The Absolute Right of Subrogation of the Work Comp Insurer ... and possible Waiver

The Worker Compensation Insurer Right to Subrogation and the waiver of that right.
The Pennsylvania Workers Compensation Act provides the worker compensation insurer with a right of Subrogation to recover benefits paid to an injured employee, where the injury is the result of the act or omission of a third party. See Section 319, 77 P.S. 671.


When the injured employee makes a recovery in a civil action arising from the work injury, the work comp insurer may request reimbursement from the recovery against the culpable party.

When a civil action is settled, the parties may set forth the the financial details of recovery and the subrogation lien calculation, in a Third Party Settlement Agreement (LIBC 380). The agreement may reflect the terms the parties have reached regarding the assertion or waiver of subrogation rights in any further civil action recovery.
At times, a disagreement may arise as to the exact rights of the parties.

Aminov v. WCAB (Herman E. Ewell), No. 311 C.D. 2013 an unreported decision of a panel of the Commonwealth Court of Pennsylvania, authored by Judge McGinley on July 15, 2013, reported this type of dispute.

Factual & Procedural Background

Employee was injured in a work-related motor vehicle accident.
The work comp insurer paid over $230,000 in medical and wage loss benefits.
Employee recovered $45,000 from the negligent third party in a civil action settlement.
A Third Party Settlement Agreement reflected the subrogation lien calculation and payment of slightly more than $23,000.

Employee filed another civil action against the Under Insured Motorist (UIM) portion of the Employer's automobile insurance policy.
Employee made a recovery against Employer's UIM, but did not disclose the amount. It was said to be in excess of the outstanding amount of the work comp subrogation lien (($185,908.44).

Employer filed a Review Offset Petition.
Before the WCJ Employer offered the Third Party Settlement Agreement.
That Agreement read:
 Claimant's 3rd party recovery was $45,000.00. The amount available for satisfaction of the 
 subrogation lien is $23,194.38. Defendant/Carrier will accept $23,194.38 in full satisfaction of their subrogation lien.

The WCJ found Employer did not explicitly waive the work comp insurer rights from any future third party claims. On the contrary, the WCJ found the work comp insurer put employee on notice that it intended to seek recovery from future claims.
A letter to Employee counsel stated: "receipt of this partial lien recovery does not waive our rights to further potential recovery in the pending UIM claim".

The WCJ granted Employer's Review Offset petition to assert its subrogation rights against the UIM recovery.

WCAB affirmed, stating the Section 319 mandated employer is automatically subrogated to employee's rights against third parties for compensable injuries.
Employer did not waive its subrogation rights through the Third Party Settlement Agreement language.

• The only party referenced in the agreement were the civil action defendants (the LIBC form has an area to caption the parties in the recovery).
• Attached to the Agreement was a release form which stated the form was not a release of any claims in any future UIM benefits. 
• WCAB noted the work comp insurer wrote to employee counsel before employee sent the initial subrogation lien reimbursement check and again advised it was not waiving its rights against any UIM claim. 

Commonwealth Court Decision

The Court affirmed the WCJ and WCAB.
The Court rejected Employee argument that it was an error of law to consider the correspondence sent to employee. Employee argued the fully executed Agreement between the parties shows that the work comp insurer intended to waive any further right to any and all subrogation.

The Court relied upon the reasoning in Gorman v. WCAB, 952 A.2d 748 (Pa. Cmwlth.2008).
In Gorman the parties settled a work comp case via Compromise and Release Agreement. In the paragraph which asks: Is there a lien or potential lien for subrogation under Section 319?
The answer was marked "No".
When employee made a subsequent civil action recovery, in a lawsuit initiated after the signing of the Compromise and Release Agreement, Employer sought a subrogation credit from that recovery.

In Gorman, the Court found that the C&R Agreement did not note there was any potential for future subrogation.  The parties stated that there was no claim at the time the C&R was signed. This is not the equivalent of a waiver of any future subrogation rights. The Court held the Employer could not have bargained away any subrogation rights, as part of the C&R settlement, as neither party contemplated a civil action settlement at the time of signing the C&R Agreement.

The Employer's subrogation rights may only be abrogated by choice. Gorman citing Winfree v. Philadelphia Electric Company, 554 A.2d 485 (Pa. 1989). slip opinion page 7.

 In the instant case, the Court held it was appropriate for the WCAB to consider the correspondence of the parties, in addition to the Third Party Settlement Agreement to determine the intention of the parties.
Employee appellate argument relied upon the general rule that " the intent of the parties to a written contract is presumed to be contained within the contract itself".

