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.