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Using Voluntary Payments to Reduce Costs

Why issue a Voluntary Tender in New Jersey?

Issue a voluntary tender to reduce exposure in litigated claims up to 20% of the total award. When an employee will have a degree of permanent disability a voluntary tender may be paid without the consent of the petitioner. By “voluntarily” paying the petitioner, the carrier/employer avoids paying petitioner’s attorneys fees on the amount issued. The Courts have held that the carrier/employer making such a voluntary payment must strictly follow the rules set forth in the statute to obtain the benefit of avoiding attorneys’ fees.

The Law.

N.J.S.A. 34:15-64 provides (in part):

When, however, at a reasonable time, prior to any hearing compensation has been offered and the amount then due has been tendered in good faith or paid within 26 weeks from the date of the notification to the employer of an accident or an occupational disease or the employee’s final active medical treatment or within 26 weeks after the employee’s return to work whichever is later or within 26 weeks after employer’s notification of the employee’s death, the reasonable allowance for attorney fee shall be based upon only that part of the judgment or award in excess of the amount of compensation, theretofore offered, tendered in good faith or paid.

The courts have held employers/carriers to absolute compliance with this statute in order to obtain the credit against attorneys’ fees. The controlling case decisions instruct that “substantial compliance” or a good faith effort to comply which fails to meet any of the literal requirements of the Act do not count. For example, paying the voluntary tender even one week late (the 27th week after MMI) has been held to destroy the employer’s right to credit. See Gorman v Waters Bugbee, 374 N.J. Super. 513 (N.J. Super. App. Div. 2005).

In Alvarado v. J & J Snack Foods Corp., the Appellate Court provides the following “checklist” for workers’ compensation law judges to use to dtermine whether a payment of permanent disability meets the criteria of the Act:

  1. N.J.S.A. 34:15-64 must be construed “in the light of the basic duty imposed upon the employer by the act in its entirety.” That is, the employer must pay benefits promptly and continuously.
  2. Literal compliance with N.J.S.A. 34:15-64 is required.
  3. N.J.S.A. 34:15-64 “impose[s] upon the employer the duty to make an unconditional and unqualified offer to pay compensation and to express it in terms that leave no room for misunderstanding.”
  4. The offer must be made
    • at a reasonable time after notice of injury and extent of disability,
    • prior to any hearing and
    • prior to the expiration of the applicable twenty-six-week period. Twenty-six weeks is not a per se reasonable time; it is only a cut-off. A reasonable time might be much less.
  5. The phrase “prior to any hearing,” means a scheduled court appearance at a point in time when the parties have assembled their medical proofs on the extent of petitioner’s disability and are in a position to proceed to trial, whether or not they actually proceed.
  6. The twenty-six-week cutoff may not be extended in the case of death caused by the compensable event, although it may be extended where medical treatment for a nonfatal injury restarts after the cutoff.
  7. Whether or not the reduced-fee exception to a full attorney fee applies, unreasonable and unjustified delay in admitting liability may be considered on the allocation of an attorney fee between the petitioner and respondent.

When issuing a voluntary tender in a workers’ compensation case, be sure to send a covering letter stating that the compensation is being offered “without prejudice.”

Practical tips for issuing Voluntary Tenders.

Strict compliance with the statute (§ 64) is required. Here are some practical tips to follow when considering issuing a payment of advance compensation.

When you can issue the tender in one lump sum.

While you can’t always pay the tender as a lump sum, as I will show you below, sometimes you can. If the voluntary tender amount is “accrued” (i.e., the weeks have elapsed since MMI or last payment of temp) you can issue all or part of the voluntary tender amount as one payment.

For example, here are some hypothetical facts for a hand case:

  • MMI was reached on November 1st.
  • IME Obtained February 15th says 5% of the hand (12.25 weeks).
  • A Voluntary tender issued February 22nd would issue all 12.25 weeks, because 16 weeks have elapsed since MMI.

But, in the same facts (hand case) with higher percentage of permanency, here’s how it would work out:

  • MMI reached November 1st
  • IME obtained February 15th says 20% of the hand (49 weeks);
  • A voluntary tender issued February 22nd would issue the 16 weeks that have elapsed (one check), and then pay our the next 33 weeks at the weekly benefit rate.

Now, because a voluntary tender must be issued within 26 weeks of MMI, only voluntary tenders where the amount tendered is less than 26 weeks could be “paid in full.”

You Don’t need an IME.

You don’t need an IME to offer a voluntary tender. The tender need only be “clear” and issued prior to the end of 26 weeks from end of treatment (MMI/RTW). See Menichetti v. Palermo Supply Co., 396 N.J. Super. 118 (App.Div. 2007).

How much to pay?

As far as how much to offer, counsel can guide you as to an expected amicable settlement value for the case. To help your counsel give advice about the amount of tender to make, be sure to provide your attorney with information including AWW, injury date, residence of petitioner (so counsel can consider the impact of the venue – which vicinage the case will be located in, and medical outcome.

How much can I reduce exposure?

By issuing a voluntary tender under §64, you avoid the attorneys’ fee payable to petitioner’s counsel. Attorneys’ fees in New Jersey are set by statute (N.J.S.A. 34:15-26 and N.J.S.A. 34:15-64) and limited to no more than 20% of the award or settlement. Judges of compensation typically “split” the fees between the parties, with the employer/carrier paying 60% of the petitioner’s attorney fee, and the petitioner paying 40%. This means that in the typical case the employer/carrier will see an exposure reduction in the realm of 12% (typical) to up to 20% (maximum) on the portion of the permanency benefit voluntarily paid.

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