A Capehart Scatchard Blog

Pre-Settlement Companies Should Have No Place at the New Jersey Comp Table

By on January 4, 2018 in Policy with 1 Comment

In the past few years there has been a rise in the number of cases where injured workers have been loaned money in advance of their workers’ compensation settlements by private pre-settlement companies.  This practice is more common in other states like Pennsylvania, but it is now creeping into New Jersey.  Companies which make private advances or loans to injured workers then attempt to appear at settlement and seek judicial enforcement of the amount due their company by placing their company’s loan on the settlement sheet.  In that way, the lending company can obtain a court order for direct payment by the employer, carrier or third party administrator.

In our office’s opinion, this recognition on the order approving settlement is improper.  We believe that pre-settlement companies have no right to be listed as an expense or payee on a court order, whether on a Section 20 or an Order Approving Settlement.  One of my partners has a case now involving a Pennsylvania resident injured in New Jersey who was advanced a large sum of money by a pre-settlement company unknown to any party other than petitioner and his attorney.  The claim petition was filed in New Jersey, and the parties have reached a substantial settlement on an order approving settlement under Section 22 (petitioner retains reopener rights).  The lawyer for the pre-settlement company appeared in court, asking the Judge of Compensation to include the loan as an expense to be paid by respondent on the order approving settlement.  We opposed this request.

N.J.S.A. 34:15-29 states, “Claims or payments due under this Chapter shall not be assignable, and shall be exempt for all claims of creditors from levy, execution or attachments.”   Child support liens and TDB liens are recognized as valid obligations in New Jersey.  Medical providers by statute also have a right to file a claim for reimbursement in New Jersey.  However, there is nothing in the statute or the rules of the Division that permit pre-settlement companies from appearing in court as a represented party to protect their loans or seek enforcement from a Judge of Compensation.

The Division of Workers’ Compensation has an interest in preventing such companies from expanding in New Jersey.  These companies do not make such loans out of charity:  they do so for reasons of financial gain at the expense of the injured worker.  One could argue that the whole practice of advancing a settlement with an injured worker in exchange for subsequent repayment violates the New Jersey Workers’ Compensation Act because under our law, only a Judge of Compensation can approve a settlement.  These are in essence private partial settlements between a lending company and petitioner as to future rights of compensation. They really constitute an end around the statute.

Another argument against placing a loan on an OAS is that it contravenes the rules against commutations.  An employer cannot make a commutation in New Jersey without filing a motion and obtaining court permission.  Paying a lending company in advance on unaccrued monies would be an illegal commutation without a motion for a commutation being first filed by the petitioner.  In New Jersey, most settlement are under Section 22.  Payments are made in weekly amounts, sometimes over several years, with claimants retaining reopener rights.  Pre-settlement lending companies have no right to step in and alter the statutory rules of payment.   Settlements in Pennsylvania and many other states involve lump sums, often rather large, but that is not how most settlements in New Jersey resolve.

Our office takes the view that all payments go to the petitioner under the Order Approving Settlement or Section 20 order.  This is prescribed under N.J.S.A. 34:15-64. The pre-settlement company has its contract with the petitioner and the petitioner only, and it must negotiate its terms of repayment directly with the petitioner without involving employers, carriers, third party administrators or Judges of Compensation.



About the Author

About the Author:

John H. Geaney, a shareholder and co-chair of Capehart Scatchard's Workers' Compensation department, began an email newsletter entitled Currents in Workers’ Compensation, ADA and FMLA in 2001 in order to keep clients and readers informed on leading developments in these three areas of law. Since that time he has written over 500 newsletter updates.

Mr. Geaney is the author of Geaney’s New Jersey Workers’ Compensation Manual for Practitioners, Adjusters & Employers. The manual is distributed by the New Jersey Institute for Continuing Legal Education (NJICLE). He also authored an ADA and FMLA manual as distributed by NJICLE. If you are interested in purchasing the manual, please contact NJICLE at 732-214-8500 or visit their website at www.njicle.com.

Mr. Geaney represents employers in the defense of workers’ compensation, ADA and FMLA matters. He is a Fellow of the College of Workers’ Compensation Lawyers of the American Bar Association and is certified by the Supreme Court of New Jersey as a workers’ compensation law attorney. He is one of two firm representatives to the National Workers’ Compensation Defense Network. He has served on the Executive Committee of Capehart Scatchard for over ten (10) years.

A graduate of Holy Cross College summa cum laude, Mr. Geaney obtained his law degree from Boston College Law School. He has been named a “Super Lawyer” by his peers and Law and Politics. He serves as Vice President of the Friends of MEND, the fundraising arm of a local charitable organization devoted to promoting affordable housing.

Capehart Scatchard is a full service law firm with offices in Mt. Laurel and Trenton, New Jersey. The firm represents employers and businesses in a wide variety of areas, including workers’ compensation, civil litigation, labor, environmental, business, estates and governmental affairs.


There is 1 Brilliant Comment

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  1. Bill Johnson says:

    This practice is becoming more & more commonplace in other states. Please be sure to share the outcome of the case in which your firm is involved. I am curious as to how the Division will rule.

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