Pennsylvania Court Confirms Compensation Carrier Can Initiate Filing Of Third-Party Action

A long-standing controversy has been resolved and a major anti-subrogation obstacle in Pennsylvania has been overcome. The proverbial light bulb has gone on in the Quaker State. The ongoing debate in Pennsylvania over whether a workers’ compensation carrier can initiate the filing of a third-party lawsuit is finally over. The answer is “yes” and we finally know how. On February 10, 2017, in The Hartford Insurance Group on Behalf of Chen v. Kamara, 2017 WL 542020 (Pa. 2017), a Superior Appellate Court finally confirmed that a subrogated workers’ compensation carrier is authorized to initiate the filing of a third-party action on its own initiative, provided it does so correctly.

Section 671 of Pennsylvania’s Workers’ Compensation Subrogation Act couldn’t be clearer. It unambiguously states, “…the employer shall be subrogated to the right of the employee.” Section 319 of the Act has appropriately been described as “clear and unambiguous,” “written in mandatory terms” and without “exceptions.” Kidd-Parker v. W.C.A.B. (Philadelphia School District), 907 A.2d 33 (Pa. Commw. Ct. 2006). However, that didn’t deter opponents of subrogation from arguing that a workers’ compensation carrier did not have a right to initiate a third-party subrogation action because the subrogation right contained in § 671 does not rise to the level of an “assignment.” The argument was that under Pennsylvania law, a workers’ compensation carrier had no right to bring suit against a third-party tortfeasor in its own name, primarily because actions arising from tortious conduct are unitary and may not be divided.

On April 17, 2015, the Pennsylvania Supreme Court, in in Liberty Mutual Ins. Co. v. Domtar Paper Co., 113 A.3d 1230 (Pa. 2015) denied Liberty Mutual the right to file a third-party action, but only because the court felt it wasn’t done correctly. They also left behind valuable clues as to how it should have been done. Domtar established that the employer or workers’ compensation carrier’s right of subrogation under § 319 must be achieved through a single action brought in the name of the injured employee or joined by the injured employee.” Id.

In Hartford Insurance Group on Behalf of Chen v. Kamara, Chunli Chen was standing in the parking lot of Thrifty Car Rental, waiting to rent a car, when she was struck by a rental car operated by defendant, Kafumba Kamara, and owned by defendant, Thrifty Car Rental, and/or defendant, Rental Car Finance Group. Chen was in the employ of Reliance Sourcing, Inc. and Hartford Insurance Group (“Hartford”) paid $59,424.71 in workers’ compensation benefits to or on behalf of Chen. Hartford thereafter filed suit against Kamara and styled the complaint with “The Hartford Insurance Group on behalf of Chunli Chen” as the plaintiff.

While Pennsylvania law has long allowed for a workers’ compensation carrier to be subrogated to the rights of an injured employee, the Pennsylvania Supreme Court had previously held, based on long-standing precedent, that “the right of action against a third-party tortfeasor under Section 319 of the [Workers’ Compensation Act] remains in the injured employee, and that the employer/insurer’s right of subrogation under Section 319 must be achieved through a single action brought in the name of the injured employee or joined by the injured employee.” Liberty Mutual Ins. Co. v. Domtar Paper Co., 113 A.3d 1230 (Pa. 2015). Precisely what that meant was, until now, unclear.

Kamara asked the trial court to dismiss Hartford’s suit, claiming that, since Chen was the injured employee and neither assigned her cause of action to Hartford nor was a party to the lawsuit, the entire complaint was improper. Hartford responded that suit was proper because “[i]n the Domtar [Paper] case, Liberty Mutual filed suit ‘as subrogee of’ [the injured employee, while, in the case at bar,] Hartford captioned the suit ‘on behalf of Chunli Chen’ to show [that Hartford is] appropriately pursuing this action in the name of the injured employee.”

On February 25, 2016, the trial court entered an order that sustained both of Kamara’s preliminary objections and dismissed Harford’s complaint with prejudice. The trial court held that in accordance with Domtar Paper, dismissal was proper because Hartford was attempting to bring an independent cause of action against the third-party tortfeasors. As the trial court explained, “under Pennsylvania law, actions against a third-party tortfeasor must be brought by the injured employee; the workers’ compensation insurance carrier has no independent cause of action against the tortfeasor under Section 319 of the Workers’ Compensation Act.”

Hartford appealed to the Superior Court (one of two intermediate appellate courts in Pennsylvania), and the issue was whether the trial court erred in dismissing Hartford’s claim when, pursuant to Domtar Paper, Hartford captioned the suit “The Hartford Insurance Group on behalf of Chunli Chen” to show that the action was appropriately brought in the name of the injured employee.

The court noted that, in Domtar, Liberty Mutual filed suit “as subrogee of” the injured employee, while, in this case, Hartford styled the suit “on behalf of Chunli Chen” to show that Hartford was appropriately pursuing this action as a “use plaintiff” in the name of the injured employee. Hartford was not pursuing a subrogation claim directly against the third-party tortfeasors, as was the case in Domtar Paper. Instead, Hartford filed suit “on behalf of Chen” and was attempting to establish the liability of the third-party tortfeasors to Chen. Therefore, the Superior Court felt that Hartford’s lawsuit was proper under both the Workers’ Compensation Act and case law construing the Act.

