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Shattered Consensus: Comp Case May Affect After School-Funding Debate
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Shattered Consensus: Comp Case May Affect After School-Funding Debate

NJ Supreme Court Review 1998-1999

The consensus that usually prevails when the New Jersey Supreme Court decides workers’ compensation claims has shattered this term when the Court dealt with an issue that could affect the ongoing school funding controversy.

Justice O’Hern, writig for the majority of the Court in Outland v. Monmouth-Ocean Education Service Commission, No. A-48-97, 1998 WL 387263 (N.J. July 1, 1998) determined that a teacher who was employed under a ten-month contract and who was injured during the school year was entitled to temporary compensation benefits during the summer recess period. 

Joined by Justices Pollock, Stein, and Coleman, the Court embraced the position that a teacher can be considered a "seasonal employee" and be entitled to temporary workers’ compensation benefits for summer months even though he/she works under a ten-month contract as long as the teacher can demonstrate that she would have been entitled to compensation for wages earned in off-season employment. The majority opinion reasoned that teachers often supplement their school-earned income during the summer months to satisfy their financial obligations, including mortgages and their children’s college education funds. The majority relied upon Chief Justice Weintraub’s rationale in Maver v. Dwelling Managers Co., 34 N.J. 440 (1961), which declared that the purpose of the workers’ compensation system was to "compensate for the inroad upon the full-time earning capacity of the victim of industrial mishap."

In a very strong dissent, Justice Handler, joined by Chief Justice Poritz and Justice Garibaldi, reflected that the real issue was not seasonal employment/public policy considerations but rather a judicial re-writing of the workers’ compensation statute, which would have a significant impact upon the ongoing school funding controversy requiring schools to appropriate more money to compensate teachers for summer jobs.

Mona J. Outland was employed by the Monmouth-Ocean Education Service Commission in 1994 as a teacher of emotionally disturbed children. On April 22, 1994, she was assaulted by one of her students and was unable to return to work through the summer of that year. From April 23, 1994, through June 30, 1994, her employer paid her temporary disability benefits. The school board refused to pay benefits to the injured employee during the summer recess, which was from July 1, 1994, to August 31, 1994. The board claimed that the contract of employment was only for ten months and that, therefore they were not responsible for payment during the summer months. The Court held that a teacher was considered to be a seasonal employee and that income could be anticipated over the summer recess through earnings of summer employment. The case was remanded to determine whether or not the petitioner actually lost wages from planned summer employment that she was unable to engage in as a result of injuries incurred during the school year.

In a matter involving national attention, the New Jersey Supreme Court, in a unanimous decision, ruled that claims of workplace sexual harassment, when the harassment results in bodily injury, could not be excluded by insurance carriers under the employer’s liability section of a workers’ compensation policy. Lisa Schmidt filed a claim against her employer, Personalized Audio Visual, Inc., and against the president of the company, Dennis Smith, for sexual harassment in violation of New Jersey’s Law Against Discrimination (LAD), assault, battery, invasion of privacy and intentional infliction of emotional distress. The original complaint filed in September of 1991 alleged that her employer demanded that she have sex with him, that he attempted to place his tongue down her throat, and that he fondled her buttocks and breasts. In addition to the intentional acts, the petitioner alleged two years later that the employer had negligently inflicted emotional distress and that it had failed to train or supervise her superior. 

