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Section 20 Settlements Versus Orders Approving Settlement

Practical Advice in New Jersey Workers’ Compensation

Our clients often ask great questions regarding settlements in New Jersey workers’ compensation, particularly regarding the two types of settlements (Orders Approving Settlement, and Section 20/full and final), and the differences between them.  This post provides examples of scenarios where an argument can be made for a Section 20 settlement.

There are two ways to settle a workers’ compensation claim in New Jersey. Most cases in New Jersey settle under N.J.S.A. 34:15-22 (known as an Order Approving Settlement) with a specific percentage of disability. In this case, the employee retains right to reopen for future benefits and receives a percentage award which is paid over a certain number of weeks corresponding with the level of disability.  The higher the disability percentage, the more weeks that are paid.

Section 20 settlements are quite different.  First, the Award is paid in a lump sum settlement. This is a full and final settlement of the case and it can never be reopened. A case settling pursuant to a Section 20 settlement must present a disputed issue of, liability, causation, jurisdiction, or dependency.  Without one of these issues, there is no legal basis for a Section 20.

Issue of Liability: An issue of “liability” generally refers to a disputed employment issue (such as an off-premises injury) or a dispute regarding the existence of permanency.  N.J.S.A. 34:15-36 states that in order to demonstrate permanent disability, a petitioner must prove, via objective medical evidence of an impairment (diagnostic studies) which restricts the function of the body.  If the respondent can make a serious argument that there really is no permanent disability, then many judges will permit a Section 20 settlement.

In addition to proving an impairment, the petitioner must show also that the impairment is disabling.  Disability is broader than impairment.  It requires that the petitioner must also prove that he or she has a lessening to a material degree of working ability or a substantial impact on non-work activities.

Other bases for a Section 20 on the issue of liability are lack of timely notice under N.J.S.A. 34:15-17 or failure to comply with the Statute of Limitations under N.J.S.A 34:15-51.

Issue of Causation: An issue of “causation” generally refers to a disputed medical issue.

Case study/Example 1: Petitioner injures her left knee at work on January 1, 2020. Her post-accident MRI of February 15, 2020 is normal. She then has a subsequent non-work accident on March 1, 2020. An MRI of April 1, 2020 reveals an anterior cruciate ligament tear and a meniscal tear. We would argue that due to the March 1, 2020 subsequent accident which obviously caused new diagnostic findings, this case is appropriate for a Section 20 settlement. This example is similar to the case of Costanzo v. Meridian Rehab, A-5547-18 (App. Div. June 17, 2021), handled by our partner Carla Aldarelli. This case was discussed in our blog article entitled Respondent Prevails Where First MRI Post-Accident Showed No Abnormalities In Knee.

Case Study/Example 2: Petitioner injures her left knee at work on January 1, 2020. Her post-accident MRI of February 15, 2020 reveals an anterior cruciate ligament tear and a meniscal tear. During Respondent’s investigation, it is revealed that petitioner had a prior left knee injury of June 15, 2019 and on August 15, 2019, petitioner underwent a left knee MRI which also revealed an anterior cruciate ligament tear and a meniscal tear. We would argue that since the January 1, 2020 accident did not cause any new diagnostic findings, any disability is related to the prior June 15, 2019 accident, making this case proper for a Section 20 settlement.

Case Study/Example 3: Petitioner injures her left knee on January 1, 2020. On January 1, 2021, she receives an Order Approving Settlement for 15% of the leg from this January 1, 2020 accident. She re-opens her case on June 1, 2021. On May 1, 2021, she had a new left knee injury with a new employer for which she underwent treatment including a series of injections. She had no new treatment for the January 1, 2020 claim after filing her Re-opener. On the Re-opener, we would argue that the May 1, 2021 incident cuts off causation from the initial January 1, 2020 work accident, and the Re-opener should now be settled pursuant to Section 20.

Case Study/Example 4: Petitioner injures her left knee on January 1, 2020. On January 1, 2021, she receives an Order Approving Settlement for 15% of the leg from this January 1, 2020 accident. She re-opens her case on June 1, 2021. On May 1, 2021, she had a new and minor left knee injury with a new employer. The first employer for the January 1, 2020 accident agrees to provide all treatment following the reopener date, and the second employer pays no medical and temporary disability benefits because its incident was very minor.  A petition is filed against the second employer. The employer for the May 1, 2021 incident will likely argue for a Section 20 dismissal.  Most likely, the employer for the original January 1, 2020 re-opened claim will have to resolve the case on an Order Approving Settlement.

