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 provision. See: 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.