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PAOLO MARANO VS. CLIFFORD J. SCHOB, M.D. (L-6604-12, ESSEX COUNTY AND STAEWIDE)
Citations: 189 A.3d 368; 455 N.J. Super. 283Docket: A-3915-16T2
Court: New Jersey Superior Court; June 20, 2018; New Jersey; State Appellate Court
Original Court Document: View Document
A New Jersey appellate court case involves plaintiff Paolo Marano, a police officer who sustained back injuries in a work-related incident in 2010. He alleged medical negligence against orthopedic surgeon Clifford J. Schob, M.D., and Comprehensive Orthopedics, PA, claiming improper diagnosis and failure to advise him to seek emergency care. Following extensive treatment, Marano received workers' compensation benefits totaling $51,779.81 from PMA Companies, the third-party administrator for his employer. In 2012, Marano filed a medical malpractice lawsuit, and the parties entered a high/low agreement for arbitration, guaranteeing him a minimum recovery of $250,000 and a maximum of $750,000. After the arbitration, despite a "no cause" verdict for the defendants, Marano received the agreed "low" figure under the settlement. PMA Companies sought to enforce a workers' compensation lien for the benefits previously paid to Marano. Marano contested the lien's enforceability, arguing that a regulation by the Department of Banking and Insurance exempting certain high/low agreement payments from physician reporting requirements should apply. The court rejected this argument, affirming the validity of the lien under N.J.S.A. 34:15-40 as established in the precedent case Pool v. Morristown Memorial Hospital. However, the court remanded the case for the trial court to reconsider a disputed portion of the lien amount. The medical malpractice case was arbitrated in January 2016, resulting in a dismissal of claims against the defendants. Under a high/low agreement, defendants paid $250,000 to resolve the claims, with $88,000 allocated to the plaintiff, $57,148.33 to plaintiff's counsel for expenses, and $62,851.67 as attorney's fees. An additional $42,000 was held in trust pending resolution of PMA's workers' compensation lien, which PMA claims is approximately two-thirds of $51,779.81. The plaintiff argued that the lien was extinguished by the arbitration outcome, while PMA contended that the payment constituted double recovery unless the lien was satisfied. PMA subsequently moved to enforce the lien in November 2016. The plaintiff filed an order to show cause in the Law Division, seeking to declare that his payment was exempt from PMA's lien. Although PMA was not a defendant in this complaint, it opposed the plaintiff's application. A hearing on PMA's motion in workers' compensation court was adjourned, and Judge L. Grace Spencer later heard arguments on the plaintiff's order to show cause. On March 6, 2017, Judge Spencer denied the plaintiff's application, emphasizing the lien statute's purpose of preventing double recovery and ruling that high/low agreement payments are treated as settlements subject to liens. The judge dismissed the plaintiff's argument regarding the physician reporting changes and ruled that PMA's lien must be satisfied, directing the workers' compensation court to determine which fees were lienable. The plaintiff appealed, arguing that the regulation changes necessitate exemption from PMA's lien, contending that the Pool decision should be reconsidered, and asserting that any enforceable lien should have its amount reduced. PMA countered that the trial court's decision was sound and that the lien enforceability should have been addressed by the compensation court, disputing the need for a lien reduction. Under the workers' compensation framework, employees or their dependents can pursue claims against third parties responsible for injuries or deaths, as stipulated in N.J.S.A. 34:15-40. If they succeed in recovering damages, employers are entitled to a portion of that recovery. Specifically, if the recovery equals or exceeds the employer's liability, the employer is released from further liability and can be reimbursed for medical expenses and compensation previously paid, minus the employee's legal expenses. The statute aims to prevent double recovery, ensuring that employees do not collect both workers' compensation benefits and full damages from a third-party claim. Settlements from third-party claims are also subject to reimbursement under Section 40, as established in Frazier and other cases, which clarify that any recovery related to the employee's claim against a third party, regardless of how unusual the settlement is, will trigger a lien for reimbursement. The lien applies irrespective of the merits of the third-party claim. Additionally, the plaintiff argues that this analysis is impacted by new regulations requiring insurers to notify the Medical Practitioner Review Panel of certain medical malpractice settlements, although such notification does not pertain to high/low agreements where no liability is found. The regulation introduced in 2009 excludes certain payments under high/low agreements from being reported to the Review Panel to avoid misleading implications of malpractice liability when no liability is found. These payments are still reported to the Department without identifying information. The regulation does not affect employers' or insurers' rights to enforce Section 40 workers' compensation liens, and its adoption was noted to have little economic impact on insurers. Settlements outside high/low agreements remain subject to reporting requirements regardless of liability admission. The plaintiff argues that allowing low payments under high/low agreements to be subject to Section 40 liens undermines public policies that encouraged such agreements, positing that fewer will be negotiated if liens are imposed. However, the court is unconvinced, emphasizing that the regulation's aim was to clarify the nature of low payments and that the enforceability of Section 40 liens is independent of the tortfeasor's liability. The court affirms the trial court's ruling on lien enforceability, reaffirms its prior opinion in Pool, and remands for further consideration of a specific lien dispute, confirming that the trial court retains jurisdiction over this matter.