Has Chen Changed the Face of Subrogation in Pennsylvania Workers’ Compensation Matters?

November 7, 2017

By Thomas E. Panzer

The Pennsylvania Workers’ Compensation Act allows an employer and its workers’ compensation insurance carrier to subrogate to a third-party recovery. In other words, where an employee is injured while in the course and scope of employment, and the injury is due to the negligence of a third party, the employee is paid workers’ compensation benefits under the no fault workers’ compensation system, but may also sue the third party in a civil suit under a negligence theory. If the claimant recovers money from the third party, the employer and its workers’ compensation carrier are entitled to be reimbursed for payments it has made to the injured worker.

The statutory right of subrogation derives from the principal against double recovery. That is, since the injured worker already received wage replacement and payment of medical bills under the workers’ compensation benefit system, they should not also be entitled to a duplicate payment from the negligent party, or tort-feasor.  Viewed differently, the employer and its workers’ compensation carrier have paid an obligation belonging to another (the tort-feasor), so when the injured worker recovers money damages from that tort-feasor, the workers’ compensation carrier should be reimbursed for their payment.

The long-standing rule in Pennsylvania has been: the right to pursue the third-party action belongs to the claimant. The employer and workers’ compensation carrier’s right to subrogation follows the injured workers’ choice whether to pursue the third-party action. The employer and its workers’ compensation carrier do not have the right to pursue an action to directly enforce their subrogation interests. In fact, in one well known decision, Liberty Mutual v Domtar Paper, the Pennsylvania Supreme Court reaffirmed that principal.  In that matter, Liberty Mutual filed a third-party action, “as Subrogee of” the injured worker. The suit was dismissed because the injured worker was not a participant.  Instead, the court considered the lawsuit as an improper attempt by Liberty Mutual to pursue a subrogation claim directly.

The long-standing rule is again being challenged in Hartford “on behalf of” Chunli Chen v Kamara. In Chen, the insurance carrier paid workers’ compensation benefits, then filed a civil action to protect its subrogation interest.  However, unlike the Liberty Mutual case, the carrier in Chen filed “on behalf of” the injured worker. The Superior Court saw a distinction in the two actions, and allowed the civil action to proceed. The rationale was “on behalf of” implied that the carrier was pursuing all remedies available to the injured worker, for the benefit of the injured worker, and would subrogate from that recovery.  Liberty Mutual was interpreted to mean that Liberty Mutual therein was simply pursuing its own subrogation interest, and not pursuing all remedies available to the injured worker.

The Pennsylvania Supreme Court will review whether the carrier’s actions in Chen are allowable. If they rule in the carrier’s favor, employers and workers’ compensation carriers in Pennsylvania will have more latitude in attempting to pursue civil actions against tort-feasors “on behalf of” injured workers.  The logistic challenges of successfully pursuing those actions is the subject for a future blog.

High Swartz workers’ compensation attorneys have decades of experience handling both employees and employers in Pennsylvania. Our Bucks County and Montgomery County workers’ compensation attorneys have knowledge and experience in all facets of workers’ compensation issues.

If you are considering filing a claim, or if a claim has been filed against you, please contact Thomas E. Panzer at 215-345-8888 or tpanzer@highswartz.com. Our attorneys in Bucks County and Montgomery County are here to assist you.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

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