail,
return receipt and in cases other than an individual shall be mailed to the
registered office of such other third person or his insurance carrier.
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34:15-40(d) “Perfecting the lien”
34:14-40(e)Expenses and attorney’s fees
(e) As used in this section, “expenses of suit” shall mean such expenses,
but not in excess of $750, and “attorney’s fee” shall mean such fee, but
not in excess of 33 1/3 % of that part of the sum paid in release or in
judgment to the injured employee or his dependents by such third
person or his insurance carrier to which the employer or his insurance
carrier shall be entitled in reimbursement under the provisions of this
section, but on all sums in excess thereof, this percentage shall not be
binding.
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34:15-40(f)Subrogation
(f) When an injured employee or his dependents fail 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, 10
days after a written demand on the injured employee or his dependents, 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 for the injuries and loss sustained by such injured employee or his dependents
and any settlement made with the third person or his insurance carrier or proceedings had and taken
by such employer or his insurance carrier against such third person, and such right of action shall be
only for such right of action that the injured employee or his dependents would have had against the
third person, and shall constitute a bar to any further claim or action by the injured employee or his
dependents against the third person. If a settlement is effected between the employer or his insurance
carrier and the third person or his insurance carrier, or a judgment is recovered by the employer or his
insurance carrier against the third person for the injuries and loss sustained by the employee or his
dependents and if the amount secured or obtained by the employer or his insurance carrier is in excess
of the employer’s obligation to the employee or his
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dependents and the expense of suit, such excess shall be paid to the
employee or his dependents. The legal action contemplated herein
above shall be a civil action at law in the name of the injured
employee or by the employer or insurance carrier in the name of the
employee to the use of the employer or insurance carrier, or by the
proper party for the benefit of the next of kin of the employee.
Where an injured employee or his dependents have instituted
proceedings for recovery of damages for his injuries and loss against
a third person and such proceedings are dismissed for lack of
prosecution, the employer or insurance carrier shall, upon
application made within 90 days thereafter, be entitled to have such
dismissal set aside, and to continue the prosecution of such proceedings in
the name of the injured employee or dependents in accordance with the
provisions of this section.
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34:15-40(f)Subrogation
(g) If such employee or his dependents effect a settlement with the
third person or his insurance carrier or institute proceedings against the
third person prior to the service of notice upon the third person or his
insurance carrier of the compensation obligation of the employer or his
insurance carrier or prior to the institution of any proceedings against
the third person by the employer or his insurance carrier for the injuries
and loss sustained by such employee or his dependents, such employer
or his insurance carrier is barred from instituting any action or
proceedings against the third person for the injuries and loss sustained
by such employee or his dependents.
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34:15-40(g)No Subrogation once employee pursues
34:15-40Definition of “third party”
The words “third person” as used in this section
include corporations, companies, associations,
societies, firms, partnerships and joint stock
companies as well as individuals.
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THIRD PARTY CLAIMS2 Cases/1 Injury
Workers Compensation Claim- against the employer- the injury arose out of and in the course of employment- no fault basis
Law Suit for Tort- against a “third party”- someone not related to the petitioner by employment.- negligence, products liability, medical malpractice, etc…
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2 CASES/1 InjuryNo Double Recovery
Workers Comp Case Medical Benefits
Temporary Disability Benefits
Permanent Disability Benefits
Law Suit Medical Bills
Lost Wages
Permanent Injury
Pain & Suffering
Consequential Damages
Per Quod
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Double Recovery
COMP CASE
Med - $2,000
Temp - $2,000
Perm - $2,000
$6,000
LAW SUIT
Med - $2,000
Lost Wages - $3,500
Perm - $4,000
Pain/Suffer $4,000
Consequential $4,000
Per Quod $ 500
$18,000
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Computing Lien PaybackComp Resolved Before 3rd Party
GROSS COMP $6,000 LAW SUIT $18,000
Costs ( 3,000)
100% of Comp $6,000 Net 15 ,000
Less 1/3 (2,000) 1/3 Fee ( 5,000)
Equals 2/3 4,000 Client 10,000
Less Cost ( 750) Lien ( 3,250)
Pay Sec 40 Lien $3,250 Client Net $6,750
Future Benefits:
Petitioner pays 2/3 of the next $12,000 in benefits = 8,000 (2/3 of $12K)
Respondent pays 1/3 of the next $12,000 in benefits = 4,000 (1/3 of $12K)
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Computing LienWhich Case Settles First?