The workers’ compensation insurance carrier, United States Fidelity and Guarantee Company (USF&G), insured the employer under the employer’s liability portion of a workers’ compensation and employer’s liability policy. A third-party declaratory judgment action was filed against USF&G on the coverage issue, but the liability issue proceeded to trial before the coverage issue. USF&G declined to participate in the liability action. The trial of the plaintiff’s claims against the employer and the supervisor for the hostile work environment, sexual harassment, assault and battery, and intentional infliction of emotional distress resulted in a jury verdict of $80,000.00 without allocation to the different causes of action. The trial court held that USF&G had a duty to defend the employer and the agent and a responsibility to indemnify the employer. The Appellate Division affirmed. In reviewing and affirming the decision, the Supreme Court declared that workers’ compensation policies must cover not only claims for compensation prosecuted in the workers’ compensation court but also claims for work-related injuries that are prosecuted in the court of common law. The reason that the employer’s liability coverage is written in conjunction with the workers’ compensation policy is its intent to serve as a "gap-filler" providing coverage to the employer in situations where an employee has the right to bring a common law action despite the exclusivity provisions of the Workers’ Compensation Act. An additional benefit of bringing the action under the umbrella of the workers’ compensation policy would presumably be a reduced monetary award payable to the victim when compared to that which might be realized under the tort system.
Schmidt v. Dennis Smith, et al, No. A-24, 1998 WL 329267 (N.J., June 15, 1998).

In a companion case, American Motorists Ins. Co. v. LCA Sales Co., 713 A. 2d 1007 - NJ: Supreme Court 1998 the court held that the "employee exclusion" provision contained in a comprehensive general liability insurance policy precludes a corporate policyholder from securing coverage for damages arising out of a claim for wrongful termination. Distinguishing this matter from Schmidt, the Court held that the Workers’ Compensation Act does not provide for workers’ compensation benefits where the employee suffers various emotional and physical ailments due to termination of employment. 

Picciallo was a salesman for LCA for over thirty years and was terminated in 1991 with two weeks’ notice. In a Law Against Discrimination (LAD) claim, the employee alleged that he was terminated because of his age and suffered emotional distress and other physical problems. The Supreme Court held that the standard employee exclusion clause of the comprehensive general liability (CGL) insurance policy precluded recovery. American Motorists Insurance Company and
Lumbermens Casualty Company v. L-C-A Sales Co., et al., No. A105, 1998 WL 334693 (N.J., June 15, 1998). However, the court in dicta distinguished workers’ compensation claims that may be barred due to general economic risks resulting in employment termination from those risks based upon age discrimination and harassment, thereby distinguishing the result in Cairns v. City of East Orange, 267 N.J.Super. 395 (App.Div.1993) which was held to be a non-compensable workers’ compensation claim based upon physical injuries resulting from economic downsizing by an employer.

In a matter involving collateral benefits, the Supreme Court declined to review Chubb Group on Behalf of Conrad v. Trenton Board of Education, 304 N.J. Super. 10 (App.Div.1997), cert denied, 152 N.J. 188 (1997). Chubb Insurance Group, a personal injury protection (PIP) carrier, brought suit for reimbursement of medical benefits paid to a minor employed by the Trenton Board of Education. The minor had elected not to pursue a workers’ compensation claim but instead pursued a common-law action pursuant to N.J.S.A. 34:15-10. The Appellate Division held that the PIP carrier’s right to reimbursement is not dependent upon whether or not the injured party has actually filed a claim for workers’ compensation benefits. The court held that Chubb may apply for reimbursement from the employer or its workers’ compensation carrier for PIP benefits paid on behalf of the injured worker. 

In another matter involving a tort action, the Appellate Division held that the workers’ compensation insurer did not have an affirmative duty to acquire and preserve a forklift. The widow of Peter Dalfonzo filed a wrongful death action naming multiple parties, including Foley Towlift Inc. & Lift Trucks, Inc., which was subsequently amended to name Allis-Chalmers Corporation Product Liability Trust and other defendants. Dalfonzo had been an employee of Able Fab Company, and the accident occurred when he was operating an allegedly defective forklift manufactured by Allis Chalmers. The forklift was ultimately destroyed, and that destruction became the subject of the spoliation action. 

