Jon / Thursday, September 7, 1989

Fraudulent Concealment Does Not Bar A Claim

NJ Supreme Court Review 1988-1989

The 1988-1989 court term has resulted in significant developments in the New Jersey Division of Workers' Compensation. The court has continued to define the scope of employment and the parameters under which remedies are available for the injured employee under the Workers' Compensation Act, and it confirmed the right of employees to obtain relief from employers where fraudulent concealment is an issue. The legislature established a system for adequate funding of, and payment by, the Uninsured Employers' Fund in instances in which the employer has failed to provide compensation. [The court also addressed issues of apportionment of liability, causation, res judicata, temporary and permanent disability benefits, hearing procedures, and injuries "arising out of or in the course of employment," as well as instituting a procedure to fund the Uninsured Employers' and Second Injury Funds.] A Commission of Judicial Performance was established to monitor the conduct of judges of compensation. Finally, the Appellate Court handed down an opinion that stated its disapproval of the Division's current custom of trying cases in a fragmented fashion over several weeks, months, or even years.

EMPLOYMENT STATUS

The exclusivity of the workers' compensation remedy was affirmed when an employee of one division of a company sought to bring a negligence action against an employee of another division of the same entity. The court considered them "co-employees" of the same employer. The injured worker and the individual who caused his injuries were employed by the State of New Jersey, the former by the State Police and the latter by the Department of Treasury. The court concluded that the legislature had not intended to limit the class of "co-employees" to those involved in a common employment relationship or common enterprise. Linden v. Solomacha, 232 N.J.Super. 29 (App.Div.1989).

The court also addressed whether a temporary worker was an employee of the employment agency which had placed her or of the company to which the worker had been assigned. The court indicated that, even though the employment agency made payment to the employee, that fact did not act to bar an action by the injured worker before the Division of Workers' Compensation against the employer to whom she had been assigned. The court concluded that the exclusive remedy of the employee who was injured while working for the special employer remained under the scope of the Workers' Compensation Act. In this particular case, an employment agency hired a worker during the holiday season to provide temporary employment to a company in need of employees. The worker slipped and fell on the premises of the assigned employer and was barred from pursuing a tort claim against the special employee since an employment relationship was said to exist. The court relied upon the fact that the employee knew she was to be hired to various employers, that she accepted the terms of her employment with the special employer, that she entered into an implied contract with the special employer when she reported voluntarily to work and complied with the store's policy, and that she accepted training and guidance from the special employer. The employee was said to have known that she could be terminated from her employment if she failed to submit to the special employer's direction and control and, therefore, that she consented to such an arrangement placing her within the employment status and eligible for workers' compensation benefits only. Antheunisse v. Tiffany & Company, Inc., 229 N.J.Super. 399 (App.Div.1988).

The court continued to follow the "right to control test" as one of its diagnostic measures to determine the existence of an employment relationship. The primary factor evaluated was whether the individual engaged to perform services was subject to the employer's control. A caddy injured when he was struck in the face by a golf ball was considered a general employee of the golf club and not a special employee of the player for whom he was caddying, even though the player paid him. The court concluded that the employer maintained the element of control over the caddy since it was the caddy master who assigned the caddy to various players at the golf club. Harrison v. Montammy Golf Club, 227 N.J.Super. 409 (Law Div. 1988).

VICARIOUS LIABILITY

The court continued to define the gray area between the remedies of workers' compensation and tort liability during the 1988-89 term. A landowner was held not responsible under the theory of vicarious liability permitted under N.J.S.A. 34:15-79 in an action in which an independent contractor was negligent. An employee of the independent contractor, who was injured when he was struck by a falling tree limb during the course of his employment, could not recover against the landowner who did not retain any control over the manner and means by which the contractor was to do his work. Moreover, default judgment against the independent contractor was upheld. Even though the plaintiff's remedies should have been dealt with exclusively under the Workers' Compensation Act, the trial court appeared to have assumed that the exclusivity of those remedies was an affirmative defense that had been waived by the subcontractor's failure to answer the complaint. This issue was not addressed by the appellate court. Cassano v. Aschoff, 226 N.J.Super. 110 (App.Div. 1988), certif. denied 113 N.J. 371 (1988).

