PA Workers’ Compensation Insurance Carrier Entitled to Credit for Future Medical Treatment After Personal Injury Case

As noted on our website, generally, an injured worker cannot sue his or her employer for its negligence in causing a work-related injury.  Additionally, unlike in a negligence case, workers’ compensation benefits do not include payment for pain and suffering.  Occasionally, however, there is another party (a “third party”) that the injured worker can sue and obtain those “non-economic damages” (like pain and suffering).  We see this primarily when the employee is injured in a motor vehicle accident or is the victim of a defective product.

Unfortunately, though, the Pennsylvania Workers’ Compensation Act (Act) is designed so that the injured worker who can file suit against a third party, and can recover those additional damages, actually ends up with none of that extra money.  We have discussed the concept of “subrogation” here before – this is what allows the workers’ comp insurance carrier to get paid back from the money an injured worker receives in a third party suit.

Recently, in Whitmoyer v. Workers’ Compensation Appeal Board (Mountain Country Meats), the Commonwealth Court of Pennsylvania addressed whether the workers’ comp insurance company is entitled to a credit for future medical treatment after a successful third party recovery.

Here, the employee suffered an amputation of his right upper extremity at the distal forearm.  This kind of injury, dealing with the loss of use of a body part, is called a “specific loss.”  As we have discussed previously, a specific loss is paid by an itemized number of weeks of benefits (dependent on the body part at issue).  Unlike a standard PA workers’ compensation case, disability and earning power are largely irrelevant for a specific loss.  Thus, the injured worker in this case received the requisite number of weeks for his forearm, and the workers’ comp insurance carrier was only thereafter responsible for medical treatment.

The injured worker sued (what appears to be) the manufacturer of some defective equipment, and won.  This recovery (as is often seen) was well above the wage loss and medical benefits already paid by the workers’ compensation  insurance carrier.  Under the Act, the insurance carrier was reimbursed what it had paid out, less a proportionate amount for the cost of the recovery (like the personal injury attorney’s fee, and litigation costs).  These costs of recovery, then, are recouped by an ongoing percentage of future compensation.  In other words, after the recovery, the workers’ comp insurance carrier is only responsible for some percentage of the future compensation due to the injured worker (in effect, meaning the injured worker receives zero benefit from the third party case).  The calculation of the percentage to be used is based on a formula on a Third Party Settlement Agreement, a document completed by the attorneys.

The language at issue in this case is contained within Section 319 of the Act:

“Any recovery against such third person in excess of the compensation theretofore paid by the employer shall be paid forthwith to the employe … and shall be treated as an advance payment by the employer on account of any future instalments of compensation.” 

In the instant case, the injured worker argued that “future instalments of compensation” could not include medical benefits, since they are not paid in that fashion.  In addition, the argument was made that allowing a credit for future medical expenses would make the injured worker responsible for the remainder of the medical bill, something specifically precluded by Section 306(f.1)(7) of the Act.

After hearing argument and reviewing the evidence, the Workers’ Compensation Judge (WCJ) granted the petition filed by the workers’ comp insurance carrier, and permitted the subrogation against a percentage of the ongoing medical benefits.  This was affirmed by the Workers’ Compensation Appeal Board (WCAB).  The WCAB disagreed on the calculation of the percentage at issue, but that is not relevant to our discussion.

Upon further appeal, the Commonwealth Court of Pennsylvania also affirmed the decision.  While “compensation” as mentioned in the Act does not always mean both wage loss and medical benefits, in this situation, the Court felt that the term encompassed both.  The Court immediately noted that the argument being made by the injured worker, “ . . . conflicts with the rationale set forth above, that an employer, innocent of negligence, is entitled to a subrogation credit up to the full amount of a claimant’s recovery.”  After reviewing the case law, and the different interpretations of “compensation,” the Court found that, here, “compensation” must include ongoing medical benefits because “an employer should be entitled to subrogation because it is presumably an innocent actor.”

A strong dissent by President Judge Leavitt, joined by Judges McCullough and Cosgrove is, however, worthy of further discussion.  In the dissent, it is noted that the majority opinion disregards the significance of the term “instalments,” which is not consistent with medical benefits.  Further, when the initial reimbursement was sent to the workers’ comp insurance carrier, mentioned was made in the cover letter that, “Future medical expenses does not constitute ‘installments of compensation.’”  The insurance carrier failed to respond to this letter, and continued to pay medical benefits for 13 years, before instituting this litigation.  Logically, the term “instalments” can only apply to disability benefits, which were no longer payable.  Further, the dissent agreed with the injured worker that the majority opinion makes the injured worker responsible for a part of his medical bills, a result inconsistent with the Act.

Perhaps it is that we represent the injured worker, and may be more sympathetic to their plight, but view presented by the dissent sure appears to be the one more consistent with the purpose of the Act, which has often been said to have been designed with a humanitarian objective to benefit the injured worker.  The fact the decision is so close, 4-3, suggests this was a very difficult issue for the judiciary as well.