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Wednesday, February 16, 2011

Court Holds Parties May Assert A Third Party Lien Against Lump Sum Payment

A NJ Court of Appeals has held that parties may stipulate, as part of a workers' compensation settlement, that a third party lien may be asserted  against a lump sum payment. A workers' compensation settlement contracted into by the parties, and approved by a Judge of Compensation, supersedes the statutory prohibition against the assertion of a lien on such proceeds.

Statutorily workers' compensation settlements made pursuant to NJSA 34:15-20 are immune form the assertion of a third party recovery lien made in accordance with a settlement under NJSA 34:15-40. As part of the workers' compensation settlement, the parties stipulated to the assertion of a third party recovery lien, and the Appellate Court held the contractual agreement made between the parties to be valid.
"The resolution of plaintiff's claims, including retention of the Section 40 lien, was negotiated as a material part of the settlement. A settlement agreement between parties in litigation is a contract. Nolan v. Lee Ho, 120 N.J. 465, 472 (1990) (citing Pascarella v. Bruck, 190 N.J.Super. 118, 124- 25 (App.Div.), certif. denied, 94 N.J. 600 (1983)). Accordingly, American Style's right of reimbursement on the $50,000 is contractual rather than statutory.

"Significantly, Calle acknowledged under oath his understanding that a Section 40 lien amount of $50,000 of the money ... [was] reservable by the insurance company as pay back for authorized treatment. This money will come from the part of the case that was handled by [the Law Firm in the Superior Court action] should they have a financial recovery.

"The parties relied upon that understanding when they entered into the settlement agreement. It would be inconsistent with the agreement and unjust to permit Calle to repudiate that understanding after the fact. See Knorr v. Smeal, 178 N.J. 169, 178 (2003) (observing that estoppel "is designed to prevent injustice by not permitting a party to repudiate a course of action on which another party has relied to his detriment").
The effect of this ruling will ultimately dilute, yet again, the value of a workers' compensation award globally. Claimants and their attorneys will be hard pressed to avoid the the inclusion of the stipulated waiver in Section 20 settlements since the alternative route would be the trial of a claim where the statutory lien mandated under NJSA 34:15-40 would be applied.

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