However, where the contract terms are ambiguous and susceptible of more than one reasonable interpretation, the court (WCAB) is free to receive extrinsic evidence, ie., parol evidence, to resolve the ambiguity. Krizovensky (Pa. Super. 1993).

Here, the Third Party Settlement Agreement language is capable of multiple reasonable interpretations. It was appropriate to examine all of the evidence to determine the intention of the parties.
The evidence of record lends strong weight to the fact that Employee did not intend to waive its right to subrogation lien recovery in future third party claims. Employer work comp insurer wrote a letter to employee counsel stating that the partial line recovery did not waive its rights to further subrogation recovery in the pending UIM claim. Employee attorney response to this letter did not protest that statement.
There was no error of law to consider the correspondence, beyond the Third Party Settlement Agreement, to determine the intention of the parties. The Employer was entitled to assert a subrogation lien against the employee UIM recovery.

Practice Pointers

1. This controversy demonstrates the important of carefully documenting the terms of the settlement agreement. Employer carefully documented their position. They addressed the issue of subrogation recovery in the pending UIM claim. In accord with Gorman, even if employer was unaware of the further recoveries, employer would still have a right of recovery. 

2. On occasion, I have prepared a Supplemental Agreement (LIBC 337) for execution by the parties, concurrent with the Third Party Settlement Agreement form. As the Third Party form has limited "space" on the form, to include additional terms or agreement of the parties, the Supplemental Agreement provides an "official" document to memorialize any additional terms.

Death on the Job... as a result of the job?... or just Happenstance?

Death on the Job... as a result of the job?... or just happenstance?

A Compensable work injury is defined as an injury to an employee, regardless of his previous condition, arising in the course of his employment and (is) related thereto.
A compensable work injury may include "death resulting from such injury and its resultant effects".
See the Section 301 (c)(1) definition of "injury".

In the instance where an employee falls, the injury sustained as a result of the fall may be the significant event.
In the instance where the employee faints, collapses or passes out, the resultant injury may be a compensable disabling injury, if it is caused by the work duties or condition of the work premises.

Where the employee suffers a fatal condition... a question of medical causation is presented.
Employee has the burden of proof to establish a relationship of the death to the work duties or condition of the work premises.

The Manitowoc Company Inc. v. WCAB (Cowan), No. 472 C.D. 2013, an opinion of a panel of Commonwealth Court of Pennsylvania, authored by Judge Friedman on August 20, 2013, addressed these medical causation causation questions in a fatal claim petition.

Factual & Procedural Background

Employee and Co-worker were working on an elevated crane platform without any harnesses. The platform was 6 feet off the ground and had no handrails.
While in a crouched position, employee said "Hold it. Wait a minute". Co-worker saw employee's eyes roll back, he fell off the platform, he struck his head on the floor.
Within seconds employee began turning blue and blood came from his mouth. He was breathing slowly and had a faint pulse. Soon his breathing stopped and first responders administered rescue breathing and chest compressions.
Diagnostic tests, later that day, showed Employee was brain dead.
He was disconnected from life support.
Autopsy report stated cause of death was cardiac dysrhythmia due to mitral valve prolapse.

A Fatal Claim petition was filed in the name of Employee's 3 year old son.

Claimant Medical Expert Opinion

He could not be certain of Employee's state of consciousness at the time of the fall... as he was not hooked up to any monitoring devices. [did the eyewitness account provide any information?].

He concluded employee did not experience cardiac arrest at the time of the fall, as he has a pulse and was breathing when on the ground. He was not agonal. [gasping for breathe]
[based upon eyewitness accounts].

He opined employee's death was a direct result of falling on his head, which caused a closed-head injury with massive concussion and diffuse axonal injury [diffuse traumatic brain injury], leading to a anoxic brain injury [brain cell death due to inadequate oxygen]  and cerebral edema.

He opined Employee did not die from mitral regurgitation or heart disease.
[autopsy cause of death].
Thomas R. Stoner, D.O. Board Certified in Internal Medicine.

Employer Medical Expert Opinion
Neurologist
He opined Employee lost consciousness before he fell, as employee went limp and fell, without trying to catch himself.

He believed it was highly possible that a cardiac event caused employee to lose consciousness, based upon the pre-existing mitral valve disease and fact that he turned blue quickly.

