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Workers Comp Liens on Legal Mal Actions: The Way it Used to Be

Wausau Ins. Companies v. Fuentes,  215 N.J. Super. 476, 522 A.2d 440 (1986).

NJ Underyling Worker’s Compensation Lien on legal mal cause of action .

Student Contributor: Anthony J. Forzano

Facts: Worker, who suffered job-related accidental injury and received workers’ compensation benefits, brought a legal malpractice action against attorney that had failed to file products liability action within limitations period against manufacturer of machine upon which worker was working at time of injury. Worker obtained a compensation settlement of $115,000 and $670 a month for the rest of defendant’s life. Workers’ compensation carrier then asserted lien. The Superior Court recognized compensation carrier’s lien, and appeal was taken. The Appellate Division held that worker’s compensation lien stops at the payments actually made by a third person whose tortious conduct contributed to happening of industrial accident; therefore, worker’s compensation carrier had no lien upon settlement fund recovered in legal malpractice action brought against attorney. The insurance company appealed.

Issue: Does a lawyer who committed malpractice take on the legal status of a “Third Person” as it pertains to the ability for an Insurance company to assert a lien for workers compensation benefits paid?

Ruling: No.  

“We hold that plaintiff’s right of recovery goes no further than to payments actually made by the “third person” whose tortuous conduct contributed to the happening of the industrial accident. The lawyer whose delinquency deprived the employee of a possible recovery from the machine manufacturer does not take on the identity of the statutory “third person.”

The court in part based their opinion on the that fact that it would not have been known whether the compensation payments covered by the carrier’s compensation lien would even have been recoverable in the malpractice action. The court held

“Since only the carrier was entitled to those monies, and it was able to sue for them in its own right, N.J.S.A. 34:15-40(f), they could hardly be claimed as an element of damage suffered by defendant as a result of her former attorney’s malpractice or contemplated as such by the malpractice settlement.”

Lesson: If a third party with a pecuniary interest in a case wishes to bring an action for malpractice against an attorney on the grounds that his malpractice damaged them, then they must follow the statutory guidelines and bring the action themselves. One cannot rely on the result of a malpractice case, then attempt to recover money on a lien claiming that the attorney was a statutory “third person” who contributed to the original negligence.

Editor’s Note: Make sure to see Frazier v. NJ Manufacturers’ Ins. Co., 142 NJ 590 (1995), a more recent statement of the law in NJ on the workers compensation lien and whether it attaches to the legal malpractice cause of action. 

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Posted in: New Jersey, Torts/Personal Injury