189 A.3d 368
N.J. Super. Ct. App. Div.2018Background
- Paolo Marano, a police officer, was injured in a work-related incident and received workers' compensation benefits from PMA totaling $51,779.81 (including $5,403.07 characterized as case management/non-treatment charges).
- Marano sued his treating physician, Dr. Clifford Schob, and Comprehensive Orthopedics for medical malpractice; the parties entered a high/low agreement resolving claims by arbitration with a $250,000 "low" and $750,000 "high."
- An arbitrator found no liability, but under the high/low deal the defendants paid the $250,000 low amount; distributions included $88,000 to Marano, $57,148.33 reimbursing counsel expenses, $62,851.67 as counsel fees, and $42,000 held in trust pending resolution of PMA's lien.
- PMA claimed a workers' compensation lien under N.J.S.A. 34:15-40 for benefits it paid and moved to enforce the lien; Marano sought a declaratory judgment in law division that the payment was exempt from PMA's lien.
- Marano argued N.J.A.C. 11:1-7.3(a)(1) (which exempts certain high/low payments from Medical Practitioner Review Panel reporting where an arbitrator found no liability) rendered the Section 40 lien unenforceable against the high/low payment; the trial court rejected that argument and applied Pool v. Morristown Memorial Hosp.
- The Appellate Division affirmed that Pool remains controlling, held the Section 40 lien applies to high/low payments even after a no-liability finding, and remanded for resolution of a disputed portion of the lien calculation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a workers' compensation lien under N.J.S.A. 34:15-40 attaches to a "low" payment made under a high/low agreement after an arbitration verdict of no liability | Marano: N.J.A.C. 11:1-7.3(a)(1) exempts such high/low payments from reporting and reflects policy that those payments should not be treated as recoveries subject to Section 40, so the lien is unenforceable | PMA: Section 40 broadly reaches settlements and functional equivalents; liability findings are irrelevant to lien enforceability; Pool controls | Held: Lien applies. Pool remains good law; the regulation does not affect Section 40 lien rights |
| Whether N.J.A.C. 11:1-7.3(a)(1) alters or overrides Pool’s conclusion that high/low payments are subject to Section 40 liens | Marano: The regulation’s exemption for reporting was intended to encourage high/low agreements and should prevent liens on the low payment after no-liability findings | PMA: The regulation concerns administrative reporting, not the statutory lien; no evidence the Department intended to affect lien rights | Held: Regulation addresses reporting only and does not negate the public policy against double recovery underpinning Section 40 |
| Whether Pool should be overruled | Marano: Requests reconsideration of Pool as wrongly decided | PMA: Pool is consistent with Section 40’s purpose and precedent | Held: Pool reaffirmed; not overruled |
| Whether the lien amount requires adjustment | Marano: Seeks reduction of the lien for disputed charges (e.g., non-treatment case management) | PMA: Disputes reductions; parties can resolve or the trial court should calculate | Held: Case remanded to Law Division for limited recalculation of lien amount |
Key Cases Cited
- Pool v. Morristown Memorial Hosp., 400 N.J. Super. 572 (App. Div. 2008) (held Section 40 lien attaches to payments made under high/low agreements regardless of a no-liability verdict)
- Frazier v. N.J. Mfrs. Ins. Co., 142 N.J. 590 (1995) (Section 40 reaches functional equivalents of third-party recoveries to prevent double recovery)
- Greene v. AIG Cas. Co., 433 N.J. Super. 59 (App. Div. 2013) (discusses Section 40’s aim to prevent duplicative recovery)
- Aetna Life & Cas. v. Estate of Engard, 218 N.J. Super. 239 (Law Div. 1986) (Superior Court jurisdiction to decide extent of Section 40 liens)
- Estate of Kotsovska v. Liebman, 221 N.J. 568 (2015) (addresses concurrent jurisdiction principles relevant to lien disputes)