He did not believe employee's airway was blocked, despite a moderate amount of blood when EMT's intubated employee.
He opined the brain injury resulted primarily from the cardiac arrhyythmia and secondarily from the head striking the floor.

He believed the head trauma had little impact upon the cause of death as it did not cause bleeding in the brain and employee would have died whether or not he struck his head.
Paul M. Shipkin, M.D. Board Certified in Neurology.

Cardiologist
Employee had mitral value prolapse and mitral regurgitation.
He experienced ventricular fibrillation because of the mitral valve regurgitation.
This lead to anoxic brain injury and death.
Ventricular fibrillation does not commonly result from head trauma unless there is bleeding in the brain.
He concluded Employee's diffuse brain swelling and anoxic encephalopathy were consistent with a cardiac event.
Joseph Gascho, M.D. Board Certified Cardiologist

WCJ Decision
WCJ found Employee was injured in the course of his employment as his death was caused by the fall and resulting head trauma. Employee medical expert was found credible.

Employer appealed the WCJ award of benefits.

Employer Argument

Employer argued that Claimant medical expert evidence was not unequivocal medical evidence to support an award of benefits. Claimant medical expert was equivocal as he offered 4 alternative theories regarding the exact cause of death.

Commonwealth Court Reasoning
WCJ decision was supported by unequivocal medical evidence, as under each of the scenarios offered by Claimant medical expert, the fall and blunt force trauma caused the employee death.
Absent the head trauma, employee would still be alive. slip opinion page 7.

Claimant has the burden of proof to establish the work injury was a substantial contributing cause of employee's death.

 Where the causal connection is not obvious, claimant must present unequivocal medical evidence which establishes that connection.

The question of whether unequivocal medical evidence proves causation, is a question of law, reviewable on appeal.

The offering of alternative analyses does not render the medical expert testimony equivocal.
Medical expert testimony is competent, even if the witness admits to uncertainty, doubt, reservation or lack of information with regard to certain medical details... as long as the medical expert does not recant the opinion expressed.

***Despite the uncertainty as to the exact chain of physiological events, Claimant medical expert opined that the work fall and head trauma caused Employee's death.

Practice Pointers:
1. This fact pattern demonstrates the difficulty of review and analysis of complex medical issues, such as "causation" where there are multiple factors present.
2. This fact pattern also demonstrates the role that the testimony of "fact" witnesses may play in assessment of the case and support of a medical expert opinion.
3. One must obtain and review all pertinent medical records, such that the reviewing medical expert can assess pre-existing and non-occupational factors. The work event must be the significant or substantial contributing factor, to establish a compensable work injury. Are there significant or substantial non-occupational factors?
4. Often there are competing theories of causation. The best practice is to present this medical expert opinion evidence, together with the complete medical records and fact witness testimony to convince the fact-finder of the logic of one particular theory.
5. One must also assess the "non-legal" factors, recognizing a certain level of sympathy arises in fatal claims litigation. This can be unavoidable. In the instant case, the fatal claim was filed in the name of the 3 year old son of the employee. Is there any evidence of other financial remedies to the surviving family members? Is it relevant or admissible? Is there any third party liability?

How to Analyze a Scope of Employment Case

Work Site Premises and the (non-)Travelling Employee
The Pennsylvania Workers' Compensation Act provides for wage loss benefits and medical expense reimbursements for work related injuries. A question of the extent of this liability arises when the employee is injured beyond the immediate work site or in the process of traveling to or from the work site.

The analysis of the scope and extent of responsibility of the Employer may involve several factors. What is the scope of the "business premises" or work site of the Employer?
Is the Employee a travelling worker?

This type of issue was reviewed by the Commonwealth Court of Pennsylvania in the decision authored by Judge Leavitt on July 26, 2013, at Mansfield Brothers Painting v. WCAB (German), No. 1858 C.D. 2012.

Factual & Procedural Background

Employee is a painter who received work assignments from his union hall.
Employer Mansfield was hired by the University of Pennsylvania to spackle and paint dorm rooms in the Quadrangle building, for every summer since 1976. The "Quad" is located in the Philadelphia campus, from 36th to 38th streets. The only entrance to the Quad building is on Spruce and 37th streets.
Employee commuted to work by train. The train station is at 34th and Market streets.

Employee painted at the Quad building, on a full-time basis, 7:00am to 3:30 pm. On the day of injury, the painters finished early and Employee left the building to walk to the train station with another co-worker. They crossed Spruce street and continued down a slate path on the campus. Employee tripped and fell on an uneven part of the slate path. This occurred approximately 150 feet from the Quad building.
[ these facts were provided in testimony of Employee, shop steward and co-worker].