Liberty Mutual’s claims department became aware of the fatal accident on the date it occurred. They assigned an investigator to determine any potential third-party liability, and that investigator was present when an engineer inspected the forklift. Liberty Mutual’s agent was advised to cooperate with the plaintiff’s attorneys because the respondent insurance carrier, Liberty Mutual, had an interest in the successful prosecution of the third-party claim for economic reasons. In May of 1990, approximately six months following the accident, Able Fab contacted Liberty Mutual’s agent inquiring about selling the forklift to Liberty Mutual Insurance Company, the workers’ compensation carrier, for $6,000.00. Liberty considered the acquisition but eventually decided against it knowing that Able Fab was probably going to scrap the forklift if it was not bought, even though Liberty Mutual’s house counsel was aware that there was a potential third-party claim. The court declined to impose a duty on Liberty Mutual to obtain ownership and control of the forklift. The Appellate Division indicated that it was not in a position to impose an affirmative duty that would go further than recognizing a tort that requires a party to refrain from negligently destroying evidence.
Allis-Chalmers Corp. Product Liability Trust v. Liberty Mut. Ins. Co., 305 N.J.Super. 550 (App.Div. 1997). 

In a matter not involving a workers’ compensation carrier, another panel of the Appellate Division did not follow the Allis-Chalmers Corporation decision. In
Aetna Life & Casualty Co. v. Imet Mason Contractors, 309 N.J.Super. 358 (App.Div. 1998), a property insurer, who had made payments to the insured contractor for repair of damage to a construction project caused by a fire that had originated in a vehicle, brought a subrogation action against the manufacturer and servicer of the vehicle. The court, in that matter, held that the insurer had a duty to preserve the vehicle for inspection by the defendants. The court held that when destruction or spoliation of evidence interferes with a defendant’s ability to defend a lawsuit and conduct discovery, sanctions should be imposed and that the non-spoliating party may even be entitled to counsel fees.

The Exclusivity Doctrine was again held to bar an intentional action brought by an employee against an employer for failure to inform its employees of the explosive nature of the product being manufactured by the employer. In Marinelli v. Mitts and Merrill, 303 N.J.Super. 61 (App.Div. 1997), the Court held that there was no substantial certainty of injury to employees when the workers had been instructed to shred pallets of hairspray which produced toxic fumes. Even though the fans were inoperable or inadequate, the employees were told to wear face masks. When the employees complained of breathing difficulty because of the high heat and humidity, they were temporarily removed from the industrial environment and then subsequently instructed to return to the compactor room to continue shredding the canisters. The workers were not provided with information concerning the effect of the fumes, which was absent from the Material Safety Data Sheets provided by the employer.

Duplication of benefits was again a concern before the Appellate Division as it attempted to balance recoveries available to an injured worker from both the Uninsured Employers Fund (UEF) and the Unsatisfied Claim and Judgment Fund (UCJF). A limousine driver, whose company carried neither workers’ compensation nor automobile liability insurance, was involved in a collision with a hit-and-run driver while operating the company’s vehicle. The injured worker sought benefits from both the UEF and the UCJF. The Appellate Court held that, while the UEF was established to provide temporary and medical disability benefits under the workers’ compensation scheme for employees whose employer did not provide coverage, benefits were also permissible from the UCJF which was created to provide "some measure of relief" to persons who would otherwise be without a remedy because their injuries were the result of an act of an uninsured or unidentified driver. The injured worker was permitted to obtain benefits from the UCJF that exceeded the benefits he received from the UEF, since the UEF could not cover either permanent disability or pain and suffering. Bashir v. Commissioner of Department of Insurance, No. A-5305-96T1, 1998 WL 329817 (N.J.Super. A.D. June 16, 1998).

