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Burk: Section 20 Settlements Versus Orders Approving Settlement

  • State: New Jersey
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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.

Maura Burk

Maura Burk

There are two ways to settle a workers’ compensation claim in New Jersey. Most cases in New Jersey settle under NJSA 34:15-22 (known as an order approving settlement) with a specific percentage of disability. In this case, the employee retains the right to reopen for future benefits and receives a percentage award that 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 can never be reopened. A case settling pursuant to Section 20 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.

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. NJSA 34:15-36 states that in order to demonstrate permanent disability, a petitioner must prove, via objective medical evidence, an impairment (diagnostic studies) that 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 nonwork activities.

Other bases for a Section 20 on the issue of liability are lack of timely notice under NJSA 34:15-17 or failure to comply with the statute of limitations under NJSA 34:15-51.

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

Case study/example

Petitioner injures her left knee at work on Jan. 1, 2020. Her post-accident magnetic resonance image of Feb. 15, 2020, is normal. She then has a subsequent nonwork 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. This case was discussed in an earlier blog article.

Case study/example

Petitioner injures her left knee at work on Jan. 1, 2020. Her post-accident MRI of Feb. 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 Aug. 15, 2019, petitioner underwent a left knee MRI that also revealed an anterior cruciate ligament tear and a meniscal tear.

We would argue that because the Jan. 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

Petitioner injures her left knee on Jan. 1, 2020. On Jan. 1, 2021, she receives an order approving settlement for 15% of the leg. She reopens 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 Jan. 1, 2020, claim after filing her reopener.

On the reopener, we would argue that the May 1, 2021, incident cuts off causation from the initial Jan. 1, 2020, work accident, and the reopener should now be settled pursuant to Section 20.

Case study/example

Petitioner injures her left knee on Jan. 1, 2020. On Jan. 1, 2021, she receives an order approving settlement for 15% of the leg. She reopens 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 Jan. 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 Jan. 1, 2020, reopened claim will have to resolve the case on an order approving settlement.

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

  • When the contract of hire is in New Jersey.
  • When the accident occurs in New Jersey.
  • 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 no duplication of benefits between the two states (medical, TTD, permanency). So an employee may receive temporary disability benefits and medical benefits in another state, such as 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 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 because 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. 

More details about this case may be found here.

In an 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.

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

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

Petitioner receives an award for 15% partial total at 2021 rates, or 90 weeks at a rate of $258 per week, totaling $23,220. 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 reopener rights.

Case study/example

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 reopener rights.

One disadvantage of 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.

Maura Burk is an attorney with Capehart Scatchard, a defense law firm in New Jersey. This post appears with permission from the New Jersey Workers' Comp Blog.

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