State News : Pennsylvania

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By Kevin L. Connors, Esquire

Sound familiar?


It is an all too familiar refrain in the context of workers’ compensation subrogation recoveries, with insurers simply seeking the equitable redistribution of no-fault compensation dollars paid by compensation insurers as a result of third-party negligence.


A recent Commonwealth Court Decision in Natasha Young v. WCAB (Chubb Corporation), decided on March 10, 2014, is an affirmation of an insurer’s statutory entitlement to subrogation, where workers’ compensation benefits were paid under the Pennsylvania Workers’ Compensation Act, although the third-party negligence occurred in a neighboring jurisdiction, with the accident giving rise to the workers’ compensation claim occurring in Delaware, as well as all litigation over the third-party personal injury lawsuit also being filed in Delaware, against a Delaware Third-Party Defendant.


The relevant facts in Young are/were:


·         Work-related motor vehicle accident in Delaware;

·         Third-party Defendant was a Delaware resident;

·         Pennsylvania workers’ compensation benefits paid to the Claimant pursuant to an NCP issued by the Employer/Insurer, accepting liability, under the Pennsylvania Workers’ Compensation Act, for the Claimant’s work injury;

·         Claimant filed a personal injury lawsuit in Delaware, seeking personal injury damages against the Third-Party Delaware Driver;

·         The Third-Party personal injury lawsuit in Delaware was settled for $160,000.00;

·         The Employer/Insurer asserted a statutory right of subrogation against the Claimant’s Third-Party recovery;

·         The Claimant challenged the Employer/Insurer’s right to subrogation, contending that Delaware, and not Pennsylvania, law should apply to the parties’ dispute over subrogation; and,

·         Employer/Insurer filed a Review Petition against the Claimant, seeking satisfaction of its workers’ compensation subrogation lien, equaling $101,381.94.


Correctly so, the WCJ granted the Employer/Insurer’s Review Petition, which was, in turn, then affirmed by the Workers’ Compensation Appeal Board.


Appealing to the Commonwealth Court, the Claimant argued that Delaware and not Pennsylvania law should be applied to the issue of the Employer/Insurer’s subrogation rights, given that the Claimant characterized Delaware’s subrogation laws as being more equitable than Pennsylvania subrogation law, and that the Claimant’s third-party recovery had been limited by Delaware law, such that the Claimant argued that Delaware law should also apply to the insurer’s right of subrogation.


Both at the WCJ and the Appeal Board levels, the Claimant’s argument that Delaware law should be applied was soundly rejected in reliance uponAllstate v. McFadden, 595 A.2d 1277 (Pa. Super. 1991), a Decision that had applied a significant contacts test to determine whether Pennsylvania or New Jersey law would apply to a workers’ compensation subrogation claim.


Claiming that there was a direct conflict between Delaware and Pennsylvania workers’ compensation laws, as Delaware specifically excludes certain expense items from subrogation, as the items are not admissible at Trial under the Delaware Code, in contrast to Pennsylvania law, which has long been interpreted to provide Employers with an absolute right of subrogation released only by their prorata share of costs and fees, the Claimant sought to apply Delaware subrogation law to the insurer’s subrogation claim.


This conflict of law disparity required the Commonwealth Court to utilize the Pennsylvania Supreme Court’s significant contact qualitative analysis underGriffith v. United Airlines, Inc., 203 A.2d 796 (1964) under which the Pennsylvania Supreme Court had held that a potential conflict between the application of state laws required the consideration of the policies and interests underlying the particular issue being brought before the Court, requiring that when jurisdictions are compared, the qualitative factors override quantitative factors when analyzing jurisdictional control.


Under Allstate, applying Griffith, the Pennsylvania Superior Court, in the course of examining the contacts each State, Pennsylvania and New Jersey, had with the underlying controversy, being the Employer’s subrogation rights, vis-à-vis its payments of workers’ compensation benefits, the Pennsylvania Superior Court had ruled inAllstate that “Pennsylvania has a significant interest in payments made under its Act and the subrogation of Pennsylvania Employers to monies paid to its Employees by a Third-Party.”Allstate, 595 A.2d at 1279.


Other factors relevant to the Allstate holding included the Claimant being a Pennsylvania resident, the Employer being a Pennsylvania Corporation, the Claimant regularly working in Pennsylvania, and the Claimant being paid workers’ compensation benefits under a policy of workers’ compensation insurance coverage satisfying the insurance requirement of the Pennsylvania Workers’ Compensation Act.


