NJ: No Double Recovery: Underlying Workers Comp Lien Attaches to Legal Malpractice Recovery
Frazier v. New Jersey Manufacturers Insurance Company, 142 N.J. 590, 667 A.2d 670 (1995) (pdf)
NJ: Underlying litigation; workers compensation lien
Student Contributor: Michael Park
Facts: Plaintiff was injured on the job while working for a third-party general contractor, and his attorney filed a worker's compensation claim against his employer's insurance carrier. However, his attorney failed to file a complaint against the third-party general contractor before the statute of limitations had run out. Plaintiff then retained a new lawyer to file a malpractice claim against his former attorney, and obtained a settlement. After learning of the settlement, the insurance carrier said it would file a lien against the recovery for legal malpractice. The matter went to court and the trial court ruled that the workers' compensation lien could not attach to his legal malpractice settlement. However, the Appellate Division reversed and held for the insurance carrier, and the plaintiff appealed.
Issue: Can a workers' compensation lien attach to the proceeds of a malpractice suit brought to recover damages from an attorney who failed to institute an action against the third-party tortfeasor responsible for the worker's injury?
Ruling: In affirming the Superior Court, Appellate Division, the Supreme Court held that a worker's compensation lien can attach to a legal malpractice settlement.
“It was the tortious act of the third party (the general contractor) that was the predicate for Frazier's malpractice action against his former attorney. But for the third-party tortfeasor's tortious conduct, Frazier would not have recovered against his attorney...No apparent justification exists for allowing an injured employee who receives a legal malpractice recovery to be in a better position than an injured employee who recovers directly from the tortfeasor. Malpractice claims that are derivative of third-party claims are therefore subject to the workers' compensation lien under N.J.S.A. 34:15-40."
Lesson: The Court did not want to allow the plaintiff to receive double recovery, pocketing the money from the legal malpractice settlement that arose from the attorney not filing a complaint against the original tortfeasor, and the money he received for workers' compensation for being injured. If the lien did not attach, he would be receiving compensation twice for the same injury.
The Court's holding denying double recovery does not really break any ground.
I think the more significant holding in this case relates to Frazier's claim that the Malpractice recovery did not adequately compensate him and that the carrier should not be entitled to its Lien. The Court responded: "There is no full compensation rule in the [section 40 workers' compensation lien]. When a plaintiff recovers from a third party, a lien attaches regardless of whether the cumulative awards are sufficient to fully compensate for all injuries." (Id. at Section IV, para. 3).
This is another one of those catch 22 situations. Either way, the plaintiff or the defendant are going to benefit off of the fact that there could be no more recovery. The plaintiff potentially with a double recover, and the defendant who's negligence goes unheeded. It's hard to figure out exactly what a good verdict in this case should be.
It is important that while rewarding those who are injured by the tortuous act of another, the court does not double compensate plaintiff with much more than necessary. This could lead to yet another explosion in torts with plaintiffs attempting to collect double for each time they have been injured. It will lead to greedy plaintiffs and will defeat the principle of compensating those Plaintiffs who were injured for their damages or to put them back in the place they were before; Plaintiffs would be receiving sums far exceeding such quantities. I agree with the court's holding on this matter.
Plaintiff's is important because the courts always want to prevent the opening of the 'floodgates' to result in litigation. Plaintiffs should not be enticed to sue by getting double damages for the same tort.
This was also the right ruling to prevent legislative intrusion into tort law in New Jersey. I imagine that a converse ruling could have prodded the legislature to reform the tort law of New Jersey, because I doubt the public would tolerate double compensation of tort victims given the public's general disdain for tort lawyers in public opinion polls.
I agree with Mr. Henn, this is not the first time the court has not allowed a plaintiff to recover twice, and i'm sure it will not be the last. However, not compensating the Plaintiff enough is something a bit less common. While my first instinct wants to disagree with the ruling not allowing for the Plaintiff to be adequately compensated, I agree with Mr. Anzalone in that it is needed in order to prevent opening a floodgate of litigation.
I can't say that I agree with this ruling 100%. I understand that the court is trying to prevent opening the floodgates to double recovery, but I feel as if in a situation like this the plaintiff should be allowed to recover for his workers compensation injury and from the legal malpractice claim. But on the other hand I also see the point that the court is not really letting a guilty defendant escape liability because they still have to pay the damages. The only catch is that the Plaintiff is being prevented from keeping that award.
This falls in line with a long series of bad rulings by the Court in this area. Insurance companies sit back and do nothing but assert their lien, then after the petitioner/plaintiff wins on a third party claim they have become pigs and often do not split the claim with the p/p, and the only people that lose if the third party claim does not move forward are the plaintiff and the plaintiff counsel who does all the work.