The New Jersey Supreme Court indicated that it prefers that issues regarding employment status be decided before the Division of Workers’ Compensation. In those instances where there is concurrent jurisdiction over the compensability of an event, the Division of Workers’ Compensation was deemed to have primary jurisdiction to decide compensability issues. A State of New Jersey Department of Transportation worker was injured while going from the State-owned bridge to his vehicle parked in a company-authorized lot. The bridge was poorly lit, and he died due to a motor vehicle accident while crossing the bridge to go to the parking lot. A claim was filed before the Division of Workers’ Compensation, as was a civil action in the Superior Court. The workers’ compensation claim did not advance in that forum, and a trial was held in the Superior Court action, which resulted in a verdict against the State of New Jersey and the vehicle owner in a wrongful death claim for over 1.8 million dollars. The Supreme Court dismissed the civil action and indicated that, in the future, all civil actions with concurrent jurisdiction should be held pending the claim's disposition before the Division of Workers’ Compensation. Kristiansen v. Morgan 153 N.J. 298 (1998). [Note clarification: Kristiansen v. Morgan, 730 A. 2d 1289 - NJ: Supreme Court 1999.]

The Appellate Division reviewed and reported two cases involving employment status. In one instance, a surgeon was held to be an independent contractor. The surgeon was employed by the University of Medicine and Dentistry of New Jersey (UMDNJ) and was granted privileges at the hospital to perform surgery. The court held that UMDNJ did not control what was done nor how it was performed. The hospital did not establish, maintain or prescribe rules or regulations governing the surgeon’s performance in a surgical suite. The surgeon had the opportunity to decide when to undertake and perform surgical procedures at the hospital, and that was sufficient to conclude that the surgeon was an independent contractor even though some of the funds realized from the procedures performed by the surgeon were kept by UMDNJ as working capital. Lowe v. Zarghami 305 N.J. Super. 90 (App.Div. 1997). [Note reversed: Lowe v. Zarghami, 305 NJ Super. 90 - NJ: Appellate Div. 1997.]

In a contrary holding, the Appellate Division found that a carpenter was an employee and not an independent contractor. The employee was found to have "substantial economic dependence" on the company even though the injured worker had registered his own business name, had his own tools and equipment and was treated by the company for all tax and accounting purposes as an independent contractor. Sloan v. Luyando, 305 N.J.Super. 140 (App.Div. 1997). Additionally, in a trial-level decision, a real estate agent was held to be an employee and not an independent contractor, as the agent was economically dependent upon the licensed broker. The agent was statutorily dependent upon the broker, who alone could lawfully enforce a client’s obligation to pay a commission. N.J.S.A. 45:15-3, Re/Max of New Jersey, Inc. v. Wausau Ins. Companies, 304 N.J.Super. 59 (Ch.Div. 1997). [Note: Re/Max of NJ, Inc. v. Wausau Ins. Companies, 744 A. 2d 154 - NJ: Supreme Court 2000.]

Occupational pulmonary disease claims are often complicated due to the nature of the exposure, which includes such factors as dosage and duration. The complexity of the human body and the problems manifested by pre-existing conditions, which may be aggravated or accelerated by an occupational exposure, make a tedious exercise into a complicated nightmare. Seeking a rational basis upon which to apply the law, the Court is required to utilize reliable evidence concerning the work environment as well as objective medical evidence establishing a causal relationship.

Irene Kiczula suffered from Wegener’s Granulomatosis (WG) which was allegedly exacerbated or aggravated by her employment on the assembly line while working at the American National Can Co. producing steel cans. The employee alleged that she was exposed to a multitude of fumes that emanated from the solder and the solvents that were being used in the work environment, including methyl ethyl ketone (MEK). 

The petitioner met the burden of proof by presenting evidence demonstrating that her pre-existing medical condition, WG, was aggravated by her employment. The petitioner offered reliable evidence about the work environment as well as objective medical evidence demonstrating a causal relationship between her occupational pulmonary condition and workplace exposure. The petitioner offered evidence regarding specific chemicals and how each of these chemicals caused symptoms that could be related to the petitioner’s condition. Even though there was no industrial hygiene study evaluating the concentration of particles in the air of the plant, the court considered the evidence presented sufficient to demonstrate a qualitative effect on the petitioner. The petitioner’s attorney offered a board-certified pulmonary specialist to testify about the pulmonary disease. Even though the medical literature demonstrated no causal connection between WG and the pollution, the court relied upon evidence that attributed a causal relationship between the hypersensitivity disorder of the petitioner and the pollutants, taking into account the timing of the disease’s symptoms which showed improvement the longer she was away from her work and exacerbation during periods of exposure.
Kiczula v. American National Can Co., 310 N.J.Super. 293 (App.Div. 1998). 

