On August 2, 1999, The New Jersey Supreme Court handed down a watershed decision addressing lump-sum settlements in denied cases, the first interpretation by the Court of Section 20 since the Legislature amended the New Jersey Workers' Compensation Act in 1980, in part to allow these settlements. In Kibble v. Weeks Dredging and Construction Co. (A-38-98), the Court held that an injured worker may not unilaterally waive his or her dependents' right to future death benefits in a lump-sum settlement, but rather must have the informed consent of his or her spouse and other dependents. The Court made this ruling notwithstanding the fact that such unilateral waivers have been occurring on a daily basis in the division since 1980.
I. Facts of Kibble
Carl Kibble worked for various employers as a welder/torch cutter from the mid-1950s until 1984. During this employment, Kibble was exposed to chromium, nickel, and other welding fumes. The last employer with exposure was Weeks Dredging and Construction Company (Weeks). Kibble worked for Weeks from 1980 to 1984. In 1977, chest x-rays performed on Kibble revealed that he was suffering from pneumonoconiosis, a lung condition caused by the retention of dust in the lungs. In 1984, after seeking treatment for a chronic cough, Kibble's family physician diagnosed him with pulmonary fibrosis and concluded that his condition was caused by his exposure to welding fumes. The doctor also concluded that Kibble was totally disabled as a result of "welder's lung" and advised him not to work as a welder again.
In June 1984, Kibble filed a workers' compensation claim against Weeks and seven other prior employers. In January 1989, Kibble settled his claim for $36,000 pursuant to N.J.S.A. 34:15-20 (Section 20), the section of the Workers' Compensation Act that was amended in 1980 to permit lump-sum settlements. Employers highly favor the settlement of cases under Section 20 as it precludes petitioners from ever reopening these cases for alleged increases in disability in the future. Furthermore, Section 20 payments are not considered payment of workers' compensation benefits except for insurance rating purposes only. In order for a case to be settled pursuant to Section 20, there must be a genuine issue of jurisdiction, liability, causal relationship or dependency. If none of these issues exists, then the case must be settled on an Order Approving Settlement and be subject to the possibility of future reopener claims.
As part of the prevailing practice in the Division, the settlement in Kibble was placed on the record and the usual preprinted Section 20 form was used. The form states that the settlement "has the effect of a dismissal with prejudice, being final as to all rights and benefits of the petitioner and the petitioner's dependents and is a complete and absolute surrender and release of their rights arising out of this/these claims."
In November 1993, Kibble was diagnosed with lung cancer. He died on March 5, 1994. Kibble's death certificate lists his cause of death as "lung cancer and pneumoconiosis." In April 1994, Mrs. Kibble (petitioner) filed a dependency claim alleging that her husband's lung cancer and death were caused by his occupational exposure to welding fumes. The Division dismissed the petitioner's claim and found that "the intention of the parties [in the Section 20 settlement] was to make a total settlement of all claims relating to lung problems, including dependency claims." The Appellate Division affirmed that judgment, but the Supreme Court reversed and remanded.
II. The New Jersey Supreme Court's Reasoning
The Supreme Court supported its decision based in large part upon New Jersey case law emphasizing that the rights of dependents to compensation are independent and separate rights flowing to them from the Workers' Compensation Act itself. The Court noted that these are independent rights derived from statute, not from the rights of the decedent. Therefore, it follows that these death benefits would not be affected by settlements executed by the decedent. The Court also noted that the majority of states follow this rule.
The Court's reasoning did not stop with an analysis of the law of dependency benefits under the New Jersey Workers' Compensation Act. The Court analogized to final judgments and settlements and their effect on derivative claims in other areas of the law as well, including personal injury law, loss of consortium claims and court ordered child-support payments. The Court noted that a judgment in favor of a plaintiff in a personal injury suit does not preclude a subsequent action for wrongful death on behalf of the plaintiff's heirs. The Court also compared a loss of consortium claim, which is a claim intended to compensate a person for the loss of a spouse's companionship and services due to the fault of another. The Court noted that a spouse's cause of action for loss of consortium is not compromised by the settlement of the underlying personal injury claim. Lastly, the Court noted that an agreement between parents purporting to waive child support does not affect the child's rights to court ordered child-support benefits. According to the Court, the common thread among these analogies is that the derivative claims, as with the dependency claim in a workers' compensation case, are completely independent and distinct claims not affected by the results in the underlying claim of the injured party.
The Court acknowledged that the Legislature intended to permit employers to enter into settlements pursuant to Section 20 that would result in a compromise of the employee's compensation claim and also constitute a waiver of the dependency claims of the employee's spouse and children. Nonetheless, the Court held that the Legislature did not intend to diminish the separate and independent status of the dependency claim by waiving it unilaterally. Therefore, the Supreme Court reversed the decisions of the lower courts and remanded the matter to the Division of Workers' Compensation for a hearing on the petitioner's case.
III. The Practical Effects of Kibble
The practical effect of Kibble on the entire New Jersey workers' compensation community is enormous. The Court did note, however, that this ruling will not have a retroactive effect on Section 20 settlements entered into prior to this decision because this decision is a "new rule of law." The Court stated that for a holding to constitute a new rule of law there must be a sudden and unanticipated change of a longstanding practice. Therefore, since this rule dramatically changes the practice in the division, it will not be retroactive. Mrs. Kibble obtained the benefit of the new ruling, however, since she championed the cause.
According to the Court's ruling in Kibble, the Division is now responsible for adopting and implementing procedures to ensure that a spouse's or other dependent's waiver of dependency benefits is given knowingly, intelligently and voluntarily. The Division has responded by adding a second page to its pre-printed Section 20 form that specifically indicates if a settlement includes or excludes a waiver of the injured worker's spouse or other dependent's benefits. If the settlement includes the waiver of any dependency claim, the petitioner's dependents must be present in court to testify to their waiver after an adequate explanation by the judge.
The basic procedures in settling cases pursuant to Section 20 has become more involved and lengthy. Cases cannot be settled until all necessary parties are present in court and the Judge has given an adequate explanation on the record of the preclusive effect that the Section 20 settlement will have on any potential dependency claims.
There are also substantive issues that were not addressed by the Court in Kibble that must now be taken into account by respondents prior to entering into any Section 20 settlements. For instance, there are obviously potential problems when petitioners do not know the identity and/or the location of their dependents. Furthermore, the rights of future dependents who did not exist when the Section 20 settlement was entered have not been defined by the Court. It is possible at this juncture that a child who was born after a Section 20 settlement could still retain dependency rights even though all of the petitioner's dependents at the time of the settlement waived their rights to dependency benefits. These and other issues become magnified when the cases involve catastrophic or terminal conditions.
IV. Conclusion
Due to some of the unanswered questions since the Kibble case, it is likely that the workers' compensation community will see an increase in the amount of cases proceeding to a full trial rather than being settled pursuant to Section 20. This increase in litigation could be a significant burden on the Division of Workers' Compensation. As a result of the issues left unaddressed by the New Jersey Supreme Court, practitioners anticipate further clarification of the issues raised in Kibble.
Mr. Tarpine is a member of Capehart & Scatchard's Workers' Compensation Department in its Mt. Laurel office. For more information, please contact Mr. Tarpine at 856.914.2062, by fax at 856.235.2786 or by e-mail at jtarpine@capehart.com.