A New Jersey hospital’s attempt to collect hundreds of thousands of dollars in the Superior Court of New Jersey — in workers’ compensation fees and punitive damages associated with the treatment of employees injured at New York workplaces — was shot down by an appellate court in a significant ruling that ultimately could shield the insurance industry from a potential onslaught of similar alleged bad-faith lawsuits that likely would cost well into the millions.

Hudson Regional Hospital — in a lawsuit filed against a Workers’ Compensation insurance company represented by Goldberg Segalla — sought nearly $390,000, plus punitive damages, alleging a breach of contract/bad faith claim in the Superior Court of New Jersey. The hospital’s claim arose out of Workers’ Compensation insurance policies it entered into in New York to cover New York employers and treat New York employees who were working in the Empire State and injured there. The patients were merely treated in New Jersey.

Goldberg Segalla’s client — whose favorable ruling was secured by utilizing a zealous defense waged by Goldberg Segalla’s team including partner John M. McConnell — is the Workers’ Compensation insurance carrier for the New York employers of the injured workers. The injured workers filed Workers’ Compensation claims in New York for injuries that occurred while working there. In each instance, the New York Workers’ Compensation Board awarded compensation to the hospital in accordance with New York’s Workers’ Compensation Act Fee Schedule, which awarded Hudson Regional a lower amount than what the hospital would have received under New Jersey’s fee schedule.

The hospital then filed a Fee Dispute, or medical provider claim, with the New Jersey Division of Workers’ Compensation, but those were denied based on a lack of jurisdiction. Rather than appealing this decision to the New Jersey Appellate Division, Hudson Regional filed suit in Superior Court in New Jersey to recoup the difference between the amount it would have been awarded in New Jersey and the lower total it received from New York.

In response to the hospital’s novel claim, Goldberg Segalla and John McConnell, vice chair of the firm’s Business and Commercial practice group, posited that the case represented neither a breach of contract or bad-faith claim and, therefore, should be adjudicated solely within the Workers’ Compensation courts. Goldberg Segalla immediately moved to dismiss the claims at the trial court level, arguing that pursuant to the New Jersey Workers’ Compensation Act — (N.J.S.A. 34:15-15) — the New Jersey Appellate Division has exclusive jurisdiction over claims for reimbursement for medical treatment arising from work-related injuries. John also maintained that a challenge to any decision not awarding such benefits must be through an appeal to the N.J. Appellate Division.

The trial court agreed, concluding that Hudson Regional could not re-characterize its patients’ claims for Workers’ Compensation benefits as allegations of breach of contract in an action in the Superior Court in lieu of appealing the Division’s decisions.

In affirming the lower court’s decision, the appellate division held that, “The claims raised in Hudson Regional’s Superior Court complaint are nothing more than a thinly veiled attempt to recast the patients’ claims for workers’ compensation benefits as breach of contract claims. Such claims may be raised only in the Division pursuant to its exclusive jurisdiction.”

The appellate ruling is a significant one for the insurance industry given that had Hudson Regional’s lawsuit been successful, it would likely have opened the door to an incalculable number of similar claims against all insurers who represent workers hurt in New York but who simply happen to be treated in other states.

John McConnell is Vice Chair of Goldberg Segalla’s Business and Commercial Group, resident in Goldberg Segalla’s Princeton, New Jersey office, and licensed in New Jersey and Pennsylvania.