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.

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