Legal Issues Raised by these Facts:

1. was employee injured in the course of his employment?
2. was employee a "travelling" worker?
3. was employee injured as a result of a condition of his work premises?

Scope of Employment Analysis

An injury takes place, "in the course of employment" in 2 distinct situations.

First, an injury is compensable if it occurs while the employee is furthering the business or affairs of the employer. If furthering the business, it does not matter whether employee was on or off of the employer's premises.

Second, an injury is compensable if employee is injured as a result of a condition of the premises.
This rule has been extended to include a reasonable time before and after the work day.
See: Newhouse 1987; Slaugenhaupt 1977.
To prove a compensable work injury, as a result of the work premises, the employee must prove all of the following:
i. he was on the premises occupied or under the control of the employer or upon which the employer's business is being carried on;
ii. he is required to be present on the premises by the nature of his employment;
iii. he sustains injuries caused by a condition of the premises or by operation of the employer's business or affairs thereon. (Slaugenhaupt 376 A.2d at 273).

Was this painter on the "business premises" of the employer when he fell on that slate walk, after the work day and 150 feet from the building where he painted?

The "Business premises" of the employer is not necessarily limited to the building(s) controlled, occupied or owned by the employer!
"Premises" has been interpreted to include property that could be considered an integral part of the employer's business.
Property becomes integral to the employer's business when they require employees to use that property, in the performance of their assigned tasks.  A good example is a sidewalk leading to the work site, or a parking area.

Was the slate path a part of the business premises?

Remember, there was only one means of entrance to the Quad building.
Employee argued he was forced to take this route!
BUT he was 150 feet from the Quad building when he fell...

NO, the slate path was not part of the Employer's business premises.
The Employer was hired to paint in one building, the Quad building.
The Employer did not occupy, control or use, any part of the campus beyond that building.
Here, the work "premises" was limited to the Quad building.

When Employee fell... he had left the work site ... he crossed a public street ... he was 150 feet from the Quad building, on a walkway owned by the University.
At that point he was on the University's premises, not on his employer's premises.

Was the slate path integral to the Employer's work site, as a means of ingress and egress?

No.  Employee was no more than a member of the public using the sidewalk as a pedestrian, much like the claimant in Eberle v. Union Dental Co. (Pa. 1957).

Once employee left the Quad building, Employer had no interest or control over the route employee used to travel home. Like his co-workers, employee could travel by automobile or he could commute via train, the employer did not make any requirements. As such, the slate path was not integral to the employer's business and was not part of the employer's premises.

Was employee a "travelling" employer, such that this portion of the day remained within the scope of his employment?

NO.  Employee was not a travelling employee. He worked at a one fixed site of employment for the duration of the project. He travelled (commuted) to the one site assigned by his employer. The employer worked at one site on the campus. Employer did not assign employee to different sites.

Employee could have received other assignments from the union hall ... but he did not.
For this employer, he worked at one site and this assignment did not involve travel to other sites.
[distinguishing this employee from the nurse who travelled between different medical facilities and patients, in her temporary agency nursing assignments, as reported at:  Peterson v. WCAB (PRN Nursing Agency 1991).]

Practice Pointers:

1. Initial Claims investigation must include a thorough analysis of the facts surrounding the employment relationship, the work assignments, the site of the injury and details, such as travel requirements.

2. Scope of Employment cases can be very fact-specific, such that a few details may alter the outcome of the compensability analysis. When in doubt, interview the witnesses and employer representatives and secure their description of the work relationship and the actual business practices at the work site.

Oxycontin use - Effectively reduced with Utilization Review Procedures

Settlement and Future Medical Expense Liability
The Pennsylvania Workers' Compensation Act provides for the payment of wage loss benefits and medical expenses where an injury is found to be "work related".
As a means to manage the extent of future liability, an Employer may settle the wage loss benefit entitlement of the employee and retain the future obligation to reimburse medical expenses which are reasonable, necessary and causally related to the work injury.

The future medical expense liability may remain significant. One means to attempt to "control" and/or limit future medical expense is to file a Utilization Review request, to have a medical expert review the records of treatment, read a statement from the employee and perhaps discuss the case with the treating medical provider. A written report is issued together with a Utilization Review Determination facesheet. The dissatisfied party may appeal to the Workers' Compensation Judge.