In another evidentiary ruling, the Appellate Division allowed medical journal articles to be admitted into evidence in a workers’ compensation proceeding even though the treating physician did not rely upon the articles at the time of his testimony. The court held that the rules of evidence were not binding in workers’ compensation matters and permitted the admission based upon the employer’s attorney’s acknowledging that the articles were from reputable journals.

Teddy Bird was employed as a groundskeeper for the Somerset Hills Country Club (Somerset). Somerset Hills, a golf club, was located in a relatively under-developed setting which was a refuge for many types of wildlife, including woodchucks, squirrels, deer, ducks, geese, chipmunks, birds, and other animals. Bird’s duties consisted of picking up trees and tree limbs, maintaining the lawn, and cleaning up the golf course year-round.

During the summer of 1991, Bird developed symptomatology of extreme fatigue and drowsiness and sought medical attention. His doctor established by way of diagnostic studies that he had contracted Lyme disease. A medical specialist confirmed this diagnosis. Confirming the trial decision below and acknowledging that causation in Lyme disease is a difficult question, the Appellate Division permitted a treating physician to testify as an expert as to the causation of the employee’s Lyme disease even though the respondent had not been informed that the doctor would be an expert witness. Additionally, there was no showing that the treating physician’s testimony was a surprise or that it would unduly prejudice the employer.
Bird v. Somerset Hills Country Club, 309 N.J.Super. 517, Cert. denied, ___N.J.___ No. C-1062 (N.J. May 21, 1998).

The exclusivity rule, which bars an employee from suing his employer directly in a common law action, has remained intact. The court held that the "exclusivity rule" could be invoked by an employer in defense of a negligence action where there was not a "virtual certainty" of risk or a deliberate intent of the employer to injure its employees. The failure of a casino to invoke certain procedures involving the transportation of money on the gaming floor did not fall within the "intentional wrong" exception to the exclusivity remedy provisions of the N.J. Workers’ Compensation Act. McGovern v. Resorts International Hotel, Inc., 306 N.J.Super. 174 (App.Div.1997). 

Sharon McGovern was employed as a Security Supervisor by Resorts International Hotel, Inc. (Resorts). On February 21, 1994, at approximately 10:30 a.m., she was shot while attempting to prevent a robbery of money on a cart. She was escorted across the public gaming floor to an armored car. The safety and security of this procedure came into question when Resorts was converting over to a twenty-four (24) hour casino operation. Previously, the transfer was made during closing hours. Following the conversion to a twenty-four-hour casino operation, the transfer of money occurred while the public was present. Resorts security personnel complained about this procedure; however, the employer continued to order that it be performed during the daytime in the presence of the public. The injured worker described the money transfer procedure as "an accident waiting to happen." The Appellate Division held that the action by Resorts did not represent a deliberate intent to injure the employee or her coworkers and that there was not a virtual certainty of harm in the procedure and, therefore, the "exclusivity rule" remained a valid defense for the employer against an intentional tort action brought by the employee. 

Cases involving a determination of the employment situation have been subject to the review of both the Supreme Court and the Appellate Division. The Supreme Court granted certification in Perry v. State, Dept. of Law and Public Safety, 153 N.J. 249 (1998), which involved a New Jersey State trooper who was injured while trying to dig out her State police car in her driveway. When the employee attempted to back the vehicle out of her driveway, she could not get onto the street because of the previous night's snowfall. As a result of her work commitments that morning, she felt that she had no alternative but to manually shovel the snow from her driveway, and while doing that, she sustained an injury. The Division of Workers’ Compensation held the matter compensable, and this decision was reversed by the Appellate Division. Following the Supreme Court’s granting of the employee’s petition for certification and while the matter was pending before the N.J. Supreme Court, the State of New Jersey moved for and was granted leave to supplement the record with a certification of the State claims manager and with a Circular Letter evidencing that it was the policy of the State of New Jersey to afford workers’ compensation coverage when State employees who are assigned to State vehicles are injured during their daily commute to and from work. Despite this supplementation, the State insisted that the trooper would not be entitled to benefits because she was not in her State car, and had not yet begun her commute to work when the accident occurred. 

