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Superior Court of New Jersey Affirms Decision Refusing to Allocate Proceeds Following Settlement after Non-Binding Arbitration Award

In a per curiam opinion, the Superior Court of New Jersey, Appellate Division, affirmed the Law Division decision refusing to allocate proceeds following a settlement after a decision from a non-binding arbitration award which specifically allocated funds for medical expenses paid by Medicare.

In Ilse Theresa Jackson v. Hudson Court, LLC, et al., 2010 WL 2090036 (NJ Super. 2010), plaintiff sued several defendants as a result of a trip and fall. In her Complaint, she sought damages for permanent bodily injury and disability, pain and suffering, emotional distress and economic losses, including medical expenses paid by Medicare. The case was referred to nonbinding arbitration wherein the arbitrator awarded plaintiff $85,000. Of that award, the arbitrator specifically earmarked $30,000 as funds in satisfaction of the Medicare lien. Thereafter, the case settled for $85,000; however, plaintiff sought a court ordered allocation of the settlement proceeds and specifically requested that no portion of her personal injury settlement be attributable to her medical expenses. The Law Division denied plaintiff's request and plaintiff appealed.

In her appeal, plaintiff argued that the collateral source rule (N.J.S.A. 2A:15-97) bars recovery by Medicare beneficiaries of medical expenses. She interpreted the statute to prohibit recovery of any benefits paid by a "source other than a joint tortfeasor." Thus, she argued that "no plaintiff should be obligated to reimburse Medicare-covered expenses from money recovered as a result of a personal injury claim because otherwise Medicare beneficiaries would have to satisfy Medicare liens using funds awarded for pain and suffering, or for lost wages." The Appellate Division disagreed with plaintiff holding that the collateral source rule does not apply to reimbursable benefits paid by Medicaid, nor Medicare. Citing to, Lusby ex rel. Nichols v. Hitchner, 273 N.J. Super. 578, 590 (App.Div. 1994). The Appellate Division further pointed out that plaintiff's settlement, as allocated by the arbitrator, included a specific amount attributable for medical expenses, and thus, the lien would not unjustly be satisfied from her non-economic award.


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