Relying upon those factors, the Superior Court had ruled in Allstate that Pennsylvania was “the State with the most significant interest in determining the right of the Employer to subrogation where it has made payments to an injured Employee” under its workers’ compensation statute.


The reasoning applied by the Pennsylvania Superior Court in Allstate became the controlling holding inByard F. Brogan, 637 A.2d at 693, involving a Pennsylvania worker injured in a motor vehicle accident in West Virginia, who was paid workers’ compensation benefits under the Pennsylvania Workers’ Compensation Act, with the Employer seeking to enforce its right of subrogation, and the Pennsylvania Court applying Pennsylvania, and not West Virginia, law to the issue, although at the time that case was litigated, the Pennsylvania Motor Vehicle Financial Responsibility Law had abrogated an Employer’s right of subrogation for motor vehicle accidents, with that right being subsequently reinstated by subsequent Amendments to the Pennsylvania Workers’ Compensation Act in 1996.


Relying upon Griffith, Allstate, and Brogan, the Pennsylvania Commonwealth Court held inYoung, that the State with the most significant contact to a workers’ compensation claim, and the potential right of subrogation for workers’ compensation payments made, is the jurisdiction whose workers’ compensation laws have been applied to the underlying entitlement to receive workers’ compensation benefits for work-related injuries.


So concluding, the Young Court held that the Pennsylvania WCA applied “because it is the State with the most significant interest in determining the right of an Employer to subrogation where it has made payments to an injured Employee.”


Did we also mention that the Claimant had, in the course of the workers’ compensation claim being resolved, entered into a Compromise and Release Agreement with the Employer/Insurer, under which the C&R Agreement specifically indicated that the Employer/Insurer was reserving its right of subrogation, an issue not contested by the Claimant in the course of receiving an $85,000.00 C&R payment.


Resolving the choice of law “significant context” jurisdictional question, theYoung Court further upheld the underlying Decisions of the WCJ and Appeal Board, that the Employer/Insurer’s subrogation lien included the twenty percent attorneys’ fees that were deducted from the Claimant’s compensation benefit payments, in satisfaction of the Claimant’s Contingent Fee Agreement with her workers’ compensation attorney, as the Claimant sought to exclude those payments from the subrogation lien, contending that they were not compensation benefit payments.


Are you kidding?


A final desperate argument was raised by Claimant, requesting that the Court limit the Employer’s subrogation lien recovery to one-third of the Claimant’s Third-Party settlement, as monies sufficient to satisfy a one-third distribution had been escrowed by the Claimant, with the Commonwealth Court denying that request, finding it had no authority to order the Employer to accept one-third of the Claimant’s Third-Party settlement, when the Employer’s rights to enforce its subrogation lien could only be abrogated by the Employer/Insurer’s consent.


Denying the Claimant’s request, the Commonwealth Court also denied the Employer’s request, seeking counsel fees, pursuant to Pennsylvania Rule of Appellate Procedure No. 2744, permitting an Appellate Court to award reasonable attorneys’ fees, if it is determined “that an Appeal is frivolous or taken solely for delay or that the conduct of the participant against whom costs are being imposed is dilatory, obdurate, or vexatious”, with the Commonwealth Court holding that, underPhillips v. WCAB, 554 Pa., 721 A.2d 1091 (1999), Employers are not entitled to counsel fees under P.R.A.P. 2744.


Show me the money!


Being Practical


Seeking enforcement of a subrogation lien for workers’ compensation benefits paid in Pennsylvania, when the Third-Party personal injury claim arose in or is litigated in another State,Young would require a Pennsylvania Court to apply Pennsylvania law to the Employer’s statutory subrogation lien rights if the underlying workers’ compensation claim is administered and paid under Pennsylvania’s WCA.


This is an important Decision for Pennsylvania Employers and Insurers seeking protection of their statutory subrogation rights under Section 319 of the Act.


It is also an important Decision for clarifying what constitutes the lien benefits that can be asserted in the context of subrogation, to include the actual payments of workers’ compensation benefits to the Claimant, which include not only attorneys’ fees deducted from the Claimant’s compensation benefits, but also medical expenses and reasonable expenses incurred in the administration of the workers’ compensation claim.



ConnorsLaw LLP


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