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July 10, 2018

PA Supreme Court Interprets Section 319 of the Workers' Compensation Act to Limit Employer's Future Subrogation Rights to Indemnity Benefits Only

The Supreme Court of PA has been very busy so far this summer with Workers' Compensation matters.  Shortly on the heels of the Court's decisions in Whitfield and Pavlack, which dealt with Protz IRE issues (see C&W Journal article dated 6/19/18), the Court has now addressed the issue of employer's subrogation rights under Section 319 in Whitmoyer v. WCAB (Mountain Country Meats), No. 52 MAP 2017).

Claimant in the Whitmoyer case was severely injured in 1993 and suffered an amputation of part of his arm.  He was paid a specific loss benefit that was commuted to a lump sum in 1994.  In 1999, he settled a third-party case and entered into a third-party settlement agreement with the workers' compensation insurance carrier.  The third-party settlement agreement provided that after the insurance carrier's subrogation for benefits already paid was reimbursed (with a reduction for expenses of recovery), Claimant would be left with a balance of recovery of $189,416.27.  Section 319 provides that the balance of recovery paid to Claimant "shall be treated as an advance payment by the employer on account of any future instal[l]ments of compensation."  In other words, the employer is entitled to a credit for any future "instal[l]ments of compensation" against the "balance of recovery" paid to Claimant.  The question, however, is what constitutes an "instal[l]ment of compensation."

The employer in the case argued that "instal[l]ments of compensation" included any future medical bills that would need to be paid.  The Claimant, of course, argued to the contrary.  The WCJ agreed with the employer's position, and granted their petition for modification seeking to be reimbursed for the medical expenses they were continuing to pay.  Claimant appealed to the Board, and the Board affirmed the WCJ's decision.  Claimant appealed to the Commonwealth Court, which also affirmed.  Claimant appealed to the Supreme Court.

In a lengthy decision discussing the various uses of the word "compensation" in the Act, the Supreme Court reversed.  The Court found it significant that the legislature used the phrase "instal[l]ments of compensation," rather than simply the word "compensation" to describe what amounts may be subrogated by the employer from Claimant's balance of recovery.  In so finding, the Court stated that:

  • To conclude that "instal[l]ments of compensation" carries the same meaning as "compensation" would render the words "instal[l]ments of" meaningless.  Our rules of statutory construction do not permit such a result. *

The Court stated that:

  • Viewing "instal[l]ments of compensation" in context, with reference to surrounding language and the overall statutory scheme, we conclude that the term is clear and unambiguous.  It does not refer to medical expenses.  Therefore, having satisfied its accrued subrogation lien at the time of settlement, an employer is not permitted to seek reimbursement for future medical expenses from the employee's balance of recovery. (Whitmoyer at p. 19).

Thus, from the date of this decision forward, an employer is subrogated to both medical and indemnity benefits that have already been paid at the time of a third-party settlement, but only to indemnity benefits from the date of the third-party settlement forward.

Interestingly, once again, as in the Protz case, the Supreme Court has failed to address the issue of possible retroactivity of this decision to cases that have already been resolved and where the carrier has been taking credit for ongoing medical bills in addition to indemnity.  Carriers may wish to review any cases that they have in this situation and decide how they wish to proceed from here.

 

 

Sources

* citing 1 Pa.C.S. 1921(a) and Commonwealth v. Lobiondo (462 A.2d 662, 664 (Pa. 1983)).