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Court Defines Role of Worker's Employer in Tort Actions

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An injured worker’s employer not only may participate in a trial stemming from a workplace accident, but can be placed on a verdict sheet for a jury to allocate a percentage of fault to the employer, according to a published opinion by the New Jersey Appellate court. While at first glance the Court’s holding in Estate of Jack D’Avila v. Hugo Neu Schnitzer East, et al (A-4439-11T2, A-4705-11T2, A-4713-11T2) appears to contradict the exclusive remedy provision of the worker’s compensation statute (N.J.S.A. 34:15-8), the narrowly-tailored decision actually clarifies the role of an injured worker’s employer in an underlying tort action when a defendant seeks contractual indemnification from that employer.

The Worker’s Compensation Act instructs that an employer may not be sued for negligence that caused injury or death to an employee without proof of an intentional wrong. However, the Act does not preclude an employee from bringing claims against third-party tortfeasors. Since the Act does not prohibit an employer from entering into an express contract to indemnify a third party, the employer may be named as a third-party defendant for contractual indemnification purposes in a tort action brought by an injured employee.

In D’Avila, an action was filed by the estate of a deceased employee who was injured on a construction site by a falling ladder, became paralyzed and ultimately died three years later after receiving negligent medical treatment. As the court noted, the case involved numerous parties, and claims of negligence against the general contractor, subcontractors that were not plaintiff’s employer and various medical providers, as well as coverage actions involving several insurance companies and brokers. The general contractor, Hugo Neu, filed a cross-claim for contribution and contractual indemnification against Femco, a subcontractor, and a third-party complaint against Simpson & Brown (S&B), plaintiff’s employer, for breach of contract and indemnification.

The trial judge denied a motion in limine to preclude S&B from participating in the litigation, but reserved on a decision regarding whether a jury could consider S&B’s negligence.

As a result, the parties were permitted to refer to S&B’s negligence in their opening statements as it related to whether the negligence of Hugo Neu, Femco and another co-defendant subcontractor was the proximate cause of plaintiff’s injuries. However, the court refused to permit S&B to be placed on the verdict sheet. The jury found negligence and proximate cause as to Hugo Neu and Femco, and apportioned 25 percent liability to Hugo Neu and 75 percent to Femco. Several of the medical defendants were also found liable for the decedent’s ultimate injury. Based on the percentages of fault allocated to each construction defendant and medical defendant, the court molded a verdict that held Femco 57.75 percent liable for the judgment, Hugo Neu 19.25 percent liable and plaintiff’s trauma surgeon 23 percent liable. The trial court also found that both Femco and S&B’s insurers were obligated to provide primary, non-contributing insurance coverage to Hugo Neu. Various appeals ensued.

The Appellate Division held that the trial court erred in allowing the plaintiff’s employer to participate in the trial while prohibiting the jury from allocating a percentage of fault, if any, to the employer on the verdict sheet. The court discussed the competing policies of not entangling employers in negligence actions versus the need for consistency of outcomes and judicial economy, and ultimately ruled in favor of resolving indemnity issues in the same trial or before the same fact-finder. This ruling was tempered by an explanation of its application in the specific context of the D’Avila case – extensive claims and an unusually lengthy trial. The court also stated that in such cases, jury instructions and the verdict form must be carefully crafted. Likewise, a judge must instruct the jury as to the role of the employer’s attorney, and is responsible to mold the verdict so plaintiff’s damages are not reduced by the employer’s percentage of fault. Finally, the court made it clear that the ruling applied to participation of counsel representing the parties on issues on contractual indemnification, not coverage. Insurance coverage disputes must be decided by the court or a separate jury.

It’s clear that the Appellate Court did not completely disturb its previous holdings in Kane v. Hartz Mountain Industries, Inc., 278 N.J. Super. 129 (App. Div. 1994) aff’d o.b. 143 N.J. 141 (1996), which prohibited an employer/indemnitor’s participation in a negligence trial; or the Law Division case, White v. Newark Morning Star Ledger, 245 N.J. Super. 606 (Law Div. 1990), which briefly addressed solving the indemnification question in terms of allocating percentages of fault to the third-party tortfeasor and employer through jury instructions and special interrogatories. Instead, the court merely sought to reduce the trail of uncertainty left by the line of cases addressing jury trial situations where an alleged tortfeasor has a fact-specific claim for contractual indemnification against a plaintiff’s employer.

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