Justice Anne M. Patterson of the New Jersey Supreme Court. Photo: Carmen Natale/ALM

In a split decision, the New Jersey Supreme Court ruled an auto insurance statute does not preclude a workers' compensation carrier from suing to recoup benefits it paid for a worker's injuries in a motor vehicle accident.

The 3-3 ruling affirms an Appellate Division decision that said a subrogation action by New Jersey Transit can proceed because it arose from medical expenses and lost wages, and not from noneconomic loss. The Appellate Division overturned a decision by Superior Court Judge Robert Polifroni of Bergen County, who said the claim to recoup benefits was barred by New Jersey's Auto Insurance Cost Reduction Act.

Justice Anne Patterson, joined by Chief Justice Stuart Rabner and Justice Faustino Fernandez-Vina, concurred with the Appellate Division.

"We find no evidence that when the Legislature enacted AICRA, it intended to bar employers and insurers that have paid workers' compensation benefits for economic loss from seeking reimbursement from third-party tortfeasors in cases such as this, in which the employee's losses were covered by workers' compensation benefits and he neither sought nor received PIP [Personal Injury Protection] benefits," Patterson wrote. "We do not view New Jersey Transit's subrogation action—limited to workers' compensation benefits paid for economic losses—to contravene AICRA's provisions or to undermine its goals."

Justice Barry Albin wrote the dissent, joined by Justices Jaynee LaVecchia and Lee Solomon. Justice Walter Timpone did not participate. Albin wrote that when a driver is involved in a work-related automobile accident and his economic costs are recoverable under his private auto insurance carrier's PIP policy or under his employer's workers' compensation scheme, New Jersey's auto insurance system makes the workers' compensation carrier primarily responsible for reimbursing those losses.

"Despite the clear language and intent of the no-fault system, the concurring opinion allows the workers' compensation carrier here to sue the tortfeasors or their automobile insurance carrier in a subrogation action, thus permitting the very outcome the Legislature intended to foreclose — more litigation and greater financial burdens on our automobile insurance system," Albin wrote.

The suit stems from a crash involving a vehicle belonging to New Jersey Transit and driven by one of its employees, David Mercogliano. He was hit by a vehicle owned by Chad Smith and driven by Sandra Sanchez. Mercogliano had his own auto insurance, which entitled him to PIP and other benefits, but he did not seek any benefits from that policy in connection with the accident.

After New Jersey Transit sued Sanchez and Smith to recoup workers' compensation benefits it paid to Mercogliano, they argued that AICRA barred the claim, and Polifroni agreed. He cited Continental Insurance v. McClelland, a 1986 Appellate Division case, in concluding that because New Jersey Transit's workers' compensation carrier paid benefits for all of Mercogliano's medical expenses and lost income, he had no uncompensated loss of income or property, and thus sustained no economic loss for purposes of AICRA.

Albin called Continental Insurance "well-reasoned," but Patterson found that decision was not persuasive as applied to the circumstances and was "contrary to the purposes underlying the Workers' Compensation Act."

John Mallon of Chasan Lamparello Mallon & Cappuzzo in Secaucus, representing Sanchez and Smith, said he was disappointed that the divided Supreme Court resulted in affirmance of the Appellate Division ruling, but added that he was pleased that the court remanded the case for the issue of whether New Jersey Transit can recover a partial permanent disability award.

Shawn Huber of Brown & Connery in Westmont, representing New Jersey Transit, did not respond to a request for comment.