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Robert F. Horn, Esquire
Yes, Domtar was our firm’s case, in which we represented our clients, Liberty Mutual and Schneider National, seeking to perfect our clients’ independent right of subrogating their workers’ compensation lien against the third-party tortfeasor that caused injuries to Schneider’s employee, resulting in workers’ compensation benefits being paid to its employee, George Lawrence.
As lead counsel for this case, which has been followed both locally and nationally by employers and insurers, the April 27, 2015 3-2 Majority Opinion of the Pennsylvania Supreme Court, in an opinion authored by Justice Baer, is a very disappointing result, both professionally and personally, given the stakes presented as well as the time and energy expended in its pursuit.
Disappointed though we are, we remain confident that this was an issue incredibly important to pursue, with the Supreme Court’s Decision potentially opening the door for framing future subrogation lien recovery cases, under a “use-Plaintiff” procedure, as opposed to the procedure used in Domtar, being a “as subrogee of” procedure.
With disappointment comes future insight.
The Domtar case involved the Pennsylvania Supreme Court being asked to address a question raised inFrazier v. WCAB (Bayada Nurses, Inc.), 52 A.3rd at 248 (2012), with the Supreme Court having granted our Petition for Allocatur to address the issue framed below:
· Does Section 319 of the Pennsylvania Workers’ Compensation Act, 77 P.S. § 671, allow an employer/insurer to step into the shoes of an injured employee to subrogate against the negligent tortfeasor causing the injuries resulting in the payment of workers’ compensation benefits?
That question was taken directly from the Pennsylvania Supreme Court’s Decision inFrazier v. WCAB (Bayada Nurses, Inc.), 52 A.3d at 248 (2012), with the Pennsylvania Supreme Court having granted our Petition for Allocatur in reliance upon our usingFrazier to frame the appellate question.
The ruling issued by the Supreme Court on April 27, 2015 limits employers and workers’ compensation insurers from pursuing a direct right of subrogation against a third-party tortfeasor when the injured employee, who has received workers’ compensation benefits but takes no direct action against the tortfeasor from the employer or workers’ compensation insurance carrier directly suing the negligent tortfeasor, absent the action being filed as an “in the name of” case.
This case arose as a result of our client’s employee, George Lawrence, sustaining work-related injuries while working as a driver for Schneider National on December 13, 2009. Lawrence’s injuries resulted from Lawrence falling in a parking lot leased byDomtar, with Schneider’s workers’ compensation insurance carrier, Liberty Mutual, being forced to pay workers’ compensation benefits, as a result of the negligence of the tortfeasor against whom we sought to recover Liberty/Schneider’s subrogation lien for the workers’ compensation benefits paid to Lawrence.
When Lawrence did not elect to file a lawsuit on his own, and never responded to several requests to cooperate with Schneider or Liberty, to allow Schneider and Liberty to pursue a subrogation claim directly againstDomtar, a Writ of Summons was filed against Domtar by our office, serving as Pennsylvania counsel for Schneider in defense of its workers’ compensation claims.
Despite repeated efforts to secure Lawrence’s direct involvement in the lawsuit, Lawrence never stepped forward to participate, and a Complaint was then filed againstDomtar on behalf of Schneider and Liberty, seeking recovery of the workers’ compensation benefits that had been paid during the pendency of Lawrence’s workers’ compensation claim, with the subrogation lien totaling $33,929.23.
The subrogation principle is simple enough, directly tracking Section 319 of the Act, which sets forth:
“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 the employe[e], his personal representative, his estate or his dependents, against such third-party to the extent of the compensation payable under this article by the employer; reasonable attorney’s fees and other proper disbursements incurred in obtaining a recovery or in effecting a compromise settlement shall be prorated between the employer and employe[e], his personal representative, his estate or his dependents. The employer shall pay that proportion of the attorney’s fees and other proper disbursements that the amount of compensation paid or payable at the time of recovery or settlement bears to the total recovery or settlement. Any recovery against such third person in excess of the compensation theretofore paid by the employer shall be paid forthwith to the employe[d], his personal representative, his estate or his dependents, and shall be treated as an advance payment by the employer on account of any future instalments of compensation.”
Following service of the Complaint on Domtar, Domtar, through counsel, filed Preliminary Objections to the Complaint, demurring to the Complaint, contending that the workers’ compensation insurance carrier did not have an independent right to seek subrogation directly against a third party tortfeasor, in the absence of the injured employee being involved in the prosecution of the subrogation claim and action.
The Preliminary Objections were initially granted by the Trial Court, with the case then being appealed to the Superior Court.
