Wednesday, January 27, 2016

Employer Subrogation Recovery Available in Employee-Passenger Work-Related Accident

Employer Subrogation Remedy in Work-Related Motor Vehicle Accident

The Pennsylvania Workers Compensation Act allows an Employer and its Insurer to assert a right of subrogation against an Employee civil action recovery. The Employer has this right to recovery where it has paid workers' compensation benefits for an injury to its employee and that injury was caused by the acts (or omissions) of a third party. See: Section 319, 77 P.S. 671.

The phrase "the Employer subrogation right is absolute", is often repeated. Despite this absolute right, the Employer request for a subrogation payment is often met with challenge.

Limitations upon the rights of an Employer to assert a subrogation recovery do exist.
For example, a common limitation is that the Employer may not seek a subrogation recovery against any portion of the civil action recovery which is designated as a spousal claim arising from the work injury.

In the preceding blog post on January 11, 2016 we discussed the statutory limitation of the right of subrogation in a medical malpractice case. An Employer right of subrogation exists for any portion of the recovery designated for future wage loss or future medical expense reimbursements. The MCare statute specifically excludes Employer subrogation rights for any past payments of wage loss and medical benefits.

Originally, the Pennsylvania Motor Vehicle Financial Responsibility Act did not allow an Employer subrogation right against any employee Motor Vehicle Accident recovery. However, since 1993, The Workers' Compensation Act amendments changed this law, so that an Employer does have a right of subrogation where a third party causes the Employee to be injured in a work-related motor vehicle accident.

There are some limitations upon these Employer subrogation rights in Employee Motor Vehicle Accident case.

An Employer may not assert any subrogation lien against the employee's recovery from his/her personal insurance policy for uninsured or under-insured coverage. See: Standish v. American Manufacturers Insurance Co. (Pa. Super. 1997) and American Red Cross v. WCAB (Romano) (Pa. 2001).

Conversely, the Employer is entitled to subrogate against any Employee recovery from the Employer insurance policy for uninsured or under-insured coverage. See: City of Meadville v. WCAB (Kightlinger) (Pa. Cmwlth. 2002).

These appellate decisions provide guidance to handle subrogation issues in the instance of the Employee or the Employer insurance policy for uninsured or under-insured coverage.

QUERY: What about an uninsured or under-insured claim against the insurance policy purchased by a co-worker-driver, where the Employee is injured, in the scope of employment while riding as a passenger.

Karen Davis v. WCAB (PA Social Services Union) is a reported decision of a panel of the Commonwealth Court of Pennsylvania which directly addresses this issue.
No. 216 C.Cd. 2015, authored by Senior Judge Friedman on December 30, 2015.

Factual and Procedural Background

Employee was injured in a motor vehicle accident which occurred while she was in the course of her employment with PA Social Services Union. Employee was a passenger in a vehicle driven by a co-worker named Jarvie.The identity of the driver who hit Jarvie's vehicle is unknown.

Employer acknowledged this work injury and paid wage loss benefits with medical expenses to Employee in the total amount of $89,785.22.

Employee filed an uninsured claim with Allstate, the motor vehicle insurer of Jarvie, her co-worker.
Employer asserted its subrogation lien of $89,785.22.
Employee settled the Allstate uninsured motorist claim for $25,000.00.

Employer filed a Petition to assert its subrogation lien against the Employee settlement recovery in the Allstate uninsured motorist claim.

WCJ Decision

WCJ concluded that Employer was entitled to subrogate against Employee's uninsured motorist settlement with Allstate. WCJ reasoned the motor vehicle insurance policy that provided the uninsured motorist coverage was purchased by someone other than Employee. On this basis, a subrogation remedy was available to the Employer.
The WCAB affirmed this decision.

Employee Commonwealth Court Appeal

Employee argued that Employer is not entitled to a subrogation lien recovery where Employer did not pay for the uninsured motorist policy coverage.

The Commonwealth Court rejected Employee argument based upon its review of the Section 319 statutory language regarding subrogation rights.

Section 319 provides:

 " Where the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right of employe, ... against such third party to the extent of the compensation payable under this article by the employer ..."  . slip opinion page 3.

The Commonwealth Court reviewed the general parameters of subrogation rights, established in the prior appellate case decisions reported at Standish, American Red Cross and City of Meadville, mentioned above.

