NJ Transit Auto Accident Shows Conflict In Cutting Insurance Costs, Allowing Subrogation

Frank Ferreri

Trenton, NJ (WorkersCompensation.com) — When the New Jersey legislature set out to reduce the cost of automobile insurance in the Garden State, how much thought did it have for the subrogation provisions under workers’ compensation law?

That question was at the heart of New Jersey Transit Corporation v. Sanchez, Nos. A-68 September Term 2018, 082292 (N.J. 05/12/20), a case in which the New Jersey Supreme Court upheld the appellate court’s ruling that workers’ compensation law, not an auto insurance law, governed subrogation claims based on benefits paid to workers injured in motor vehicle accidents during the course of their employment.

In the view of the New Jersey Supreme Court, when the state enacted the Auto Insurance Cost Reduction Act in 1998, it didn’t change the workers’ compensation law. This means that when a New Jersey employer pays workers’ compensation benefits and the employee doesn’t seek personal injury protection benefits from his automobile insurer for the accident, no burden is on the employee’s insurer, and thus, workers’ compensation subrogation principles still apply.

Subrogation or auto insurance cost reduction?

Acting within the course of his employment while driving a New Jersey Transit vehicle, the employee was rear-ended and was later diagnosed as experiencing cervical strain and strain of the right trapezius. After two months, he was medically cleared to return to work without restriction.

New Jersey Transit’s workers’ compensation carrier paid the employee $33,625.70, consisting of $6,694.04 in medical benefits, $3,982.40 in temporary indemnity benefits, and $22,949.26 in lost wages. The employee didn’t seek PIP benefits under his auto insurance policy.

New Jersey Transit sought to recoup the benefits from the other driver’s insurer. At trial, the court ruled against New Jersey Transit, explaining that the employee couldn’t have sued under the AICRA because the workers’ compensation benefits he received meant that he had no uncompensated loss of income or property,” so he didn’t experience economic loss.

The appellate court disagreed, holding that New Jersey’s workers’ compensation law gave New Jersey Transit an “absolute right” to seek reimbursement from the other driver for the benefits New Jersey Transit paid to the injured employee. The other driver appealed to the New Jersey Supreme Court.

Under the no-fault scheme of the AICRA, when a named insured selects the limitation-on-lawsuit option that the employee’s PIP coverage contains, third-party tortfeasors, such as the other driver in this case, are exempted from tort liability for noneconomic loss. At the same time, the workers’ compensation law includes a subrogation scheme that provides carriers with a right of recovery to the same “action that the injured employee … would have had.”

Because one justice didn’t take part in the decision, the New Jersey Supreme Court split 3-3, meaning that the appellate court ruling remained intact. The concurrence, which delivered a victory to New Jersey Transit, held that there was nothing to indicate that the state legislature intended to bar employers and insurers that have paid workers’ compensation benefits from seeking reimbursement from third-party tortfeasors.

As a result, New Jersey Transit was allowed to seek benefits from the other driver’s insurer to cover what it paid to the employee in workers’ compensation benefits. Essentially, New Jersey Transit’s carrier could seek what the employee would have received had he opted to use his PIP coverage instead of receiving workers’ compensation.

Legislative intent

The concurrence reasoned that the legislature’s objective was “clear” that employers and workers’ compensation carriers will promptly pay benefits for medical expenses and other economic losses to employees injured in the course of their employment when they are protected by subrogation rights. In turn, the subrogation right is limited by the principle that an employer’s or carrier’s right to reimbursement is only for what an injured employee could have sought, in this case, the economic losses recovery available under the employee’s PIP insurance.

The concurrence noted that the legislature could have expressed its intent that the AICRA alone governs benefits to individuals injured in motor vehicle accidents, even accidents that arise in the course of employment. However, it didn’t, leading the concurrence to find no reason to bar the subrogation claim.

“We acknowledge defendants’ contention that workers’ compensation subrogation claims arising from work-related motor vehicle accidents may increase the volume of claims, thus exacerbating the burden on the no-fault automobile insurance system as a whole,” Justice Anne M. Patterson wrote. “We also note … [t]he Legislature has the authority to address any such concerns by amending the Workers’ Compensation Act, AICRA, or both statutory schemes.”

In the dissenters’ view, the AICRA showed that the legislature intended the economic costs of work-related automobile accidents to be covered by the workers’ compensation system, not auto insurers. The dissenters maintained that the no-fault system intended to reduce costly litigation involved in subrogation claims and, thereby, lower auto insurance premiums.

“Because the [employee] was injured in the course of his employment, New Jersey Transit covered his economic loss,” the dissenting opinion reasoned. “That result fulfilled the purpose of the no-fault system’s collateral source rule, shifting the losses from the automobile insurance industry to workers’ compensation.”

Like the concurrence, the dissent highlighted the legislature’s potential role in clearing up its intent.

“Our task is to give life to the Legislature’s policy choices,” Justice Barry T. Albin wrote. “If the concurrence has misconstrued the interplay between the no-fault system and the Workers’ Compensation Act, as I believe it has, the Legislature has the power to correct the misinterpretation of its enactments.”

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