The Supreme Court remanded the matter, without objection by the State, to the Division of Workers’ Compensation to determine whether or not the policy embodied in the Circular Letter acted to remove the controversy as to whether or not the petitioner was in an employment situation under the jurisdiction of the Division of Workers’ Compensation. If the Circular Letter was valid, then the State, on a unilateral basis and beyond the statutory restrictions of the Workers’ Compensation Act, could consider the matter to be within the course of the employment and provide workers’ compensation coverage in that type of situation. The Supreme Court did not address the issue of whether or not an employer on a unilateral basis may extend workers’ compensation coverage in situations not embodied in the Act thereby permitting the employer to waive the "exclusivity rule" as a defense in potential collateral actions which may yield a higher economic recovery. 

Reaching into the dimensions of time and space, the Supreme Court in a 7-2 decision, established new parameters to define the limits of the employer’s premises. Painting with a broad stroke, the Court effectively expanded the employer’s premises into common areas, thereby further emasculating the "going and coming rule" that had previously been bolstered by legislative amendment to the Workers’ Compensation Act in 1979.

Writing for the majority of the Court, which reversed the Appellate Division decision, Justice Handler determined that Felipe Ramos was injured in the course of employment when he fell down an elevator shaft in the common area of the building when he appeared for work an hour earlier than required. Ramos was a handicapped individual who had lost four of the fingers on his left hand, which were amputated when he was cutting grass with a machete to pick coffee beans on an agricultural site in Puerto Rico at the age of eighteen. In 1984, Ramos, age 42, moved to New Jersey from Puerto Rico. He was employed as a presser at M & F Fashions, Inc., a garment manufacturer located in Newark. Ramos arrived at work at 7 a.m. even though he could not punch in for work before 8 a.m. If he arrived late his salary would be docked. Ramos arrived early every day and would go upstairs, read the newspaper, drink coffee and smoke a cigarette. As a result of the plunge down the elevator shaft, he suffered a cerebral concussion, a fractured pelvis, a spinal sprain, and a fracture of the left wrist, which required a surgical bone graft from his hip onto his wrist. The employee was unable to return to work following the accident and recovered $100,000.00 in a third-party claim against the landlord.

In interpreting the "premises rule" enacted by the New Jersey Legislature in 1989 as theoretically replacing the "going and coming rule", the Court concluded that the accident occurred in an employment area under the employer's control. The Supreme Court determined that the employment situation exists when the employee reaches an area under the employer's control, even if that area extends into a common portion of the property used by multiple tenants of the building. In establishing the element of control, the Court relied upon the facts that the elevator was used to transport fabric and clothing between the ground floor and the fourth floor and that some of the employees had used the elevator for ingress and egress. The use of the common area for business purposes brought that area of the building within the employer’s theoretical control and was considered to be the employer’s premises under the Workers’ Compensation Act. Therefore the employer’s conduct is said to determine whether or not the employer has control over a common area; the capacity to authorize the use of the area is the essence of control. The fact that the employee arrived at work early was not a critical element, and the Court dismissed that issue by establishing that the petitioner was a victim of habit. 

Another issue brought forth in the Ramos case was the timeliness of medical examinations to determine the nature and extent of permanent disability in a total disability claim. The Court indicated that medical examinations are not stale when a diagnosis can be made at a time when it has been presumed that the disability has become permanent. Ramos was examined by medical experts on his own behalf 2 ½ years after his accident, and the Supreme Court stated that the thirty-one month time lag was a sufficient period of time for a medical expert to establish an opinion of total and permanent disability and one which the Court could rely upon as credible evidence. The fact that the evaluations occurred four and one-half years before the doctors testified did not, in and of itself, render the evaluations stale.