REMEDY FOR FRAUDULENT CONCEALMENT
In a landmark decision, the New Jersey Supreme Court again reaffirmed that the Workers' Compensation Act of the State of New Jersey did not bar a cause of action for aggravation of illness resulting from the employers' and company physicians' fraudulent concealment of already discovered disabilities. The court recognized that, although the employees were limited to workers' compensation benefits for an initial occupational disease claim related to the hazards of the employment experience, the Workers' Compensation Act did not bar a cause of action for aggravation of such illnesses resulting from fraudulent concealment. The court reasoned that an employer's fraudulent concealment of diseases that have already developed is not one of the risks that an employee should assume. Millison v. E. I. DuPont de Nemours & Company, 115 N.J. 252 (1989).

RELIEF IS PROVIDED WHERE EMPLOYERS ARE UNINSURED
In 1988, the New Jersey Legislature restructured the Uninsured Employers' Fund to provide a reliable mechanism for payments to injured workers whose employers had failed to provide compensation in accordance with statutory requirements. N.J.S.A. 34:15-79 L.1988 c.25. Procedures were established by the Division of Workers' Compensation for the processing of claims for which there is no insurance coverage and which arose from accidents occurring on May 27, 1988, or later. The matters are to be listed before a supervising or senior judge of compensation regardless of the vicinage. At the time of the hearing, the judge of compensation shall require that the petitioner's attorney furnish evidence establishing the correct name and address of the alleged employer. The petitioner's attorney also will be responsible for furnishing proof of inquiry of and response from the Compensation Rating and Inspection Bureau. If no answer has been filed by the respondent, the compensation judge may require the personal service of the claim petition. The clerk of the Division of Workers' Compensation must provide notice to the Uninsured Employers' Fund of the scheduled hearing on a form provided by the Division of Workers' Compensation.

EVIDENCE FOR APPORTIONMENT
The court continued to wrestle with the apportionment of a respondent's liability in occupational disease claims. It reiterated the basic guidelines that there must be sufficient evidence from expert medical testimony to apportion liability among multiple insurance carriers or employers. An employee, who had suffered a specific traumatic event while working for one employer, who then worked for six weeks for another employer, and who alleged an occupational back condition but offered no medical evidence to support the determination that the subsequent employment had established a material lessening of his working ability or a significant decrease in disability, was prohibited from receiving any benefits from the subsequent employer. Kozinsky v. Edison Products Co., 222 N.J.Super. 530 (App.Div. 1988).

ARISING OUT OF AND IN THE COURSE OF EMPLOYMENT
Confronted with the new language of the 1979 amendments to the Workers' Compensation Act, the court continued to define those areas in which an accident was determined to have arisen out of the employment situation or to have occurred within the course of the employment. An employee is said to be on a "special mission" when he is performing a service for his employer while away from the employer's premises; however, in two cases concerning this issue, the court was reluctant to find that the employee had met the required criteria to be considered within the scope of the employment.

A training technician whose job was to provide training to various emergency management personnel, including firemen, first aid members, and police officers, and whose regular working hours were from 8:30 a.m. to 4:00 p.m. was denied benefits when she was injured in a motor vehicle accident while using her employer's vehicle to drive home from the office to change her clothes after which she was to return for night classes. The employee was denied benefits even though she had been encouraged to go home to visit with her children, have dinner, and "take a break." The court reasoned that she was not required to leave the premises and that the activity of driving home did not constitute performance of any duties assigned by her employer. Chisholm-Cohen v. County of Ocean, Department of Emergency Services, 231 N.J.Super. 348 (App.Div. 1989).

In another instance, an employee, who was assigned by his employer to work in Australia, was not considered to have been injured in the performance of his duties when he was involved in an automobile accident en route to a beach and sustained injuries that resulted in his death. The appellate court determined that the decedent was not on duty at the time of his accident either because he was encouraged to sightsee or because he had work with him, which he expected to do when he arrived at his destination. The court further concluded that the benefit of the trip to the employer was no greater than that which might be incidental to improving the morale of the decedent. Walsh v. Ultimate Corporation, 231 N.J.Super. 383 (App.Div. 1989).

A police officer in full uniform who suffered an automobile accident while driving to work in his private automobile was not permitted to recover workers' compensation benefits since the officer was not responding to a duty assignment or emergency situation but was merely commuting to work. Plodzien v. Township of Edison Police Department, 228 N.J.Super. 129 (App.Div. 1988).