3rd Party Settles First 3rd Party Settles Second
Medical $2,000 Medical $2,000
Temporary $2,000 Temporary $2,000
Total Benefits$4,000 Permanent $2,000
Less 2/3+cost ( 1,916) Total $6,000
2,083 Less 2/3+cost ( 3,250)
Perm $2000
(Pay only 1/3) 667
Total $2,750 $2,750
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OSCAR - Calcs Program – 2016
Office of Special Compensation Application Resource
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http://lwd.dol.state.nj.us/labor/wc/legal/OSCAR.htm
l
OSCAR - Web Based http://courtsonline.dol.state.nj.us/OscarCalc/PartialTotal.html
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OSCAR - Screen ShotFront Page
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OSCAR -Screen ShotSection 40 Lien Calculator
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OSCAR -Screen ShotSection 40 Lien Calculator
The Trouble with OSCAR:Computing Attorney’s Fees
STEP DOWN FEE OR THE AVERAGE FEE?
$1,000,000.00 settlement
1st $ 500,000.00 @ 33 1/3%
2nd $ 500,000.00 @ 30 %
Average overall fee: 31.66%
McMullen v. Maryland Casualty,127 N.J. Super. 239 (App. Div. 1974), aff’d 67 N.J. 416 (1975)
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Audit the LienWhat is included for reimbursement?
Respondent entitled to be reimbursed for Medical Benefits
Temporary Disability Benefits
Permanent Disability Benefits
Less attorney’s fees and expenses.
Respondent is NOT entitled to be reimbursed for Section 20 Awards or administrative costs, IME’s, private investigators, etc.
(C) 2016 Dennis M. Baptista, Esq.
MillisonClaimsDoes Section 40 apply?
Millison vs. E.I. du Pont de Nemours,
101 N.J. 161 (1985)
Calalpa vs. Dae Ryung, Inc.,
357 N.J. Super. 220 (App.Div.2003)
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MCLE CODE
Please record this code for your MCLE forms:
injury161411
Title 59 ClaimsDoes Section 40 apply?
No Section 40 lien on 3rd Party recovery
obtained from a public entity.
N.J.S.A. 59:9-2(e)Travelers vs. Collella,
169 N.J. Super. 412 (App. Div. 1979)
Furey vs. County of Ocean,
273 N.J. Super. 300 (App.Div.)
cert denied 138 N.J. 272 (1994) Michael Desmond vs. JafferJee
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Motor Vehicle ClaimsDoes Section 40 apply?
John K. Denver vs. New Jersey ManufactuersInsurance Company
Unpublished App Div – October 23, 2013
Lefkin vs. Venturini, 229 N.J. Super 1 (1988)
Talmadge vs. Burns Unpub. App.Div 6/22/16
Lambert vs. Travelers Unpub App Div 8/24/16
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UIM ClaimsDoes Section 40 apply?
Utica Mutual Ins. Co. vs. Maran & Maran,
142 N.J. 609 (1995)
Frazier vs. New Jersey Mfrs. Ins. Co.,
142 N.J. 590 (1995)
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Dependency ClaimsDoes Section 40 apply?
Roberts vs. All American Engineering,
99 N.J. Super. 291 (App. Div. 1979)
Cert denied 53 N.J. 351
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Per Quod ClaimsDoes Section 40 apply?
Weir vs. Market Transition Facility, N.J. Super. 318 N.J. Super 436 (App. Div.)
Cert denied 160 N.J. 477 (1999)
“Accelerated” PaymentWhen 3rd Party Resolves, balance of Comp payable in a lump sum.
Owens v. C.R. Waste, 76 N.J. 584 (1978)
Does not address benefits past 45o weeks or other open ended benefits such as post 2007 Dependency Benefits.
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34:15-40(g)Respondent’s Motion to Intervene
What about the statute?
Often filed - with or without Plaintiff’s consent or cooperation
Mixed bag for plaintiff’s attorney
Assist without appearance
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34:15-40(d)Who’s responsible for paying the lien?
What about the statute?
Trump Taj Mahal Associates vs. Costruzioni…761 F. Supp 1143 (D.NJ 1991), aff’d. 958 F.2d 365 (3d
Cir. 1992) cert denied 113 S.Ct. 84 (1992)
Selective Insurance Co. v. Ronzo255 N.J. Super. 415 (App. Div. 1992)
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Compromising the Lien
Negotiate before 3rd Party settlement, not after.
Argue case weaknesses, not strengths
Audit the lien
Step down v. Average attorney’s fee
Arrange accelerated payment of benefits
Address future benefits in writing –compromising or deferring payment?
Court Order from Comp Judge?
Sexton vs. Insulation Contractors
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Section 40 Liens Decoded 2016
DENNIS M. BAPTISTA, ESQCertified Workers Compensation Attorney
For More Info Visitwww.dennis baptista.com
E-Mail: [email protected]: 973 -661-4545
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Dennis Baptista, Esq.
Court Admissions
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Education
Rutgers University – Newark College of Arts & Sciences, B.A. Rutgers University – Newark Law School, J.D.
Professional Memberships
New Jersey Advisory Council on Safety and Health (NJCOSH)
Certifications
Certified by the Supreme Court of NJ as a Workers Compensation Law Attorney