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NJ: Workers Compensation Liens Attach to Legal Malpractice Recovery

Utica Mutual. Ins. Co. v. Maran & Maran, 142 N.J. 609 (1995)

NJ Underlying workers comp proceeding

Student Contributor:  Lisa Larato

Facts: Defendant Ingala sustained work related injuries and had been receiving workers compensation benefits from the Plaintiff, Utica Mutual Insurance Co. (Utica). Ingala retained a separate attorney to handle a products liability claim against the third party liable for his injuries. That attorney failed to file suit within the statute of limitations. Plaintiff then retained  Maran & Maran, to sue that attorney for malpractice. The malpractice suit settled for $585,000.

Utica contended that it had a workers compensation lien on the legal malpractice settlement proceeds, but Maran & Maran disagreed. Utica filed the instant lawsuit and the parties cross-filed for summary judgment. Maran & Maran argued that even if such a lien could attach to a legal malpractice recovery, it should not attach if the malpractice and workers compensation recoveries do not fully compensate the injured worker. They also argued that the workers compensation carrier had no claim because it failed to institute its own action against the tortfeasor.

The Superior Court, Law Division, granted Ingala and Maran & Maran’s motion and held that the lien did not attach to a malpractice recovery. Utica appealed, and the Supreme Court, Appellate Division, affirmed. Utica then moved for reconsideration and the Supreme Court granted that motion.

Issue: Whether, pursuant to N.J.S.A. 34:15-40, a workers compensation lien attaches 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?

Ruling: The Supreme Court held that the statute establishing workers compensation liens prevents Maran & Maran from retaining any workers compensation benefits that have been supplemented by recovery against a liable third party, even if recovery and benefits when combined would leave Ingala less than fully compensated. Under N.J.S.A. 34:15-40, Utica is entitled to reimbursement, irrespective of whether or not Ingala is fully compensated.

Lesson: The Purpose of N.J.S.A. 34:15-40 is to prevent recovery from different sources for the same injury; no 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. The court reasoned that the “no double recovery” rule should not be different when the third-party recovery is against a party other than the tortfeasor.


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Posted in: Insurance, Legal Ethics, New Jersey