In a vigorous dissent, Justice Pollack indicated that the "going and coming rule" had been abolished by the legislature in the 1979 amendments and that the new place and time limitations established under the "control doctrine" were too broad and contradictory to the intent of the 1979 amendments. The dissenting opinion provided a more economically conservative approach to the allocation of benefits to employees who are injured while going to and coming from work.
Ramos v. M & F Fashions, Inc., et al., No. A-109-97, 1998 WL 384604 (N.J. July 13, 1998).

In another matter, a personal risk was not deemed to be compensable by the Appellate Division. An employee who was a beautician was told to leave the beauty salon where she was employed because no appointments were booked for her that day. The beautician decided to stay and have a facial and was scalded during the process. The court held that it was not a compensable event since the employee’s accident arose from a "personal risk"; her facial at her employer’s beauty salon was exclusively for her benefit. Sparrow v. La Cachet, Inc., 305 N.J.Super. 301 (App.Div. 1997). 

Recreational activities that bordered on horseplay were not considered to be compensable events under the Workers’ Compensation Act. A worker who participated in arm wrestling, which occurred regularly but was not endorsed or approved by the employer, was denied workers’ compensation benefits when he sustained a spiral fracture of the right humerus while participating in the activity. Even though the arm wrestling occurred on a regular basis and the competition at the store was similar to a tournament, the employee had participated in an activity that deviated from the course of his ordinary work, and he was not permitted to recover workers’ compensation benefits.
Quinones v. P.C. Richard & Son, 310 N.J. Super. 63 (App.Div. 1998).

The statute of limitations remained a restrictive bar to workers’ compensation claims. The Appellate Division conservatively interpreted the Supreme Court’s decision of Sheffield v. Schering Plough Corp. 146 N.J. 442 (1996), which permitted the extension of the statute of limitations in workers’ compensation claims where the employee had been lulled into a sense of false security, where the employer under its control had paid private-plan disability benefits and private-plan medical benefits to its employee in a denied workers’ compensation matter. In a case decided this term, the Appellate Division followed the strict statutory interpretation that a workers’ compensation claim must be filed within two years after the claimant knew the nature of the disability and its relationship to the employment.

Joan Earl worked as a secretary/clerk at Johnson & Johnson from 1973 – 1993. She spent a significant portion of her employment in a small file room where the windows were nailed shut, and the file draws were lined with gypsum sheetrock which was pulverized when she touched it and spread into the air about her and on her clothes. The ventilation system was considered inadequate, and stale cigarette smoke, perfume, and exhaust fumes from a helicopter were present in her work environment. In 1989, the employee became ill at work and was hospitalized for asthma and chronic obstructive pulmonary disease. She was hospitalized again in 1993. A claim petition was filed in September 1993. The petitioner’s position was that she did not know the nature of her disability until she knew its extent, as indicated by the results of pulmonary function tests administered to her in 1994 and 1996 after she had filed a claim petition, and that the statute of limitations had been tolled since health insurance payments were made to the petitioner or to her health care providers for her medical condition. The Appellate Division did not extend The Sheffield Doctrine as there was no evidence presented to show whether the entire cost of the "hospital plan" was paid by the employer or whether the employee paid all or part. There appeared to be no evidence that indicated that the petitioner would have been given the impression that the employer was paying her healthcare providers in partial satisfaction of its obligation under the Workers’ Compensation Act, nor did the petitioner testify that the employer had lulled her into a sense of false security.
Earl v. Johnson & Johnson, No. A-5856-96T2, 1998 WL 334689, (App.Div. June 23, 1998). [Note: NJ Supreme Court reversed and held that matter compensably.)  Earl v. Johnson & Johnson, 728 A. 2d 820 - NJ: Supreme Court 1999.]