CHAIN OF CAUSATION

Focusing on determining what constitutes an intervening cause, the court indicated that an employee's conduct considered intentional or negligent is deemed to break the chain of causation. The subsequent event is considered an independent, intervening cause that relieves the employer of responsibility for the consequences of the subsequent event. An individual who injured his right hand in the course of his employment and who was required to undergo a surgical repair of the flexor tendon of the right hand was not permitted to recover compensation benefits for a re-rupture of the previously-repaired tendon which occurred while he was working on his car at home. The treating physician offered testimony that the second event was the immediate cause of the second rupture. The petitioner testified that he was using a wrench to tighten an alternator belt on his car when he heard a popping noise which he later was advised was the tendon rupturing. At the time of the hearing, the employee demonstrated to the court how he pushed down on the wrench with the palm of his hand at the time of the re-rupture. Since the treating physician indicated that the petitioner had exceeded the recommended normal use of his hand and the employee's activities went far beyond the normal use of the hand, the petitioner's activity was considered negligent, and benefits were denied. The court concluded that this independent, intervening accident had broken the chain of causation. Amey v. Friendly Ice Cream Shop, 231 N.J.Super. 278 (App.Div. 1989).

RES JUDICATA
The doctrine of res judicata was cited by the appellate division in affirming the trial-level opinion of Judge Seymour M. Stadtmauer regarding the apportionment of disability made between the employer and the Second Injury Fund for an employee who had been determined to be totally and permanently disabled. The employee, who had been exposed to smoke, dust, fumes, and other pulmonary irritants, had been awarded total disability benefits, of which 55 percent was attributable to the employer for chronic bronchitis and pulmonary disease, and the balance of 45 percent was attributed against the Second Injury Fund for severe cardiovascular disease and severe hypertension. The widow of the decedent was barred from making an application at a later date, alleging an increase in disability against the employer. The court reasoned that there can be no further increase in compensable disability against an employer after an adjudication of 100 percent total permanent disability has been made for the compensable condition unless the employee in fact, has returned to work and has been reinjured. Therefore, the court concluded that an award for 100 percent total permanent disability would preclude any additional award for increased benefits against the employer for the effects of the same injury. Taylor v. Engelhard Industries, 230 N.J.Super. 245 (App.Div. 1989).

WORKERS' COMPENSATION BENEFITS DEFINED
An appellate court decision provided further insight into the difference between permanent and temporary disability benefits. A workers' compensation award for permanent disability benefits was said not to constitute a weekly income and therefore, an employee was permitted to receive both workers' compensation permanent disability benefits and income continuation benefits in accordance with the personal injury protection benefits (P.I.P.) of an automobile insurance policy. However, credit for workers' compensation temporary disability benefits was taken against the P.I.P. income continuation benefits since the temporary benefits were considered to be a replacement for lost wages. Olivero v. New Jersey Manufacturers Insurance Company, 227 N.J.Super. 367 (App.Div.1988), N.J.S.A. 39:6A-1: et seq.

In cases where only workers' compensation and personal injury protection benefits are available, the appellate court concluded that the primary responsibility to make payment rests with the workers' compensation insurance carrier. Lefkin v. Venturini, 229 N.J.Super. 1 (App.Div.1988). Procedural Developments To continue adequate funding of the Second Injury Fund and the Uninsured Employers' Fund, the Department of Labor established procedures to collect an annual surcharge from all workers' compensation and employers' liability insurance policyholders and self-insured employers. The surcharge will begin to appear in all policies written in New Jersey. N.J.A.C. 12:235-13.

The appellate division was confronted with the problem of original jurisdiction and the inability of the Division of Workers' Compensation to statutorily order the recovery of voluntary or involuntary payments to injured workers or their dependents. The court prescribed a two-step procedure that might ultimately provide restitution to the employer in those instances where the injured spouse remarried, and the employer had paid dependency benefits on a continuing basis. A two-step procedure was outlined by the court to be followed in such instances. The first step of the procedure is to require a rehearing before the Division of Workers' Compensation to review the evidence to determine if the original award should be modified due to the remarriage of the surviving spouse. The second step would occur only if the employer successfully convinced the Division of Workers' Compensation to modify the original order. The court provided that the employer may institute an enforcement proceeding in the Law Division in the Superior Court in a summary fashion pursuant to R. 4:67-1, et seq. to seek reimbursement. Hajnas v. Engelhard Mineral & Chemical Co., 231 N.J.Super. 353 (App.Div.1989).

Several cases concerning hearing procedures per se were reviewed by the court this term. In discussing motions for temporary and medical benefits, the court indicated that the motion is contested. There are opposing supporting documents offered that meet, contradict, or oppose the material allegations of the moving pleadings. A full hearing is required, including the offering of medical experts and opposing counsels' right to cross-examine the experts' opinions. Hogan v. Garden State Sausage Co., 223 N.J.Super. 364 (App.Div.1988).