An additional decision was reviewed as support of the Employer right to subrogation in an uninsured motorist claim. In Hannigan v. WCAB (O'Brien Ultra Service Station) (Pa. Cmwlth. 2004), an employer was entitled to assert a subrogation lien against an employee recovery in an uninsured motorist claim from a customer's motor vehicle insurance policy. The employee was a mechanic and he was injured in an accident while driving a customer's vehicle. The negligent driver was uninsured.
The court reasoned that Employer was entitled to a subrogation recovery against the uninsured motorist benefit recovery, as those uninsured motorists benefits are paid in the place of adequate insurance of a negligent insured driver.

"Uninsured motorist benefits are intended to benefit, not only the insured, but also his relatives, passengers, lawful occupants and authorized drivers who are injured in the operation of the policy owner's vehicle. Thus, there is no difference between the policy holder and his beneficiaries".
Davis slip opinion page 6 citing Hannigan 860 A.2d at 640.

The Commonwealth Court has determined that an employer has a right to subrogation, not only where the employer has paid for the insurance policy, but also where a third party, such as a customer or co-worker has paid for the policy. Here, the Employee's co-worker paid for uninsured motorist coverage, therefore Employer was entitled to subrogate against the Employee's settlement.

Employee personally funded insurance policy benefits, continue to remain beyond the reach of the Employer subrogation lien recovery.


1.   In your review of the work-related motor vehicle accident claim, investigate and identify each party and their respective insurers.

2.   Place each party on notice of the existence of the Employer statutory right to subrogation for any recovery arising from the work-related injury.

3.   Promise to provide any documentation necessary to establish the subrogation lien figures.

4.   Request a copy of the pleadings filed in the civil action

5.   Monitor the civil claim arising from the work-related injury.

6.  Look beyond the "policy limits" to determine if there is any additional coverage available.

7.   Do not allow the plaintiff attorney to "represent" your subrogation lien.
This is an inherent conflict of interest. When limited settlement funds are available, guess who will be asked to compromise their recovery? (hint: it is not plaintiff).

 8.   Dissatisfied with the representations that your subrogation lien will be recognized before any settlement proceeds are distributed?
Petition to Intervene as a Use-Plaintiff. As a party to the civil action you will participate in any settlement conference discussions.

Monday, January 11, 2016

Work Comp Subrogation available in Medical Malpractice Case

Employer Subrogation Rights against Employee civil action recovery.

Section 319 of the Pennsylvania Workers' Compensation Act provides a right of subrogation to the Employer against a third party recovery by the injured worker.  The Employer may recover compensation payable, reduced by its pro rata share of the attorney fees and litigation costs which created the civil action recovery. (Section 319; 77 P.S. 671).

The Supreme Court of Pennsylvania has stated that the Employer right of subrogation is "absolute" and not subject to equitable exceptions.
See: Thompson v WCAB (USF&G) (Pa. 2001) and Brubacher Excavating Inc. V. WCAB (Bridges) (Pa. 2003).

However, the Employer right of subrogation is not without limitation.
There are limitations upon subrogation rights in specific circumstances
(this blog post is not a discussion of all of the possible limitations).

The MCARE Act (Medicare Care Availability and Reduction of Error Act) of 2002 limits the Employer right of subrogation against medical malpractice recovery of past medical expenses and past wage loss, paid before the time of the trial, in which the injured worker seeks a malpractice recovery.

Worker's Compensation practitioners have noted the expressed limitation of the Employer subrogation rights in the Medical Malpractice case. However, since 2002, there are limited published legal precedents on the issue of Employer subrogation rights for future medical expense and future wage loss in the Medical Malpractice case

Protz v WCAB (Derry Area School District, No. 402 C.D. 2015,  is a published decision of a panel of the Commonwealth Court authored by President Judge Pelligrini on January 6, 2016. This decision addresses the Employer Subrogation rights in Medical Malpractice cases.

[NOTE: another Commonwealth Court decision entered September 18, 2015 addressed the issues of IRE application of the AMA Guides, in litigation involving the same parties.]

Factual and Procedural Background

Employee sustained a work-related knee injury in April 2007. This injury was accepted as work-related and Employee received partial disability benefits as of January 2012, pursuant to an Impairment Rating evaluation.

Employee's work injury resulted in a total knee replacement surgical procedure. Due to surgical complications, additional surgery was necessary, Employee filed medical malpractice civil action against the surgeon and hospital . Employee medical expert evidence related the initial surgery to the work injury and further related the subsequent medical conditions and surgical repair. These claims were settled.

Employer filed a Petition to Review Compensation Benefits, seeking to subrogate the civil action recovery pursuant to Section 319.