Issue of Jurisdiction: As a general matter, there are three principal ways in which jurisdiction in New Jersey may be found:

1.         When the contract of hire is in New Jersey;

2.         When the accident occurs in New Jersey;

3.         When a substantial amount of employment for the respondent occurs in New Jersey.

There are instances where jurisdiction may be found in more than one state. This is allowed, so long as there is not a duplication of benefits between the two states (medical, TTD, permanency). So an employee may receive temporary disability benefits and medical benefits in another state like New York but apply for partial permanent disability benefits in New Jersey if the injury, hire, or work occurred in New Jersey.

Marconi v. United Airlines, 460 N.J. Super. 330 (App. Div. 2019) holds that localization of the employer in New Jersey and residency of the petitioner in New Jersey was not sufficient to warrant New Jersey jurisdiction where the petitioner worked almost exclusively in Pennsylvania and was injured in Pennsylvania.  Petitioner argued that since United Airlines had a hub in Newark Airport (although petitioner worked in Pennsylvania) and petitioner also lived in New Jersey, those facts should be enough for jurisdiction. The Appellate Division disagreed.  Our partner, Prudence Higbee, prevailed in this matter for United Airlines. More details about this case may be found in our blog article entitled United Airlines Wins Important Appellate Decision Involving Jurisdiction.

Issue of Dependency:

If it is determined that the work accident was not the cause of death, ultimately, we would argue that nothing except funeral costs are owed. However, in certain situations, a small Section 20 settlement/Award may be offered, in order to close the case.

If it is determined that an alleged dependent is not a valid dependent under Section 13, we would argue that nothing is owed. However, in certain situations, a small Section 20 settlement/Award may be offered, in order to close the case.

Miscellaneous Issues

Finally, there are also some “miscellaneous” considerations when determining if a Section 20 settlement is feasible. First, all Section 20 settlements are subject to petitioner’s, petitioner’s attorney’s, and the Judge’s approval.

Second, practitioners should keep in mind that legal fees are quite different between a Section 20 and an Order Approving Settlement. In Orders Approving Settlement, petitioner’s attorney’s fee (which is 20% of the overall Award) is paid 60% by Respondent and 40% by petitioner. For petitioner’s permanency exam, Respondent pays 50%; petitioner pays 50% (generally $300 each) In a Section 20 Order, petitioner pays 100% of his or her attorney’s fee.

Case Study/Example 1: Petitioner receives an Award for 15% partial total at 2021 rates, or 90 weeks at a rate of $258.00 per week, totaling $23,220.00. Petitioner’s attorney’s fee is $4,644. Of this, Respondent pays $2,786.40 and petitioner pays $1,857.60 (this may be rounded to the nearest dollar and rounded up for Respondent and rounded down for petitioner). Respondent and petitioner each pay $300 for petitioner’s expert. Ultimately, petitioner nets $21,062.40 and retains re-opener rights.

Case Study/Example 2: Petitioner receives a Section 20 Award of $27,500. Petitioner is solely responsible for his attorney’s fee of $5,500 out of his Award; he also pays the full $600 for his report. Ultimately, petitioner nets $21,400 and does not retain re-opener rights.

One disadvantage of a Section 20 is that payments are not lienable when there is a third party recovery unless both parties specifically agree on the record to make such payments lienable. This is quite different from an Order Approving Settlement where the entire permanency payment may be lienable if the third party amount is higher than the amount of the permanency award.

More than two thirds of settlements in New Jersey resolve on an Order Approving Settlement.  The reason is that in many accidents there simply is no legal basis for a Section 20 settlement.  The advantages of a Section 20 settlement are that the case is closed in a lump sum payment (unlike payments over many weeks for an Order Approving Settlement), there is no admission of liability and there is no potential for a reopener.  But there must be a disputed issue of, liability, causation, jurisdiction, or dependency to argue for a Section 20 settlement.

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About the Author

About the Author:

Ms. Burk focuses her practice in the representation of employers, self-insured companies, and insurance carriers in workers’ compensation defense matters.

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