The ongoing saga in Pennsylvania – colloquially referred to as the “reluctant plaintiff problem” – has perhaps come to an end. Section 671 of Pennsylvania’s Workers’ Compensation Subrogation Statute 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. Workers’ Comp. Appeal Board (Philadelphia School District), 907 A.2d 33 (Pa. Commw. Ct. 2006). However, that hasn’t stopped opponents of subrogation from arguing that the carrier does not have a right to initiate a third-party action. They argue this because the subrogation right contained in § 671 does not rise to the level of an “assignment” and the carrier cannot file a subrogation action on its own. The concept is that under Pennsylvania law, a workers’ compensation carrier has 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 Liberty Mutual Ins. Co. v. Domtar Paper Co., 2015 WL 1888572 (Pa. 2015) may have finally put the argument to rest. While the Supreme Court’s decision denied Liberty Mutual its subrogation rights in that particular case, it makes clear that a workers’ compensation carrier can independently file a third-party action in Pennsylvania, provided it does so in the right way.
In Domtar, George Lawrence, an employee of Schneider National, Inc., was injured when he slipped and fell, but did not file a third-party action. The workers’ compensation carrier, Liberty Mutual, did file a subrogation suit, but the Court of Common Pleas (trial court) granted the defendant’s demurrer to Liberty Mutual’s Complaint. In spite of the clear language of § 671, the Court stated, “Liberty Mutual under the above cases has no right to independently sue the third-party for part of the injured employee’s alleged damages.” On appeal, the Superior Court (Court of Appeals) affirmed the Trial Court, stating that a workers’ compensation carrier lacks standing to bring suit directly against a third party under § 319. It stated that prior decisions did not hold that the Workers’ Compensation Act provides carriers with the ability to proceed independently against a tortfeasor and subsequent decisions have confirmed that the carrier has no independent right to pursue the tortfeasor. Instead, the Court announced that this third-party cause of action stays with the employee. On May 29, 2014, the Pennsylvania Supreme Court granted the appeal and agreed to weigh in on the issue.
As in most states, Pennsylvania has an ongoing legal tug-of-war between subrogated carriers and trial lawyers. Despite the fact that prior decisions appear to only require that a third-party action filed by the subrogated carrier must be done so in the name of the injured employee, and § 319 clearly states that “the employer shall be subrogated to the right of the employee,” it appears the ability of the carrier to file a third-party action remained in doubt in Pennsylvania. The Superior Court in Domtar stated that § 319 does not provide employers with the ability to bring suit directly against a third party, despite the fact that most other states with similar statutory language allow such a direct suit by the carrier, Domtar and other cases cite to Pennsylvania’s aversion to the splitting of causes of action between subrogors and subrogees, with the “potential exposure” of defendants to multiple liabilities. The specific issue the Supreme Court addressed was:
Does § 319 of the Pennsylvania Workers Compensation Act, 77 P.S. § 671, allow the employer/insurer to step into the shoes of the insured employee against the tortfeasor?
On April 27, 2015, the Pennsylvania Supreme Court ruled that although § 671 does not confer on a workers’ compensation carrier/employer the statutory right to bring suit directly against a third-party tortfeasor in its own name, the same result can be achieved “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.” Domtar, supra. Because Liberty Mutual filed suit “as subrogee of” the employee, the suit was not authorized under § 671 and the case must be dismissed. The decision acknowledges that these types of “for use” suits by a subrogee remain viable. Section 671 provides in 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, his personal representative, his estate or his dependents, against such third party to the extent of the compensation payable under this article by the employer; reasonable attorney’s fees and other proper disbursements incurred in obtaining a recovery or in effecting a compromise settlement shall be prorated between the employer and employe, his personal representative, his estate or his dependents.
The facts of Domtar were that on December 13, 2009, George Lawrence (“Lawrence”), while in the employment of Schneider National Inc. (“Schneider”), suffered a work-related injury when he slipped and fell in a parking lot leased by Domtar Paper Company, and allegedly owned and maintained by Commercial Net Lease Realty Services, Inc., Commercial Net Lease Realty Trust, Commercial Net Lease Realty, Inc., National Retail Properties, Inc., and National Retail Properties Trust (collectively “Appellees”). As a result of this injury, Schneider’s workers’ compensation carrier, Liberty Mutual Insurance Company (“Liberty Mutual”), paid Lawrence $33,929.23 in workers’ compensation benefits.