In many older "legacy" cases, the remaining workers' compensation liability is the medical expense.
If one does not challenge the  "reasonableness or necessity" via Utilization Review, the remaining remedies are: (1) denial of payment based upon the lack of a causal relationship and/or (2) medical evaluation that the employee has fully recovered from the medical condition and no longer requires medical care.

Petroski v. WCAB (Anemostat Products), No. 436 C.D. 2013, an unreported memorandum opinion of the Commonwealth Court of Pennsylvania authored by President Judge Pellegrini on July 18, 2013, addressed the Utilization Review issue.

Factual & Procedural Background
In 1988 Employee injured her lower back at work. The Employer issued a Notice of Compensation Payable for "a herniated nucleus pulposus". The wage loss benefits were settled, but Employer remained responsible for reasonable and necessary medical expenses, causally related to the work injury.

22 years later the Employer filed a Utilization Review request in November 2010.
Based upon review of the records of treatment of provider Dr. Gilhooley, Employee suffered from chronic pain, insomnia and anxiety.
The UR physician, Dr. Feinstein opined that reasonable and necessary medical treatment included:
(1) office visits, once every 3 months;
(2) prescriptions for skelaxin, xanax and temazepam every 3 months;
(3) prescription for oxycontin for 3 months to March 8, 2011.

Dr Feinstein found there was no evidence that Oxycontin was useful in facilitating employee's normal daily activities and she continued with complains of escalating pain despite relatively high doses of narcotic analgesics.
He concluded it would be reasonable to allow an additional 3 months of Oxycontin use to allow safe weaning or transitioning. slip opinion, page 2.

Employee testified she consumed two 80mg, two 40mg and two 10mg Oxycontin each day.
(her testimony was inconsistent as to her discontinued use of vicodin).
Her testimony was inconsistent regarding any treatment effect; "Oxycontin changed her life" versus she continued to had "excruciating pain".

The provider testified that employee required this medication, to "afford her the greatest quality of life... with the least amount of impairment of other systems".

He admitted on cross that employee stated at times the prescribed level of Oxycontin was not working or that she needed early refills. At one visit she stated her pain was increasing, she did not feel the medication was helping her pain.

Decisions:
The WCJ granted the Utilization Review. The WCAB affirmed. The Commonwealth Court affirmed.

Reasoning:
In a Utilization Review, the burden of proof remains on the Employer, to establish the challenged medical treatment is not reasonable or necessary.

An employee may argue that treatment that does not cure the medical condition may be reasonable and necessary, if it acts to relieve pain and treats symptomatology... if it is palliative in nature.
[citing Trafalger House 2001; Glick 2000; Cruz 1999 and Central Highway 1999].

Here, the "palliative" argument fails, as employee offered conflicting testimony as to whether the Oxycontin at prescribed levels was not working well or helping to alleviate her pain or that her pain was actually increasing. The WCJ found her testimony was not credible.

Practice Pointers:

1. This decision demonstrates and effective strategy to challenge and reduce liability for continued opioid use. An important element is the detailed review and documentation of the treatment effect of opioid use, as reported by the patient and recorded by the provider.

2. Narcotic pain medication use remains a significant issue in the workers' compensation system. Employers and Insurers must be more aggressive in the review and challenge to excessive long-term opioid use.

Appellate Decision places Employee outside Scope of Employment

The Pennsylvania Workers Compensation Act defines the term "injury" to mean " an injury to an employee, regardless of his previous physical condition, arising in the course of his employment and related thereto...".

"Arising in the Course of Employment" includes injuries sustained while the employee is actually engaged in the furtherance of the business or affairs of the employer.
See Section 301 (c)(1), 77 P.S. 411(1).

The determination of the compensability of an injury will be made on a case-by-case basis, in light of the specific facts presented. In the recent past, we have reviewed several appellate decisions which broadly construed the scope of one's employment, on the basis that minor departures will not interrupt the course of one's employment.

Trigon Holdings, Inc v. WCAB (Griffith), No. 207 C.D. 2013 is a reported panel decision of the Commonwealth Court of Pennsylvania, authored by Judge Covey on August 7, 2013.
This decision is significant, in that the Court reversed the determination by the WCJ and WCAB that an employee was within the scope of employment at the time of his injury.

Factual & Procedural Background
Employee was a "gang leader" at a business which machine finishes medical and aerospace industry parts. His job was to ensure the machines were operating properly. He was required to examine the equipment, troubleshoot or get tooling for the machine operators, when necessary. He was not a machine operator.