Granting Domtar’s Preliminary Objections, the Trial Court relied upon the Pennsylvania Superior Court’s Decision inReliance Insurance v. Richmond Machine Company, 455 A.2d 686 (Pa. Super. 1983), holding that only the injured employee, and not the employer/insurer, has a right of direct action against the third-party tortfeasor in a recovery predicated on negligence.
With the Trial Court concluding that the employer and insurer did not have an independent right to sue the third-party tortfeasor without intervention and involvement by the injured employee, Liberty Mutual filed a timely appeal of the Trial Court’s granting of Preliminary Objections to the Pennsylvania Superior Court, arguing that Section 319 of the Pennsylvania Workers’ Compensation Act provided an absolute right of subrogation for benefits that had been paid to Lawrence, and that the mere fact that Lawrence had not elected to bring his own action against the Defendant should not bar Liberty Mutual and Schneider National from perfecting their subrogation rights under Section 319 of the Act.
Before the Superior Court, Liberty Mutual and Schneider National relied upon the Pennsylvania Supreme Court Decision inScalise v. F. M. Venzie and Company, 152 A.90 (Pa. 1930), in which the Supreme Court had held “that the employer is not to be denied his right of suit because the employee does not sue, but may institute the action in the latter’s name.” Scalise, 152 A. at 90.
In 2013, the Superior Court affirmed the Trial Court’s order granting Domtar’s Preliminary Objections, rejecting Liberty Mutual’s contention that Section 319 of the Act, as well as the dictum from theScalise decision, permitted Liberty Mutual and Schneider National to separately pursue their subrogation claims against the third-party tortfeasor, when Lawrence, as the injured employee, took no direct action of his own.
Moreover, the Superior Court ruled that “Section 319 does not provide employers with the ability to bring suit directly against a third party”, ruling “the action against the third party tortfeasor must be brought by the injured employee … i.e. the employee-victim must sue, and the employer’s carrier is subrogated to the employee’s claim”. Liberty Mutual, 77 A.3d at 1288-89.
Boldly going where none had gone before, we successfully secured allocatur before the Supreme Court, to seek clarification of an issue critical to our clients, being preservation of their subrogation rights under Section 319 of the Act.
And yes, we believe strongly in our clients’ subrogation rights, as well as believing that there was sufficient confusion from prior subrogation cases that appellate clarification was absolutely necessary, notwithstanding the Supreme Court’s clearly divided decision in Domtar denying our clients’ “day in court”, constituting in baseball terminology, a third strike, low and at the knees, and a little at the edge of the plate, in terms of actually clarifying not only the existence of the right, but also the procedural mechanics in terms of how clients can effectively perfect their subrogation lien rights, as we are now headed to the dugout, scratching our heads, asking what could have been done differently to turn a 3-2 majority opinion against our clients into an affirmation of subrogation rights that have consistently been described, in innumerable appellate decisions, as being both “absolute” and “primary”, dating since the dawn of compensation legislation and litigation.
Keep in mind that 47 of the 50 States in the “I would never choose to live anywhere else” United States, have workers’ compensation statutes permitting the employer or insurance carrier to independently seek recovery of their subrogation lien claims against third-party tortfeasors responsible for causing the work-related injuries resulting in the payment of workers’ compensation benefits to injured employees, with Pennsylvania being one of only three jurisdictions in the United States which does not have such a right of recovery, adding fuel to the flames of “if you thought we asked the right question”, which is why you granted Allocatur in the first place, why then the harsh grade school ruler across the knuckles, that arriving at the prom without a date meant the retraction of dance privileges.
Yes, this was a fight worthy of its tortured course.
Did we prevail?
The answer being it depends upon what the meaning of “is” actually is, and thank you Bill for that illusion.
Interpreted by the Pennsylvania Supreme Court, in a decision in which three of the five sitting Justices have denied our relief, with two Justices dissenting on “are you kidding me” grounds, the answer to the question we posed is, well, it depends.
Seemingly, the only thing wrong with our case was that we could not: (1) secure the agreement of Lawrence to be involved in the litigation; and (2), that we designated the case as a case of “as subrogee of”, instead of “in the name of”, or, alternatively, “in the use of”, distinctions which technically and procedurally change nothing in terms of the actual parties involved in the case, although the majority opinion does lay the ground work for what we think needs to happen in the future, in terms of how subrogation lien claims can be perfected in the course of seeking recoveries against responsible third-party tortfeasors.