WCJ Litigation & Decision

Employer submitted the medical malpractice complaints, the settle and discontinue praecipe and the settlement distribution sheet prepared by Employee counsel.

Employer submitted the Employee medical expert report which related the surgery and subsequent complications to the work injury. She would not have experienced these complications, but for the alleged medical malpractice.

Significantly, these documents reflected that all of the monies awarded were in regard to future medical expenses and lost wages. None of these settlement funds were designated to be set aside a payment for past medical bills or past wage loss.

WCJ Decision awarded Employer subrogation from the time of the settlement forward. WCJ noted Section 508 of MCARE Act precluded Employer from obtaining subrogation for past medical expenses and past wage loss paid before the time of trial. Section 508 did not preclude Employer from seeking subrogation with respect to future payments.

WCAB affirmed WCJ determination of subrogation rights.
Employee appealed to the Commonwealth Court.

Commonwealth Court Appeal

Employee did not dispute that Section 508 of the MCARE Act is silent regarding subrogation rights for future medical and wage loss awards in medical malpractice cases; BUT Employee argues this silence must be construed as a prohibition of subrogation, in accord with the plain language of Section 508 (c).

Examination of the statutory  language reflects Section 508 (c) precludes subrogation of Employee medical malpractice proceeds to the extent that those proceeds are "covered in subsection (a)".

Subsection (a) bars recovery of "past medical expenses or past lost earnings incurred to the time of trial", including those paid by an employer or worker's compensation insurer.

Subsection (a) does not address future medical expenses and/or future wage loss.

Conclusion: as future medical expenses and future wage loss are not covered in subsection (a), the subsection (c) prohibition against subrogation does not apply.

The Commonwealth Court concluded, this plain-meaning statutory interpretation is consistent with the purpose of subrogation insofar as it prevents employee double recovery. Also, it furthers the goal of ensuring that employer is not compelled to compensate employee for injuries caused by the negligence of a third party. slip opinion page 11. 

This interpretation of Section 508 of the MCARE Act is consistent with the presumption that the legislature does not intend to change existing law by omission or implication but only by an express provisionSee: Fletcher v. Pennsylvania Property and Casualty Insurance Guaranty Association, (Pa. 2009).


1. Do not become complaisant in your review of your subrogation rights.
Do not accept the "general rule" that there is no right of subrogation in medical malpractice cases.

Examine the civil action documents. What were the subjects of the employee civil complaint? What were the damages plead? What were the damages proven by medical evidence? What are the terms reflected in the settlement documents?

Note, in this case, Employer prevailed before the WCJ, as the terms of the civil action settlement documents described compensation for future medical expense and future wage loss. These are two subjects which are not precluded from subrogation by the MCARE statute.

Query: do we have a different result if the civil action settlement documents described the award as payment for past medical expense and past wage loss?

Can the employer "go beyond the terms" of the settlement agreement to establish that the award "includes" compensation for amounts beyond those past losses?

Caselaw generally suggests that one may be limited to challenge any description (or apportionment) of the settlement proceeds in a workers compensation petition. Participation in the civil litigation may be required.

2. There may be an attempt to limit the Employer subrogation in non-medical malpractice civil  litigation. In the litigation of civil liability of a third party for medical expense and wage loss damages to the injured worker, there may be an attempt to limit the Employer subrogation rights via description the award or settlement.

Frequently the Employee will attempt to describe a portion of the settlement proceeds as settlement of any spousal claim for loss of consortium. This portion of the settlement is not subject to the Employer subrogation rights.

Ongoing Employee attempts to "apportion" an amount of a civil action settlement to damages beyond the scope of the Employer subrogation rights may describe a portion of the award as attributed to a "pain and suffering" recovery. Often this argument will fail, for lack of documentation of this alleged apportionment. However, this argument continues.

3. BEST PRACTICE: place the injured employee and his/her legal counsel on notice of any possible rights of subrogation. Monitor the civil action to determine if there are any apportionment (description of recovery) issues. If so, it may be necessary to intervene in the civil action litigation, in order to preserve the Employer subrogation recovery.

IMO, an employer/insurer should not allow the employee legal counsel to "represent" their subrogation rights. There is an inherent conflict of interest in proceeding in this fashion. This conflict typically arises when there is a limited recovery available and/or limited settlement proposal. When faced with the task of dividing the limited recovery between employee and employer, counsel may request a reduction of the subrogation lien, in order to preserve a recovery to employee. Avoid this unnecessary problem.