I was involved in a car crash while working. Why do I have to pay back the Worker’s Compensation people?

LIBERTY MUTUAL INSURANCE o/b/o SABERT CORPORATION,  v. JOSE R. RODRIGUEZ,

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION  Approved for Publication — Decided April 2, 2019

I was involved in a car crash while working. Why do I have to pay back the Worker’s Compensation people?

Submitted by New Jersey Worker’s Compensation Lawyer, Jeffrey Hark.

In this case the court addressed the section of the New Jersey Worker’s Compensation statute that the legislature created mandating/requiring your attorney to pay back the Worker’s Compensation carrier a percent of your third party settlement less any attorney fee that was paid from any third-party recovery. In other words if you file a lawsuit against a third-party for your injuries while at the same time receiving Worker’s Compensation benefits in the form of medical treatment, temporary disability benefits, and permanency award you will have to pay back the Worker’s Compensation insurance company out of any settlement by law. Your third-party attorney has absolutely no choice. This specific question in this case is how much of a discount must be a paid based on the attorney fee which reduce the third-party settlement.

Often this comes into play in settlements that are above the New Jersey Rules of Court minimum $750,000 level. Why is that? In New Jersey the rules that govern attorney fees require a reduced fee for any portion of a third-party settlement above $750,000 to 30% from 33.3%, and then an additional reduction for those recoveries above $1 million to 25%. As a result for substantial recovery cases there is usually a blended attorney fee rate of approximately 30.5% as opposed to the presumed 33.33%. As a result, this appellate division court ruled the Section 40 lien for reimbursement of Worker’s Compensation benefits shall be reduced by the actual blended attorney fee rate as opposed to the suppose it 33.3% rate identified in the statute as the cap.

What does this mean  for most cases?  Unfortunately Worker’s Compensation liens can become very large based on the nature and extent of the injury. If there is a third-party recovery of $750,000.00 or less the compensation carrier shall give the 33 1/3% credit for the 3rd party attorney fee. However with larger catastrophic claims or traumatic brain injury or back surgery cases with substantially greater third-party recovery this case outlines the specific blended rate evaluation that must be done to determine the credit the comp carrier is entitled to which will result in a greater reimbursement to the comp carrier for their lien.