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NJ: Double Dipping Prohibited Under N.J.S.A. 34:15-40

Frazier v. New Jersey Manufacturers Insurance Company, 142 N.J. 590 (1995)

Student Contributor: Selena Marchan

NJ Underlying Insurance Action

Facts: Plaintiff filed a worker’s compensation claim after sustaining an injury at work. The Defendant, Plaintiff’s employer’s workers compensation carrier, accepted the claim and settled with the Plaintiff.

After settling with the carrier, Plaintiff filed suit for malpractice against his former workers compensation attorney for failure to file a third party action against the general contractor who was responsible for Plaintiff’s injuries. The malpractice suit was later settled. Plaintiff’s new attorney sent a letter to the workers compensation carrier to determine the amount of benefits paid to the Plaintiff. The carrier responded stating that it would file a lien against Plaintiff’s recovery in the malpractice suit.

Plaintiff then filed a declaratory judgment action alleging that the carrier could not place a lien on any proceeds obtained from the malpractice suit. The Superior Court granted summary judgment in favor of the Plaintiff, the Appellate Division reversed, and Plaintiff subsequently appealed to the New Jersey Supreme Court.

Issue: Could the workers compensation carrier attach a lien to Plaintiff’s recovery from the legal malpractice suit?

Ruling: Yes. N.J.S.A. 34:15-40 provides that plaintiff may not recover from both a workers compensation claim, and a third party tortfeasor, for the same injury. Therefore, the carrier was permitted to attach a lien on Plaintiff’s recovery from the malpractice suit.

Lesson: N.J.S.A. 34:15-40 is intended to prevent an employee from obtaining a double recovery for the same injury. It is applicable when an employee receives a settlement from both a workers compensation carrier and from a third party tortfeasor who contributed to the employee’s injuries. It is not limited, however, to only those cases where the employee receives recovery directly from the third party. It also applies to cases where an employee’s recovery stems from the third party’s actions.

In this case, for example, but for the actions of the general contractor, the employee would have no cause of action against his former attorney. Plaintiff’s recovery in the malpractice suit, therefore, necessarily stems not only from the negligence of his attorney, but also from the negligence of the contractor. As such, N.J.S.A. 34:15-40 applies, and Plaintiff would not be allowed to recover both from the workers compensation carrier, and his attorney, for the same injury.

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Posted in: Insurance, New Jersey