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Serpa v. New Jersey Transit

401 N.J. Super. 371, 951 A.2d 208 (App. Div. 2008)

CONTRACTORS; INDEMNIFICATION — A public entity has no statutory obligation to reimburse a contractor for workers compensation benefits paid by that contractor.

A general contractor’s employee was injured in a construction accident while renovating a train station owned by a governmental entity. The injured employee received workers’ compensation benefits from his employer, the general contractor. He sued parties including the governmental entity. The governmental entity brought a third-party complaint against the general contractor that included a claim for express indemnification pursuant to a contract with the general contractor. The governmental entity eventually settled with the employee, and at the time of the settlement, the general contractor agreed that the amount paid was reasonable. The governmental entity’s claim for express indemnification was submitted to a jury for an allocation of fault. The jury found the general contractor 85% at fault and so was responsible for eighty-five percent of the settlement amount. The contractor appealed, contending that it should receive a credit for what was paid as workers compensation benefits, or alternatively the governmental entity should only be responsible for fifteen percent of the settlement.

The Appellate Division stated that a public entity’s liability in a case involving a workplace injury on public property could not be reduced by an employer’s share of responsibility, and therefore the governmental entity could seek indemnification from the employer for its share of liability, since the employer was not a tortfeasor. The Court noted the inapplicability of a statute that limits a public entity’s contribution as a joint tortfeasor to the portion of damages attributable to its share of negligence. The Court also held that the governmental entity’s settlement was reasonable as it faced potential liability for the claims underlying the settlement, and that the settlement amount was acknowledged by the general contractor as reasonable. Therefore, it found that the indemnity claim was lawfully based on a pre-existing contractual relationship, and the eighty-five percent exposure was based on an allocation of fault. Lastly, the Court found that the contractor was not entitled to any reimbursement from the governmental entity, as its statutory right to reimbursement from a third person for its workers compensation liability did not extend to public entities.

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