Section 319 of the Workers’ Compensation Act (“WCA”), codified at 77 P.S. § 671, furnishes the statutory basis for subrogation by a workers’ compensation carrier. Section 319 states, in relevant part:

Where the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right of the employe … against such third party to the extent of the compensation payable under [the WCA] by the employer….

The right to pursue the third-party action remains in the injured employee, and the employer/insurer’s right of subrogation under ֻ§ 319 must be achieved through a single action brought in the name of the injured employee or joined by the injured employee. The carrier is not to be denied his right of suit because the employee does not sue, but may institute the action in the latter’s name. The carrier’s right of subrogation must be worked out through an action brought in the name of the injured employee, either by joining the employer as a party plaintiff or as a use plaintiff.

In Domtar Paper, the Supreme Court held that a workers’ compensation carrier may not “pursue a subrogation claim directly against a third-party tortfeasor when the compensated employee who was injured has taken no action against the tortfeasor.” Since Liberty Mutual was suing the third-party tortfeasors “as subrogee of” the injured employee, and since Liberty Mutual was simply attempting to pursue its own subrogation claim directly against the third-party tortfeasors, Liberty Mutual’s complaint was properly dismissed. It was pursuing its own claim, not the employee’s claim. The third-party right of action against the tortfeasor is indivisible and remains in the employee. Pennsylvania courts disfavor splitting causes of action, and have frequently remained true to this maxim in the context of workers’ compensation subrogation. Preventing the employer/insurer from asserting an independent cause of action against the tortfeasor eliminates the possibility that the third-party tortfeasor could be exposed to multiple suits filed by both the employer and injured employee, and will preserve the preferred rights of the injured employee who retains a beneficial interest in the cause of action against the tortfeasor.

While Domtar clearly held that a carrier’s third-party subrogation rights must be protected through a single action brought in the name of the injured employee or joined by the injured employee, nobody was quite sure what this meant. In The Hartford Insurance Group on Behalf of Chen v. Kamara, Hartford followed the above precedent and carefully filed suit with the plaintiff listed as “The Hartford Insurance Group on behalf of” the injured employee. Therefore, Hartford was not attempting themselves to “pursue a subrogation claim directly against a third-party tortfeasor,” was not seeking to recover only the amount that it paid to Chen in workers’ compensation benefits, and was not “splitting” the employee’s cause of action. Instead, Hartford brought a single action against the third-party tortfeasors in the name of the injured employee and attempted to recover the entire amount to which Chen is entitled and to which Hartford was subrogated. They got it right.

In Pennsylvania, Rule of Civil Procedure 1024 requires that a complaint be verified by one or more of the parties filing it. In Kamara, the subrogation complaint was verified by a Hartford employee named Jamie Young, who did not have personal knowledge of the underlying accident, but he didn’t state as much in the affidavit. Rather, he stated that the averments were “true and correct to the best of my information and belief.” Defendants attempted to dismiss the case due to the improper verification of the complaint, but the Pennsylvania Superior Court concluded that the affidavit was proper. Hartford was a party to this action because the injured employee did not file a third-party action. Hartford had a real interest in the lawsuit because it had a statutory right of subrogation to the employee’s recovery against the third-party tortfeasors. Hartford was also the entity that was controlling the litigation, and therefore, the Hartford representative properly verified the complaint. Although the Hartford representative did not have personal knowledge of the accident, he averred that the allegations of fact made in the complaint were true and correct to the best of his information and belief. This was proper and the trial court erred when it dismissed the suit. Even though Jaime Young was not present at the scene of the accident and did not have first-hand knowledge of the incident, the Superior Court allowed the affidavit because Hartford was a party to the suit brought “on behalf of” Chen. Hartford was the entity controlling the litigation and its verification was appropriate.

On appeal, the Superior Court concluded that the trial court erred when it dismissed Hartford’s third-party complaint. A dissent in Domtar Paper noted that where the workers’ compensation carrier brings suit in the name of the injured employee in the capacity of a use plaintiff, it is critical that the actual injured employee be served with a copy of the subrogee’s complaint so that the employee may, if he or she desires, retain counsel and actively participate in the action. Although there was some discussion about whether Hartford complied with this requirement, no issue was preserved on this point in the Kamara appeal.

Filing as “subrogee of” the employee is not authorized under the statute. Filing suit with the plaintiff as “The Hartford Insurance Group on behalf of Chunli Chen” is authorized. The confusion and anti-subrogation obfuscation in Pennsylvania regarding third-party actions appears to have been cleared up once and for all. The Kamara decision shows subrogated carriers precisely how file a third-party action if they need to.

If you have any questions regarding this article or subrogation in general, please contact Gary Wickert at [email protected].

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Gary L. Wickert
Partner

Gary L. Wickert is an insurance trial lawyer and partner with the law firm of Matthiesen, Wickert & Lehrer, S.C. Gary has 35 years of litigation experience and is regarded as one of the world’s leading experts on insurance subrogation. He is the author of several subrogation books and legal treatises and a national and international speaker and lecturer on subrogation and motivational topics.