Verbal Threshold Does Not Bar Employers’ Subrogation

Section 40 of the New Jersey workers’ compensation statute allows employers or workers’ compensation carriers to automatically receive reimbursement of benefits paid to an injured worker from a third party tortfeasor – either directly from the tortfeasor, or from an award received by the injured worker in a third party claim.

But what happens when an injured worker is barred from suing the third party tortfeasor? Can the employer or carrier still seek reimbursement for benefits paid in the workers’ compensation claim? The Appellate Division ruled YES in New Jersey Transit Corp. v Sanchez, A-0761-17T3 (App. Div. December 4, 2018).

The court in Sanchez held that the verbal threshold, which bars recovery of non-economic loss in the absence of a permanent injury in a third party case, does not bar a plaintiff from recovering for economic loss, such as medical expenses and wage loss. The court, thus reasoned, that an employer or workers’ compensation carrier, may bring a subrogation claim to recover for medical benefits and temporary disability benefits, paid to the an injured worker, as these are economic losses.

This decision is a milestone for employers and insurance carriers because it broadens the ability to recover for economic benefits paid to an injured worker, even when that injured worker is unable to file a tort claim.

The question that comes to mind with this decision is whether permanency benefits are considered economic loss. The decision speaks directly to wage loss and medical benefits because these were the benefits at issue in Sanchez. Permanency benefit compensates the extent of disability suffered by an injured worker in a work accident. Therefore, the ability to recover permanency benefits would depend on whether or not it is categorized as economic or non-economic loss. As this issue remains unclear, it behooves an employer or insurance carrier to argue for recovery of permanency benefits, in addition to medical and temporary disability benefits, which are now decidedly always recoverable per the Sanchez decision.

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