Employer Gets Subrogation on Contract Suit

While an injured worker in Pennsylvania generally cannot sue his or her employer for causing a work injury (since Pennsylvania workers’ compensation is an “exclusive remedy”), the injured worker is able to sue a third party for causing a work injury. We see this situation with car accidents, slip and fall cases and products liability cases.

When an injured worker in PA does sue another party for causing his or her work injury (called a “third party”), and is awarded money, the workers’ compensation insurance carrier is entitled to be repaid money that it paid in medical expenses and wage loss benefits (this is called “subrogation”). Ultimately, unless the attorney negotiates something better (which is what happens normally), the injured worker ends up with no money from this third party case.

Not every law suit involving a work injury creates a right to subrogation, however. For example, a PA workers’ compensation insurance carrier is not entitled to subrogation in a medical malpractice award, if the work injury was not aggravated by the malpractice. The key is whether the award in the third party case is a direct result of what caused the disability.

Recently, the Commonwealth Court of Pennsylvania examined whether the award of money for a third party case must be from the exact party at fault, and must be directly awarded for personal injury. In Kennedy v. Workers’ Compensation Appeal Board (WCAB), the employee crushed his right hand in a conveyor belt. A products liability action was filed against the manufacturer of the conveyor belt. Due to an exclusions clause in the liability insurance contract held by the manufacturer, neither the manufacturer nor its liability insurance carrier defended the products liability suit. As a result, the injured worker was awarded a sum of money.

To collect the money, the injured worker had to file a breach of contract suit against the liability insurance carrier of the manufacturer. This was successful, so the injured worker was ultimately awarded the sum of money which was found in the initial personal injury suit.

When the workers’ compensation insurance carrier then sought subrogation, to get money back from that judgment, the injured worker refused, saying the money was for a breach of contract suit (not a personal injury suit) and was being paid by an insurance carrier, not by the party responsible for the injury. Litigation ensued before a Workers’ Compensation Judge (WCJ), who found that the money awarded to the injured worker, despite the tortured process, was for the injury that caused him to be disabled. Therefore, the WCJ granted the workers’ comp insurance carrier’s request for subrogation. This was affirmed by the WCAB.

Upon further appeal, the Commonwealth Court of PA also affirmed. The Court concluded that subrogation was appropriate because ” . . . the instant case involves a monetary recovery coming from the insurance carrier for the third party tortfeasor that caused Claimant’s original compensable injury.” Interestingly, the Court did not stop there. Instead, the Court reviewed the purposes behind the principle of subrogation, to make sure this matter fit:

“By allowing reimbursement of Employer’s subrogation lien all purposes of subrogation are met: (1) Claimant, having been made whole for his injury, will not receive a double benefit; (2) Employer will not be compelled to make compensation payments for the negligence of a third party; and (3) liability is placed on the proper party.”

Though we at Brilliant & Neiman LLC only handle workers’ compensation cases, and partner with other similarly superb attorneys to handle third party aspects faced by our clients, we do come across these situations in our practice. As the law reads, and the “purposes” of subrogation are stated, the decision made by the Court makes sense. However, we cannot lose sight of the fact that the law actually is designed so the injured worker gets ZERO from a personal injury lawsuit in this context. Since personal injury allows for a recovery of pain and suffering, but workers’ compensation does not, how is that fair?