Monday, August 8, 2011

NJ Bad Faith Claim to Supreme Court; Sometimes Its Necessary

The New Jersey Supreme Court is considering whether a bad faith claim can be brought outside of the jurisdiction of the state's Division of Workers' Compensation.

The action of the Supreme Court was brought to attention by attorney Jon Gelman in his blog, and was followed this morning in a WorkCompCentral story.

In 2008 the New Jersey legislature passed a series of reform laws, and one of the provisions passed gave Division of Workers' Compensation (DWC) judges the power to impose penalties for parties who fail to timely comply with court orders. Judges were given the power to order 25% surcharges on overdue payments and levy fines of up to $5,000 for parties that fail to comply with court orders. Judges could also hold separate contempt hearings and recommend further action by the New Jersey Superior Court.

The case in question involved allegations of improper delay of medical benefits. After 2 orders to pay past due medical benefits the injured worker sued for bad faith. The superior court denied civil court jurisdiction. The New Jersey Superior Court, Appellate Division agreed, stating that the injured worker still has the option of going back to the workers' compensation judge and seeking sanctions.

The Supreme Court could have easily denied review. The fact that it decided to grant review is significant in that it will either grant the ability to pursue damages in excess of DWC sanctions against carriers engaging in bad faith, or will outline what may or may not constitute an injured worker's remedies.

I decided to search for the term "bad faith" in the WorkCompCentral news database to see how prevalent the cause of action might be in various states. More states than I thought permit bad faith action against carriers even though workers' compensation may have exclusive jurisdiction.

A quick review of search results came up with cases in California, Texas, Florida, Arizona, Ohio, and a number of other states.

The underlying theme of bad faith in these cases is alleged behavior that is particularly egregious, bordering on criminal, and much more than missing deadlines or incorrect payment amounts.

While the remedy of a bad faith civil suit should be a very unusual one and one that carries a very high burden of proof, it is nevertheless unfortunately necessary to ensure that misbehavior is correctable because sometimes administrative penalties just aren't enough incentive in certain situations.

Where carrier behavior borders on criminal activity, involving a high degree of intentional malfeasance, then a civil remedy with the threat of a large penalty for pain, suffering and punitive damages should be available.

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