Workers’ Comp Insurer in PA Has Absolute Right to Subrogation

While, in Pennsylvania, an injured worker generally cannot sue his or her employer for causing the injury, the injured worker is free to sue a third party. For example, the injured worker could file an action against a manufacturer of a product which caused the injury, or another driver who caused an accident. When an injured worker receives a settlement or a verdict leading to the recovery of money from a third party, Section 319 of the Pennsylvania Workers’ Compensation Act says the workers’ compensation insurance carrier is entitled to be repaid all or part of the benefits the carrier paid to the injured worker.

Though the goals of Section 319 are somewhat logical – to keep a party from receiving a double benefit, the result of this law is often troublesome. In effect, between the repayment made from the recovery, and the credit the workers’ compensation insurance carrier enjoys against future wage and medical benefits, the injured worker often winds up netting absolutely nothing from the third party case. Considering that the Pennsylvania Workers’ Compensation Act does not provide for any compensation for pain and suffering, it seems terribly unjust that the injured worker can recover money in a third party case, intended to compensate for pain and suffering, and yet end up netting nothing.

Recently, the Commonwealth Court of Pennsylvania decided the case of Gorman v. WCAB. Here, the claimant settled his workers’ comp case. At that time, he was not pursuing a third party suit. In the Compromise & Release Agreement (the document used when a workers’ compensation case is settled in PA), the parties stated that there was no lien for any third party case. After the workers’ compensation settlement was done, the claimant successfully pursued a third party case and recovered money.

The workers’ compensation insurance carrier filed a petition with the Pennsylvania Bureau of Workers’ Compensation to recover some of the money claimant received in the third party case. The claimant opposed this recovery, because, in the Compromise & Release Agreement, the workers’ compensation insurance carrier gave up their rights to any money.

Finding that the workers’ compensation insurance carrier was not aware of the third party case at the time the workers’ comp case was settled, the Court held that the right to recovery could not have been given up. The Court did say that the right of recovery can be reduced, or waived entirely, by a workers’ compensation insurance carrier, but such a reduction or waiver must be made with knowledge of what is being given up. The right of the workers’ compensation insurance carrier to subrogation is absolute and cannot be lost without a voluntary decision to do so.