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New Jersey Appellate Decision Will Impact How Employers Deal with Verbal Threshold in Subrogation Suits

On Tuesday, December 4, 2018, the Appellate Division of New Jersey Superior Court issued a precedent-setting decision that will likely impact future cases involving employers who sue a third party for reimbursement of damages following an auto accident involving employees – particularly when the injured worker would be barred from a recovery of non-economic damages by New Jersey’s verbal threshold.

The case, New Jersey Transit Corporation v. Sanchez, involved a transit worker who was injured in a motor vehicle accident while in the course of his employment, and while in a vehicle owned by NJ Transit.

Following the incident, NJ transit paid workers’ compensation benefits totaling nearly $34,000, including medical, temporary disability, and permanent partial disability benefits. The employee did not sue the driver of the other vehicle (Sanchez) or the vehicle’s owner, who was a different person. As such, following the one-year waiting period established by the state’s workers’ compensation statute, NJ Transit filed a subrogation action against the third party for reimbursement of wage loss and medical benefits, claiming the accident was caused by Sanchez’s negligence.

In the initial trial, the presiding judge ruled against NJ Transit, stating that its claims are barred by the “limitation on lawsuit option,” or New Jersey’s verbal threshold, which offers reduced auto insurance premiums at the expense of restricting the right to sue for damages following an auto accident, unless serious injury or death occurred. The trial court’s decision held that NJ Transit, in effect, stood in the employee’s shoes, and would not be entitled to a recovery because he did not suffer a severe injury as defined by the verbal threshold.

Upon appeal, the Appellate Division reversed the lower court’s decision and sided with NJ Transit. Appellate judges made the following points in the ruling:

  • The verbal threshold in New Jersey drivers’ auto insurance policies does not apply to economic loss (i.e. the medical and wage loss benefits NJ Transit had sought to recover), but instead only to non-economic losses.
  • Because the verbal threshold applies only to non-economic damages, the court ruled the injured worker had the right to recover his medical bills from the negligent third party (tortfeasor).
  • Since NJ Transit’s injured employee could therefore have been able to sue and recover economic damages, NJ Transit had the right to file suit, pursuant to the workers’ comp subrogation statute and the one-year waiting period.

The ruling, which you can view here, is likely to serve as a guide for employers who seek reimbursement of workers’ comp benefits for medical and temporary disability from tortfeasors following auto accidents where injured employees are restricted by the verbal threshold. Because the ruling concerned only medical and temporary disability benefits, questions remain as to whether it may apply to permanent benefits. Broad language cited by the Appellate Division suggests employers may very well have that right, through it remains to be seen.

Levinson Axelrod, P.A. is a workers’ compensation and personal injury law firm that has served clients throughout the state of New Jersey since 1939. If you have questions about a potential workers’ compensation case, contact us.

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