He sustained an injury to his left thumb when it was drawn into a lathe, as he was polishing a bolt for his child's go-cart.
Employee filed a work comp claim petition. The WCJ awarded temporary total disability of 6 months until his return-to-work date. WCAB affirmed this award.

Employer appealed and argued it was an error of law to conclude that employee was in the course and scope of his employment, as the time of injury. Employee left his appointed duties, without the employer's knowledge or consent when he performed unauthorized work of a personal nature. Commonwealth Court agreed and reversed this award.

Commonwealth Court Reasoning
The Court reviewed the Section 301(c)(1) definition of a compensable work injury.
The determination of the course and scope of employment is a legal issue.
At the time of his injury, this employee was not in the course of his employment.

The Court reviewed prior decisions where "momentary departures" did not remove the employee from his employment. Although the "course of employment" includes intervals of leisure or breaks for personal comfort, there is no fixed standard by which to make such a determination.
"As a result, the case law in this area appears to have made a clear and consistent application of law difficult and consequently, the standard has become somewhat strained". slip opinion page 7.

[ Citing The Baby's Room 2004 decision, where a delivery driver was awarded benefits for a traumatic brain injury sustained when he jumped to touch a basketball rim at a place of delivery and City of Newcastle 1988 decision where a co-worker was awarded benefits when he contracted a rare disease when he kissed a co-worker departing for maternity leave.]

Several facts were cited in the decision:
1. Employee was not injured when attending to his personal comfort, such as taking a drink or using the restroom.
2. The accident occurred after He actively disengaged himself from his work activities.
3. He did not inform his supervisors that he was leaving his assigned area.
4. He advised his co-workers he was leaving the area for a couple of minutes. This was after he made sure the employer's machines were operating properly. The tool room was approximately 20-25 yards away.
5. Employee was suspended for 5 days for violation of work rules, ie performing personal projects.

The Court concluded that Employee abandoned his work responsibilities and deliberately engaged in an unrelated activity, that was "foreign" to his employment.
Although the purpose of the Work Comp act is remedial in nature and intended to benefit workers, the Act "was never intended to make the employer an insurer of the safety of all employees".

Interestingly the WCJ made several pertinent factual findings, including:
a. it was general knowledge that employees used workplace equipment for personal tasks
b. Employee said, on the preceding day, his foreman made clear that he could go to the tool room, any time, to do personal work.
c. at times, supervisors would ask employee to perform personal jobs for them.
d. Employer witness testified he was unaware of any instance where employees performed personal work on employer's machines on employer's time. [IMO this is a very specific statement].

Practice Pointers:
1. This decision reflects the importance and significance of reviewing these scope of employment cases on a case-by-case basis. Experienced Work Comp defense counsel will be familiar with the prior caselaw decisions and provide an assessment of the facts presented and the proper application of these legal standards.
2. IMO this decision makes a specific distinction from the "personal comfort" cases, where a brief time departure or small deviation from one's work assignments, will not break the employment relationship. Although this employee was injured during a brief time departure, he was injured when he was doing a personal task, not a task to further the business of his employer.

Pa Work Comp Subrogation in Civil Action

The Pennsylvania Workers' Compensation Act provides the Employer and Insurer with a right to subrogation against a civil action recovery, arising from the compensable work injury, where the injury is "caused in whole or in part by the act or omission of a third party". See: Section 319, 77 P.S. 671.

This right to subrogation is said to be "absolute". The Pennsylvania Supreme Court has explained the rationale behind the right to subrogation is:
(i) to prevent double recovery for the same injury by the claimant;
(ii) to ensure the employer is not compelled to make compensation payments as a result of the negligence of a third party;
(iii) to prevent a third party from escaping liability for its negligence.
Dale Manufacturing (Pa. 1980).

A Question arises as to the right to subrogation where the injured Employee makes a recovery against another party, who was not the third party tortfeasor who caused the Employee's injury.

Kennedy v. WCAB (Henry Modell & Co. Inc.) No. 1649 C.D. 2012 is a reported decision of a panel of the Commonwealth Court of Pennsylvania, authored by Judge Leavitt on August 1, 2013, which addressed this legal issue.

FACTUAL & PROCEDURAL BACKGROUND

Employee sustained a crush injury to the hand while using a conveyor belt at work. The conveyor belt was manufacturer and installed by Keystone Spray Equipment Inc. Employer's work comp insurer, Liberty Mutual, initiated wage loss and medical expense payments.

