By: Samantha E. Hahn and Yi Zhu
On May 12, 2020, the New Jersey State Supreme Court held that when a worker is injured in a motor vehicle accident while in the course and scope of his employment, the right of the workers’ compensation carrier to pursue a subrogation action against the third party tortfeasor is governed by the NJ Workers’ Compensation Act (WCA) and not the Automobile Cost Reduction Act (AICRA). New Jersey Transit Corporation v. Sanchez, 2020 WL 2374054 (NJ 2020). The Carrier can recover against the third party tortfeasor even if AICRA’s verbal threshold requirement would preclude the injured worker from recovering non-economic damages.
The Sanchez Decision is the latest case addressing the interplay between AICRA and the WCA. AICRA was passed in an effort to reduce automobile insurance costs by requiring auto insurers to provide Personal Injury Protection (PIP) benefits. PIP benefits are available to the named insured injured in a motor vehicle accident regardless of fault. If a motor vehicle accident arises out of the course and scope of the injured victim’s employment, medical expenses must be paid through workers’ compensation and not through PIP. See N.J.S.A., 39:6A-6. Although medical expenses paid through PIP are not recoverable from a tortfeasor in a civil lawsuit, a plaintiff injured in a work related motor vehicle accident can recover medical expenses paid by his workers’ compensation carrier from a negligent tortfeasor. N.J.S.A 39:6A-12, Lambert v. Travelers Indemnity Co. of America, 447 N.J. Super. 61 (App. Div. 2016).
In Sanchez, David Mercogliano was injured in a work related motor vehicle accident. Under AICRA, insureds have the option of purchasing an auto insurance policy with, or without, limitations on their ability to file a lawsuit. N.J.S.A 39-8(a). Plaintiffs who elect policies with lawsuit limitations are generally unable to sue for non-economic damages (ie: pain and suffering) unless they suffer a permanent injury. This is known as the “verbal threshold.” Mercogliano’s insurance contained the lawsuit limitation, and his injuries were not severe enough to overcome the verbal threshold. He did not file a lawsuit against the other vehicle’s driver, Sandra Sanchez, or the vehicle’s owner, Chad Smith. Instead, he only received workers’ compensation benefits from his employer, NJ Transit.
NJ Transit filed a subrogation action against Sanchez and Smith. NJ Transit alleged that the Defendants negligently caused the accident and were therefore liable for reimbursement of the workers’ compensation benefits paid to Mercoglianoa. The Defendants argued that NJ Transit’s claims were barred by AICRA’s verbal threshold.
Agreeing with the Defendants, the Trial Court granted summary judgment and dismissed NJ Transit’s claims. The Trial Court found that, because Mercogliano was fully compensated by the workers’ compensation carrier for his medical expenses and wage loss, he suffered no uncompensated economic loss. Furthermore, NJ Transit, as subrogee, stood in the shoes of Mercogliano and had no rights superior to the him under AICRA. The Trial Court held that NJ Transit’s claim must be dismissed because AICRA bars claims for compensated economic damages and the subrogation claim would subvert the legislature’s intent. NJ Transit appealed to the Appellate Division.
The Appellate Division reversed the Trial Court. It found that the WCA was enacted eighty-four years before AICRA. There is no indication that the Legislature intended to substantively change the rights of workers injured in motor vehicle accidents, or the rights of their workers’ compensation carriers, in AICRA’s statutory language or legislative history. Had that been the Legislature’s intent, it would have done so unambiguously. Resultantly, the Appellate Division held that Section 40 of the WCA gives a workers’ compensation carrier an absolute right to seek reimbursement from a negligent tortfeasor for benefits paid to an injured employee. Because Mercogliano’s economic loss was covered by his workers’ compensation benefits, not by personal injury protection (PIP) benefits under his automobile insurance policy, NJ Transit’s subrogation action did not run afoul of AICRA. The Defendants appealed the decision to the New Jersey Supreme Court.
The New Jersey Supreme Court affirmed the Appellate Division in a 3-3 Decision. The Court agreed that there was no evidence that the Legislature intended to bar subrogation actions by workers’ compensation employers and carriers against third party tortfeasors. The Legislature’s intention of preserving subrogation rights is clearly evidenced by the fact that, when it enacted AICRA, the Legislature did not amend the Workers’ Compensation Act to eliminate or circumscribe the right of subrogation in cases involving motor vehicle accidents. As such, the Supreme Court concluded that NJ Transit’s subrogation action did not contravene AICRA’s provisions or undermine its goals. Furthermore, by authorizing actions against third-party tortfeasors, the Workers’ Compensation Act serves the Legislature’s goal to make benefits readily and broadly available to injured workers through a non-complicated process.
The Court’s Decision in Sanchez is a reaffirmation of the workers’ compensation carrier’s lien rights. Over the years, plaintiffs and defendants alike have sought to use AICRA as a means to limit or preclude workers’ compensation liens. The Appellate Division has repeatedly rejected those attempts. Now, there is no ambiguity. The New Jersey Supreme Court has held that if a plaintiff is injured in a work related motor vehicle accident, and receives workers’ compensation benefits, the carrier has an absolute statutory right to recovery against any third party award from the negligent tortfeasor.
 Samantha E. Hahn, Esq. is a Shareholder in GRSLBG&B’s Workers’ Compensation Department. She defends employers, insurers, and third party administrators against workers’ compensation claims in New Jersey and Pennsylvania. Samantha can be reached at SHahn@grsl.com.
 Yi Zhu, Esq. is an Associate in GRSLBG&B’s Workers’ Compensation Department. He represents insurance companies and self-insured employers in the defense of Workers’ Compensation claims in New Jersey and New York. Yi can be reached at YZhu@grsl.com.