Procedurally, Liberty Mutual filed a Praecipe for Writ of Summons against the appellees on December 9, 2011, naming the plaintiff as “Liberty Mutual Insurance Company, As Subrogee of George Lawrence,” and seeking to recover the workers’ compensation benefits it paid to or on behalf of Lawrence. Notably, Lawrence did not file suit or pursue settlement with the tortfeasors, did not assign his cause of action to Liberty Mutual, and did not join in Liberty Mutual’s suit. Instead, Liberty Mutual merely identified its status as subrogee of Lawrence in its independent action against appellees. Accordingly, citing previous cases confirming that actions arising from tortious conduct are unitary and may not be divided, the Trial Court concluded that Liberty Mutual had no right to sue independently for Lawrence’s alleged damages. Based on the Superior Court’s decision in Reliance Ins. Co. v. Richmond Machine Company, 455 A.2d 686 (Pa. Super. 1983), the Trial Court explained that only the injured employee has the right of action against a third-party tortfeasor and not the employer/insurer.
Emphasizing that the cause of action against the third-party tortfeasor exists for one indivisible wrong, the Trial Court held that the employer’s/insurer’s right of subrogation under § 319 of the Workers’ Compensation Act must be achieved through an action brought in the name of or joined by the injured employee. It cited Moltz v. Sherwood Bros., Inc., et al., 176 A. 842, 843 (Pa. Super. 1935) (holding that the right of the employer/insurer to subrogation against a tortfeasor must be achieved through a single action brought in the name of the injured employee, either by joining the employer or insurance carrier as a party plaintiff or as a use plaintiff) and Scalise v. FM Venzie & Co., et al., 152 A. 90 (Pa. 1930) (holding that § 319’s mandate that the employer is “subrogated … to the extent of compensation payable” does not mean that the sole right to recover from the tortfeasor is in the employer; rather, the right of action against the tortfeasor remains in the injured employee and suit is to be commenced in his name). The Trial Court did note that § 671 does not confer on a workers’ compensation carrier/employer the statutory right to bring suit directly against a third-party tortfeasor in its own name. The Supreme Court agreed, holding that although Liberty Mutual’s action in Domtar was barred, the carrier can independently bring a third-party action “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.”
Two very illuminating dissents followed the majority decision. Chief Justice Saylor said that he would find that the caption used in Domtar effectively makes the injured employee the use plaintiff. In the Complaint, the plaintiff was captioned as, “Liberty Mutual Insurance Company, as subrogee of George Lawrence, Plaintiff.” Saylor states the obvious when he says that the use of the phrase, “as subrogee of,” is a particularized means of bringing suit in the name of the use plaintiff. As such, there was little danger that the cause of action might be divided since any subsequent action brought directly by Lawrence would have been barred under the doctrine of res judicata.
Another dissent by Justice Todd agreed with the majority to the extent it preserves the right of an employer or its insurance company, as subrogee of an injured employee, to bring suit in the name of the injured employee in the capacity of a “use plaintiff.” However, he also pointed out what most subrogation professionals already assumed – that the manner in which Liberty Mutual captioned the instant proceeding, “as subrogee of George Lawrence,” should not have been fatal to its claim, because it is the functional equivalent of bringing this proceeding in the capacity of a “use plaintiff.” The effect of Liberty Mutual instituting suit “as subrogee of George Lawrence” was to indicate that it was “standing in the shoes” of Lawrence, and, thus, was asserting Lawrence’s rights in the suit, and not suing in its own capacity.
Furthermore, Justice Todd noted that the National Association of Subrogation Professionals (NASP) filed an amicus curiae brief on behalf of Liberty Mutual, wherein it asserted that confusion has developed regarding the proper manner to bring a “for use” proceeding in Pennsylvania within the context of workers’ compensation subrogation claims. Acknowledging that use plaintiff practice is a style of action employed infrequently in Pennsylvania, NASP requests that this Court enter a specific finding regarding the most appropriate language to be employed in the caption of a subrogation action brought by the employer on behalf of and in the name of the injured employee. Justice Todd was persuaded by the amicus curiae brief, and because there is a paucity of guidance in the case law and under the Pennsylvania Rules of Civil Procedure regarding the proper captioning of these suits, he referred this question to the Pennsylvania Supreme Court’s Civil Procedural Rules Committee for study and recommendations. Justice Todd also directed the Committee to address suitable service requirements when these types of actions are commenced by a subrogee, in order to ensure that the subrogor, whose claim the subrogee is litigating, receives adequate notice and the opportunity to participate in the action.
Gary Wickert was interviewed by Work Comp Central immediately after the Domtar decision was released. Not surprisingly, the interviewer indicated that she spoke with several trial lawyers claiming that this decision was a major victory for injured victims throughout Pennsylvania. To the contrary, now that the Supreme Court has clearly spelled out how and when a workers’ compensation carrier can file a third-party action, this procedure can and should be meticulously followed in order to protect this newly-confirmed right of subrogation in Pennsylvania.
If you should have any questions regarding this article or subrogation in general, please contact Gary Wickert at [email protected].