Employee legal counsel informed Employer of the intention to file a 3rd party products liability civil action against Keystone. Employer placed Employee on notice of its subrogation rights against any 3rd party recovery. Employee counsel agreed to "protect" the subrogation lien, so as to withhold disbursement of any proceeds from the products liability action until Employer was reimbursed for its lien.
In Employee's products liability action, Keystone's insurer, Regis Insurance Company refused to defend the claim, asserting the action fell within the "products liability" exclusion in the Keystone insurance policy.

The Trial Court approved a $426k consent judgment against Keystone. The parties stipulated that Keystone was negligent in the manufacture, installation and failure to warn, regarding the conveyor belt. Keystone was financially insolvent. Employee agreed to not pursue Keystone, but accepted an assignment from Keystone of its rights under its liability policy and Employee pursued Regis Insurance for collection of the judgment.

Employee filed a lawsuit against Regis Insurance for breach of contract and bad faith refusal to defend and indemnify Keystone.
The Trial court ruled in Employee's favor, concluding the Regis Insurance had a duty to defend Keystone in the product liability lawsuit. Regis was direct to indemnify Keystone for the amount of the $426k consent judgment. This order was affirmed on appeal by the Superior Court.

So, Regis paid Employee. Now Employer Keystone asked for payment of it's subrogation lien, ie, the work comp benefits paid to Employee in the amount of $81,000. When Employee did not pay, Employer filed a work comp Review petition to assert it's subrogation right.

Employee argued the money came from Regis Insurance for the [assigned] breach of contract action , not from the products liability action against Keystone.

WCJ granted Employer's review. WCJ concluded Employer was entitled to subrogate the Employee civil action recovery from Regis Insurance as that action arose from the original work injury.

COMMONWEALTH COURT DECISION

The decision of the WCJ was affirmed, allowing the Employer's worker compensation insurer, Liberty Mutual, to recoup the wage loss and medical expense payments made to Employee from the civil action recovery that Employee made against Regis Insurance, the insurer of employer, who decline to defend the products liability civil action.

Remember, Employer had the right to file a lawsuit against Regis Insurance for its refusal to defend Employer in the products liability action filed by employee.  Employer assigned this right to Employee. Employee was successful and recovered $426k from Regis Insurance. Then Liberty Mutual asserted its right to subrogation against this recovery for the $81,000 work comp payments made.

Why was the work comp insurer able to subrogate the civil action recovery employee made against Regis Insurance, when Regis was not the 3rd party tortfeasor?
Keystone was the negligent 3rd party hat caused the injuries to Employee.

This situation was analogous to the Poole (Pa. 2002) decision where the claimant recovered in a civil action for legal malpractice, where his attorney did not properly file a civil action against the 3rd party responsible for his slip and fall injury. The claimant recovery from his attorney was subject to the subrogation right of the work comp insurer. A legal malpractice claim is unique in that it requires the claimant "demonstrate, not merely an injury as a result of the malfeasance of his previous counsel. but also the malfeasance of the original tortfeasor which resulted in the underlying injury".
Poole, 810 A.2d at 1184.

There is no right to subrogation, in cases where the monetary recovery came from a source unrelated to the 3rd party [such as a recovery from the claimant's own insurance policy; American Red Cross (Pa. 2001).], or where the tortfeasor caused a subsequent harm, different from the original compensaible injury [a civil rights violation by a subsequent employer; (Brubacher Pa. 2003).].

The instant case involves a monetary recovery from the insurance carrier for the 3rd party tortfeasor. The tortfeasor caused Employee's original work injury.
Employee had no independent cause of action against Regis Insurance. He stepped "into the shoes" of Keystone, as an assignee of the right to pursue payment from Regis. Like the Poole decision, this employee's lawsuit against Regis depended upon the "malfeasance of the original tortfeasor".
Allowing reimbursement of Employer's work comp subrogation lien satisfies the purposes of the subrogation statute.

PRACTICE POINTERS:

1. Investigate the potential for any third party recovery by claimant and the potential for a right of subrogation, AT THE OUTSET OF THE CLAIM ASSESSMENT.

2. Investigate the potential for ant third party recovery by claimant and the potential for a right of subrogation, AT THE CONCLUSION OF THE WORK COMP LITIGATION, circumstances change!