Before we go there, the two dissenting opinions, by Justices Saylor and Todd, clearly suggest that this is “much ado about nothing”, with credits to Shakespeare, as both dissenting opinions evidence the majority opinion having failed to address the question that was posed to the Supreme Court in the course of allocatur being sought, being that subrogation, by its very nature, involves the act of stepping into another party’s shoes, in order to perfect the right that rightfully should be held, and, broadcast from the highest elevation, by the party actually paying for the third-party tortfeasor’s negligence, being the insurance carrier that files suit “as subrogree” of the injured party, whether it be in the context of workers’ compensation claims, or in any other context, as the injured party, compensated through insurance proceeds becomes the foil through which the negligence of a third-party tortfeasor becomes exposed.
Whether this right is perfected through the designation of “as subrogee of”, or “use-Plaintiff”, is a procedural issue that needs to be addressed by the Pennsylvania Supreme Court Civil Procedural Rules Committee, for study and recommendations, as correctly noted in the Dissenting Opinion of Justice Todd, believing this to be the criticaljudicial coding of the Domtar Decision.
Without plodding ad nauseum through the majority opinion authored by Justice Baer under which we were so impolitely turned away from a home plate seemingly within reach, potentially attainable had there been clearer precedent in terms of how to caption the case suit, who should be designated as parties, and the necessary procedural mechanics, there having been none, although there is, by extension ofDomtar, at least in terms of the dissenting opinions and negative extrapolation of the Majority’s Opinion, some clear indicia of how to proceed in future subrogation lien recovery cases yet to be filed, with the following recommendations being made:
· First, it seems clear that any future action, needs to be filed as “to the use of”, with the caption being “John Doe, to the use of, ABC Insurance Co.”, which has yet to write any insurance policies in Pennsylvania, but which would, if retaining our firm to perfect its subrogation lien rights, file a Complaint, as just captioned;
· This recommendation is necessary, as the Domtar Court has not explained the distinction between “as subrogee of”, as opposed to “to the use of”, and since English has always been a second language for us, it is, therefore, necessary to consider this as a lesson learned;
· It is probably also necessary that the injured employee be served with a copy of the Complaint to be filed, as well as securing an Affidavit of Service on the injured employee, with it making sense to also serve the injured employee with a 30 day notice letter of your intent to file a “use” action, similar to procedural guidelines that have been established in states that have much more detailed procedural mechanics embedded in their workers’ compensation subrogation lien statues, such that everyone knows what to do, as well as when to do it;
· It probably also makes incredible sense to incorporate a 30 day notice letter into the actual Complaint being drafted and filed, so that any attack by the defense bar, using Preliminary Objections to strike the pleadings, would be able to survive Preliminary Objections based on a demurrer to the Complaint, as then there is procedural evidence that the injured employee has consented, or at least failed to object, to the action being initiated, begging the question as to how involved the injured employee will need to be in the course of the claim being litigated against the third-party tortfeasor, for recovery of the subrogation lien; and,
· It is also suggested that an assignment be taken from the injured employee, allowing the employer and/or insurance carrier to pursue the civil subrogation lien claim, on behalf of the injured employee, as well as in the “use of” the injured employee, for purposes of negating Preliminary Objections being granted in the nature of a demurrer to a complaint seeking recovery of a subrogation lien on behalf of an employer or insurance carrier for workers’ compensation benefits paid as a result of the negligence of a third-party tortfeasor.
Obviously, we anticipate the Supreme Court’s ruling in Domtar to generate significant press, necessitating that this decision be carefully analyzed in terms of what it might mean for the future of subrogating, in the course of seeking to perfect the subrogation lien rights of workers’ compensation carriers and employers that have paid workers’ compensation benefits because of the negligence of third-party tortfeasors, in order to prevent the third-party tortfeasors from escaping liability for work-related injuries resulting in the payment of workers’ compensation benefits that might otherwise not have been payable, but for the negligence of a third-party.
Trust us, we just get it! It is trust well spent!
We defend Employers, Self-Insureds, Insurance Carriers, and Third Party Administrators in Workers’ Compensation matters throughout Pennsylvania. We have over 100 years of cumulative experience defending our clients against compensation-related liabilities, with no attorney in our firm having less than ten (10) years of specialized experience, empowering our Workers’ Compensation practice group attorneys to be more than mere claim denials, enabling us to create the factual and legal leverage to expeditiously resolve claims, in the course of limiting/reducing/extinguishing our clients’ liabilities under the Pennsylvania Workers’ Compensation Act.
Every member of our Workers’ Compensation practice group is AV rated. Our partnership with the NWCDN magnifies the lens for which our professional expertise imperiously demands that we always be dynamic and exacting advocates for our clients, navigating the frustrating and form-intensive minefield pervasive throughout Pennsylvania Workers’ Compensation practice and procedure.