Unreasonable delay in paying disability benefits opens door for additional fees

Under New Jersey law, an award of attorney's fees is not severable from the 25 percent penalty for an unreasonable or negligent delay or refusal to pay temporary disability benefits. Therefore, when a judge awards the statutory penalty, he must also award reasonable attorney's fees.

Case name: Quereshi v. Cintas Corp., No. A-1848-08T3 (N.J. Super. Ct. App. Div. 05/28/10).

Ruling: The New Jersey Superior Court, Appellate Division reversed the portion of a judge of compensation's decision denying the employee's request for reasonable attorney's fees associated with an unreasonable delay in paying benefits.

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What it means: Under New Jersey law, an award of attorney's fees is not severable from the 25 percent penalty for an unreasonable or negligent delay or refusal to pay temporary disability benefits. Therefore, when a judge awards the statutory penalty, he must also award reasonable attorney's fees.

Summary: The claimant was awarded temporary disability benefits for several work-related injuries. The judge of compensation also ordered the employer to pay past-due benefits, reimburse the claimant her out-of-pocket medical expenses, and pay attorney's fees. When the employer failed to timely pay the temporary benefits, the claimant sought penalties. The judge assessed a 25 percent penalty but declined to award additional attorney's fees, reasoning that the original fee award was sufficient. The Superior Court reversed the portion of the judge's order denying reasonable attorney's fees, finding that such an award went hand-in-hand with the penalty assessment.

The court explained that a delay of 30 days or more in paying temporary disability compensation "gives rise to a rebuttable presumption of unreasonable and negligent conduct" by the employer or insurer. Further, the statute clearly states that the employer is liable for the penalty plus any reasonable legal fees incurred because of such delays or refusals. Therefore, the judge does not have the discretion to deny attorney's fees where a penalty has been assessed.

With respect to the amount of fees that can be awarded, the court clarified that when the fee is based on an unreasonable delay or refusal to pay temporary disability benefits, it is not subject to the 20 percent ceiling that applies to reasonable fees awarded to a prevailing party.

Read more at the WorkersComp Forum homepage.

August 16, 2010

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