3. In my opinion, work comp insurers should NEVER have the claimant/plaintiff counsel "protect" the subrogation rights of the work comp insurer in any civil action. IMO, there is an inherent conflict of interest, as the interests of the parties differ, on so many points ... AND when there is a finite source of funds available for recovery ... who do you think the Plaintiff lawyer will favor???

Work Comp Suspension allowed despite Non-Occupational Disabilities

An Employer may be entitled to a Suspension order, despite the presence of disabling non-work related conditions

The Pennsylvania Workers' Compensation Act provides wage loss benefits and payment of reasonable medical expenses to the employee suffering from disability as the result of a work injury.

An Employer may attempt to Suspend or Modify the payment of wage loss benefit via medical and vocational evidence of available work.

When the employee suffers from non-occupational disability, in addition to residual work disability, the right and responsibilities of the parties are altered. 

In Southeastern Pennsylvania Transportation Authority (SEPTA) v. WCAB (Cunningham), No. 2045 C.D. 2011, the Commonwealth Court of Pennsylvania addressed these issues in an opinion authored  by Judge McCullough dated July 12, 2013.

Factual and Procedural Background

Employee injured his right knee on June 11, 1996, while working as a mechanic in a permanent light-duty capacity, as a result of prior work injuries. A Claim and Penalty petition were litigated, after a Notice of Temporary Compensation Payable was revoked.

Employee returned to work shortly after the June 1996 right knee injury.
He was involved in a non-work related MVA in July 1996 with injuries to the left knee, low back and left hand. He went off work. He had surgery for the work-related right knee injury in January 1997 and returned to his light duty position in April 1997.

Employee suffered a 2nd non-work related accident in December 1998 when he was struck by a vehicle, injuring his left knee, left shoulder, left hand and low back. He has not worked in any capacity since an unsuccessful attempt to work in December 1998.

WCJ Decision, June 2000, granted the claim and penalty petitions.

Employer filed a petition for Modification in August 2006 based upon medical and vocational evidence as of April 12, 2006.

Employer filed a petition for Modification/Suspension in January 2007 averring employee was able to return-to-work, but for his non-occupational injuries.

Employer and Employee presented vocational and medical expert testimony.

WCJ Decision granted Employer Modification as of April 12, 2006, based upon competent and credible medical and vocational evidence.

WCJ Decision also granted a Suspension of benefits as of January 26, 2007, based upon the evidence that employee's non-work related injuries rendered him incapable of all possible work.

WCAB affirmed the Modification and reversed the Suspension order.

Commonwealth Court Decision reinstated the Suspension order.

Commonwealth Court Reasoning:

1). Section 413 of the Act, 77 P.S. 772 allows the WCJ to modify, suspend or terminate benefits upon prove the disability of the injured worker has decreased, or finally ceased.

2). The Pa. Supreme Court decision in Kachinski set forth the standard for modification based upon job availability: i. An employer must produce medical evidence of some recovery of ability to work; ii. Employer must produce evidence of open (available) jobs within the medical clearance; iii. employee must demonstrate a good faith follow through on job referral; iv. benefits continue if the referral does not result in a job.

3). A Suspension of benefits is appropriate where the employee has sufficiently recovered from the work-related injury to return to work.

4). However, where the employee is incapable of return to all possible work activity, as a result of his non-work related injuries, it "would be an exercise in futility" to require the employer to show that work is available to such an injured worker.

In the instant case, Employer medical evidence was found credible by the WCJ to establish employee was capable of returning to sedentary capacity work, as a result of his work-related injury.

Employer vocational evidence was found credible to establish a post-injury earning capacity as of April 12, 2006.

A Suspension of Benefit as of January 26, 2007 was appropriate, as employee was incapable of returning to any work, as a result of his non-work related injuries. The Court noted that employee did in fact return to his available position after his work injury and after the first non-occupational accident. It was only after the 2nd non-occupational injury that employee did not return to his position.

Commonwealth Court relied upon the logic and reasoning of the Pa. Supreme Court decision in Struthers Wells v. WCAB (Skinner) (Pa. 2010) for the proposition that Employer was not required to demonstrate that work was available within employee's work-related limitations, where in fact, employee was totally disabled by his non-work conditions.

PRACTICE POINTER:
It is essential to examine any work restrictions where an injured employee has non-occupational conditions which may limit the workers capacity to return to work.
Ask you medical expert to identify the degree of disability as a result of the work injury versus the degree of disability associated with any non-occupational conditions.

This distinction may alter your litigation plan and the remedies available to the Employer and Insurer.