Friday, January 25, 2013

Subrogation Recovery not limited by Employer Actions

An Employer/Insurer right to assert a subrogation right against an Employee third part recovery, arising from a work injury has been said to be an "absolute" right, abrogated only by choice.

The Pa Supreme Court has also described this Section 319 subrogation right as "automatic" and "by its terms, admits no express exceptions, equitable or otherwise".

One "exception" to this absolute right has been recognized by the Pa Supreme Court, that is, "...where an employer undertakes in deliberate bad faith to subvert a third party suit brought by its employee..."
citing Thompson v. WCAB (USF&G) 781 A.2d 1146 (Pa. 2001).

Glass v. WCAB (The City of Philadelphia) No. 1274 C.D. 2012 decided by the Commonwealth Court on January 10, 2013 by Judge Cohn Jubelirer.

Factual History
Police officer sustained injuries when he lost control of a motorcycle during training exercises.
His injury was accepted as work related and paid. He filed a third party civil action against Philadelphia Cycle Center (PCC) asserting improper maintenance caused him to lose control, resulting in his injuries. He received a $490,000 arbitration award against PCC. Employer asserted subrogation rights via petition for review. Employee objected to the subrogation request asserting that Employer acted in bad faith by allowing spoliation of evidence. Any right to subrogation should be extinguished pursuant to Thompson case.
Employee Attorney sent a letter in May 2006 requesting the employer refrain from altering the motorcycle until inspected by an engineer expert. The motorcycle was repaired on September 2006, before the employee expert inspection of January 2007.

Procedural History
WCJ granted Petition to Review and allowed subrogation recovery.
WCAB affirmed.
Commonwealth Court affirmed.

Legal Issue
What level of employer conduct will extinguish one's right to subrogation?

In Thompson, the employer did not retain bolts from a crane which had loosened/failed and were said to be the cause of claimant's injury. As the bolts were not available for testing by experts in the civil action, claimant argued the employer should have no right of subrogation. The Thompson court articulated the above-cited rules that subrogation is absolute, unless where an employer acts in deliberate bad faith to subvert the claimant's lawsuit.   But the Court did not deny employer subrogation, under those facts, concluding that claimant did not demonstrate that the employer acted in bad faith.

In Glass, the testimony of employer witnesses and documents were reviewed by the WCJ and the WCJ inferred there was a miscommunication among the City representatives and this miscommunication was not based upon a deliberate bad faith desire to subvert Employee's third party lawsuit against PCC.

In short, the testimony reflected that a legal assistant spoke to a sergeant and lieutenant on several occasions regarding employee's desire to inspect the motorcycle and advised to not alter it. The sergeant and lieutenant recalled the calls regarding the inspection request but not the direction to not alter the motorcycle. There was a lack of written records regarding these communications.

Commonwealth Court, stated that the inferences drawn by the WCJ were reasonable and a reasonable mind would accept such evidence as substantial evidence in support of the finding of a "miscommunication" not a bad faith act to subvert the employee's lawsuit. (slip opinion pp 12-13).

Thompson court also discussed a prior federal district court decision describing a "dereliction of duty" as a showing of bad faith. Here the WCJ did not find the City representatives direlict in their duties, there was a series of miscommunications, but not conduct sufficient to alter the WCJ analysis.

Practice Pointers
1.   Early in the work comp case evaluation, one should identify claims involving possible third party negligence and potential subrogation.
2.   Identify your team member to be the person with responsibility for communication with plaintiff counsel, responding to discovery requests and monitoring civil action case status.
3.   Document discussions with written correspondence. You never truly know when you may need documents for future evidence of your actions.

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