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Geaney: Appellate Division Endorses Penalty Assessed for Late Payment

  • State: New Jersey

There are few cases in the Appellate Division that discuss penalties for late payments of permanency awards, so the recently published decision in Ripp v. County of Hudson should be studied by workers’ compensation practitioners.

John H. Geaney

John H. Geaney

The Ripp case was not about delayed temporary disability benefits, which are subject to a potential 25% penalty for delays over 30 days. This case was about a delay in paying a permanency award on a total disability claim.

On Jan. 26, 2021, the judge of compensation entered an order for total and permanent disability. The county was required to pay Louis Ripp the sum of $173,480 for accrued permanency benefits within 60 days of the entry of the order, followed by weekly benefits for life.

The county failed to pay the order within 60 days but made the payment on the 76th day after the award, a delay of 16 days.   

Ripp filed a motion to enforce the order. He sought simple interest on the settlement and an additional assessment of 25% of the money due. The county explained that delays were due to the failure of the third-party administrator to submit the payment request in a timely manner, changes in adjuster assignment on the case, and the pandemic.

There were also substantial delays before the order was entered in terms of the county’s formal approval of the total disability award. Ripp and his wife wrote to the judge to complain about how long it was taking the county to get authority to settle the case. The judge of compensation noted that the delays had a severe effect on the family, which had no wages for four years.

This also had an impact on the couple’s disabled child. Although the county had agreed in early 2019 that Ripp was totally disabled, authority did not come through for many months. The judge of compensation noted that the failure of the county to obtain authority further delayed the computation of Ripp’s “average current earnings” calculations from the Social Security Administration. That information was necessary to complete the final court paperwork.

In deciding the appropriate penalty, The judge considered the delays in getting approval for the settlement as well as the 16-day delay in paying the final order. The judge relied on NJAC 12:235-3.16 in assessing against the county an additional 25% of the accrued payment amount due, or $43,370. The county appealed.

The Appellate Division began by stating, “The Workers’ Compensation Act does not require that payment of settlement benefits must be made within a specific period of time.” Yet NJSA 34:15-28 (cited by the court) states: 

Whenever lawful compensation shall have been withheld from an injured employee or dependents for a term of 60 or more days following entry of a judgment or order, simple interest on each weekly payment for the period of delay of each payment may, at the discretion of the division, be added to the amount due at the time of settlement.

Practitioners generally advise clients that all permanency awards must be paid within 60 days. The court also observed that NJSA 34:15-28.2 provides:

  • If any employer … fails to comply with any order of a judge of compensation …. a judge of compensation may, in addition to any other remedies provided by law:
  • a) Impose costs, simple interest on any moneys due, an additional assessment not to exceed 25% of moneys due for unreasonable payment delay, and reasonable legal fees, to enforce the order, statute or regulation.
  • b) Impose additional fines and other penalties on parties or counsel in an amount not exceeding $5,000 for unreasonable delay, with the proceeds of the penalties paid into the Second Injury Fund.

The New Jersey Division of Workers’ Compensation added NJAC 12:235-3.16(h)(1)(i), which allows a judge to “impose an additional assessment not to exceed 25% on any moneys due if the judge finds the payment delay to be unreasonable.”

There are two key parts to the Appellate Division decision in the Ripp case. First, the Appellate Division fully endorsed the judge of compensation’s right to assess a 25% penalty in this case. Second, the court clarified that only the 16-day delay could be considered for the penalty. The court did not endorse any penalty for failure to obtain authority in a timely manner. The court requested that the judge of compensation reconsider an appropriate penalty “for the minimal, yet ‘unreasonable payment delay’ in this case.”

For practitioners, this decision is a strong reminder that awards must be paid within 60 days, notwithstanding the statement in this decision that the New Jersey act does not prescribe a specific time period to pay an award. The practice in place in all insurance companies, third-party administrators and self-insured entities is to make sure awards get paid within 60 days. 

This case sends a message that if a motion to enforce is filed, the employer will pay not only simple interest but also potentially 25% of the total amount due, depending on how long the delay is. While the Appellate Division made clear that it thought a penalty of $43,370 was too high for a 16-day delay, the court did not provide guidance on what amount was too low.

The case has been remanded to the judge of compensation to reconsider a new penalty amount on the county. 

John H. Geaney is an attorney, executive committee member and shareholder with Capehart Scatchard, a defense law firm in New Jersey. This post appears with permission from Geaney's New Jersey Workers' Comp Blog.

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