The court reiterated that a party has a fundamental right not to be prejudiced at the time of trial and that parties must disclose reports or opinions to opposing counsel who must be permitted adequate time to prepare for cross-examination. Waters v. Island Transportation Corp., 229 N.J.Super. 541 (App.Div. 1989), N.J.A.C. 12:235-5.9, N.J.A.C. 12:235-5.10(j).

The appellate division also upheld provisions that, while a permanent district office need not be established in every county of the state, the statute does require that a temporary hearing facility be established and a hearing conducted in any county where there is a coincidence of all of the criteria for venue and where either party insists on strict compliance with N.J.S.A. 34:15-53. Middlesex County Bar Association v. Parkin, 226 N.J.Super. 387 (App.Div. 1988), certif. denied 113 N.J. 380 (1988).

COMMISSION ON JUDICIAL PERFORMANCE
A Commission on Judicial Performance was established to monitor judicial conduct before the Division of Workers' Compensation. The Commission comprises seven members appointed by and serving at the pleasure of the Division of Workers' Compensation Director. It comprises two judges of compensation, at least three members of the Bar, and not more than four members who are laymen and do not hold any public office whatsoever. The administrative rules provide for the removal from office, suspension, fine, written reprimand, or verbal reprimand of a judge of compensation. N.J.A.C. 12:235-3.11, et seq.

OBJECTION TO PARTIALLY HEARD MATTERS
The custom of the Division of Workers' Compensation which permits cases to be tried in a piecemeal fashion, has now come under stinging attack by the Appellate Division. It has been the procedure of the Division to list motions, pre-trial conferences, and trials on the same calendar and at the same time. Matters are now listed on a cycle of three weeks, and they are generally grouped according to the respondent's attorney. Testimony in a contested case is often spread out over many hearing dates and, thus, over many weeks, depending on both the availability of counsel and witnesses and the court's schedule. It is not unusual for a contested case to take months, if not years, to reach final disposition. For example, in the Hajnas case involving dependency benefits of a worker who died on September 19, 1975, testimony was commenced on January 27, 1988, and was concluded on September 19, 1979. The Appellate Division noted in its decision that the practice of fragmented hearings without good cause is "expressly disapproved." Hajnas v. Englehard Mineral & Chemical Co., 231 N.J. Super 353 (App. Div. 1989).

The Court has indicated that fragmented hearings not only result in "inexcusable delay in the disposition of the claim" but also increase the need for extensive notes upon which the hearing officer is required to rely in judging the credibility and demeanor of witnesses. In addition, the purchase of expensive transcripts is required to memorialize prior proceedings. The disapproval of the current system was again emphasized by Appellate Court Judge Scalera in his decision in Lister, in which he reminded the parties and the Division that the purpose of the Workers' Compensation Act is to provide a prompt and inexpensive system of redress to the injured worker who should be promptly compensated for his injuries. Lister v. JB Eurell Co., 560 A. 2d 89 - NJ: Appellate Div. 1989.

During the 1988-1989 term, the courts have continued to interpret the Workers' Compensation Act in accord with its original purpose as remedial social insurance while also continuing to define the employment relationship and the types of incidents that fall within the scope of employment. Procedurally, it remains to be seen whether the custom of fragmented trials over a long period of time will be continued or whether the Lister decision will result in stricter adherence to the rules governing the conduct of formal hearings (N.J.A.C. 12:235-5.10 (e).
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The author, Jon L. Gelman, practices law in Wayne, NJ. He is the author of NJ Workers’ Compensation Law (Thomson-Reuters) and co-author of the national treatise Modern Workers’ Compensation Law (Thomson-Reuters). For over five decades, the Law Offices of Jon L Gelman 1.973.696.7900 jon@gelmans.com have represented injured workers and their families who have suffered occupational accidents and illnesses.

Recommended Citation: Gelman, Jon L., Fraudulent Concealment Does Not Bar A Claim, www.gelmans.com (1989),
https://www.gelmans.com/ReadingRoom/tabid/65/ArtMID/1482/ArticleID/451/preview/true/Default.aspx

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Tags: NJ Supreme court Review Apportionment Employment Status Arising out of and in the course of employment Fraudulent concealment Vicarious Liability Commission on Judicial Performance Res Judicata Chain of Causation

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