Subrogation: The Lien is Absolute (or Is It…)

November 17, 2016

By Thomas E. Panzer

Employers and their Workers’ Compensation Insurance Carriers (“Employer”) need to be aware that the Employer’s right to subrogate to a Claimant’s third party action is under attack.

Section 319 of the Pennsylvania Workers’ Compensation Act provides the statutory authority for the Employer to subrogate to a third party action.  The Employer’s subrogation interest is a creature of statute, as opposed to an equitable or contractual right to subrogation.  No equitable exceptions eliminate the Employer’s right to subrogation.  As such, while litigants and the courts discuss contractual and equitable doctrines, at the end of the day, the Workers’ Compensation Lien is absolute.

Workers’ Compensation subrogation applies as follows.  An injured worker is hurt while in the course and scope of his employment.  The claim is compensable.  Compensation benefits are paid, sometimes on an ongoing basis for an indeterminate period of time.  The injured worker sues a third party, like a negligent driver in a motor vehicle accident.  The Claimant makes a recovery from the third party civil action.  The Workers’ Compensation carrier asserts its right to subrogate to the recovery, in order to recoup monies paid through the Workers’ Compensation claim.

In a perfect world, the Employer receives from the civil action, repayment of the bulk of the wage loss and medical benefits paid through the Workers’ Compensation claim.  The Plaintiff attorney is paid for securing the funds returned to the Employer.  The Claimant receives some measure of recovery from the third party action, but does not double-recover wage and medical benefits.

Notably, if the third party recovery is greater than the Workers’ Compensation lien, and the Workers’ Compensation carrier remains responsible for future wage loss and medical benefits related to the work injury, the Employer is entitled to reduce the amount of the future payments by a calculated percentage (see Bureau Form LIBC-380).

As long as §319 has been a part of the Pennsylvania Workers’ Compensation Act, attorneys for injured workers have attempted to reduce the amount returnable to the Employer.  The most recent attack is an attempt to exclude future medical payments from the definition of compensation, and thereby exclude them from the application of the pro-rata reduction.

In essence, the Claimant seeks to recover the third party monies, but not provide to the Employer a corresponding reduction in future medical payment obligations.  The issue was recently addressed in the matter of Whitmoyer v. Mountain Country Meats.  In that matter, the Workers’ Compensation Appeal Board rejected the Claimant’s argument attempting to exclude future medical benefits from the definition of compensation, and further rejected contractual and equitable principles as a basis for extinguishing the Employer’s absolute right to subrogation.  The matter was further appealed by Claimant and is pending before the Pennsylvania Commonwealth Court.

While the Employer’s statutory Section 319 subrogation right has been time honored by the Courts, and has withstood multiple assaults, the principals articulated by the Claimant in Whitmoyer, underscore that the Employer must be vigilant in identifying subrogation opportunities, appropriately document the subrogation lien, and vigilantly pursue and secure return of the lien, including assuring credit versus future payments, where appropriate.  Knowledgeable Workers’ Compensation defense counsel can provide appropriate guidance and assistance in assuring that the lien remains absolute.

If you have questions about workers’ compensation law in Pennsylvania, contact Thomas E. Panzer at 215-345-8888 or via email at tpanzer@highswartz.com.

 

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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