While medical treatment under the New Jersey Workers’ Compensation system is under the exclusive control of the employer, the employer remains liable for payment of medical benefits for a compensable condition even though its obligation under the Workers’ Compensation Act has been satisfied by the payment of permanent disability benefits. A totally disabled petitioner was entitled to receive full medical benefits by way of surgery which was required more than two years after the last payment by the employer under a total disability award but during the period when payments were being made by the Second Injury Fund. The worker injured his back on July 8, 1980, and required two back surgeries. In March of 1985, a total disability award was entered, allocating responsibility to the employer of 66 2/3% and the Second Injury Fund of 33 1/3%. The Second Injury Fund commenced payment on June 6, 1988. In 1993, more than two years following the last payment by the employer and more than two years from the last medical treatment rendered as authorized by the employer, the petitioner was required to undergo a hemilaminectomy related to the prior surgeries to his back. The court held that the employer was responsible for the payment in October of 1993 since the petitioner was receiving total disability benefits due to the original accident, even though the payments were being furnished by the Second Injury Fund. Di Bernard v. Great Atlantic and Pacific Tea Co., 303 N.J.Super. 280 (App.Div.1997).

In an appeal after remand by the New Jersey Supreme Court, the Appellate Division considered the petitioner’s sterility compensable and awarded permanent partial disability even though the condition may not have affected his ability to work or diminished his earning capacity. The court considered the record and held that it contained sufficient credible evidence indicating that the effects of the sterility impaired his ability to carry on his ordinary pursuits of life. Akef v. BASF Corp., 305 N.J.Super. 333 (App.Div.1997).

The Appellate Division had the opportunity to review recent statutory amendments to the Workers’ Compensation Act involving dependency benefits and indicated that the retroactive application of economic provisions was appropriate. In 1995, the New Jersey Workers’ Compensation Act was amended, and the credit against continuing dependency benefits for earnings paid to a dependent spouse after the expiration of the initial 450-week dependency period was eliminated. The court held that it was appropriate to retroactively apply the statutory amendment to existing cases since such an application would promote the public interest. Harris v. Branin Transport, Inc., No. A-2635-96T1, 1998 WL 327021, (N.J.Super. A.D., May 22, 1998).

John Davis Oliver, the petitioner’s husband, died in a motor vehicle accident on August 17, 1976. An order for dependency benefits was entered on February 16, 1979, by the Division of Workers’ Compensation awarding the petitioner widow-dependency benefits at the rate of $128.00 per week subject to a reduction due to earnings after 450 weeks which was provided for in the Statute, N.J.S.A. 34:15-13. The New Jersey Legislature amended the statutory provision effective July 25, 1995, L.1995, c.185 and eliminated the credit. N.J.S.A. 34:15-13. The court indicated that the legislative amendment that was passed enabled widows to have the benefit of their earnings in addition to workers’ compensation benefits. An interpretation permitting the retroactive application of the amendment was that it would promote the public interest in providing financial assistance to widows in times of need, regardless of their employment status. The employer would not be obligated to make payments they would not have otherwise been obligated to make if the petitioner had not been employed. The court held that the retroactive application did not create a "harsh and oppressive" consequence for the employer in that the contingent credit could not be considered a vested right before the actual realization of the credit. Therefore no vested right of the employer was violated.


By Jon L. Gelman, Attorney at Law. Jon L. Gelman of Wayne, NJ. He is the author of NJ Workers’ Compensation Law (West-Thomson-Reuters) and co-author of the national treatise Modern Workers’ Compensation Law (West-Thomson-Reuters). For over five decades, the Law Offices of Jon L Gelman  1.973.696.7900 have represented injured workers and their families who have suffered occupational accidents and illnesses.

Recommended Citation: Gelman, Jon L.,  Shattered Consensus: Comp Case May Affect After School-Funding Debate,, (1998),

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This article is reprinted with permission from the September 7, 1998 issue of the New Jersey Law Journal ©1999 American Lawyer Media, 153 NJLJ 930 (Sept. 7, 1998).


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