Personal Injury Protection (PIP) coverage is mandatory in Pennsylvania. Due to Pennsylvania being an optional or “choice” no-fault state, insureds must choose between “full tort” and “limited tort” options, and PIP coverage must be provided. Pennsylvania, New Jersey, and Kentucky are the only states that have “choice” no-fault laws, also known as an optional modified plan. This should not be confused with an “add-on PIP” state like Texas. In an add-on PIP state, the policy may provide for first-party PIP benefits, but there are no limitations on the ability to sue in tort. PIP benefits are consequently an “add-on” to their auto insurance policies, and those add-ons are either compulsory or optional depending on the state. In Pennsylvania, however, an insurer issuing or delivering a liability insurance policy must provide coverage that includes a medical benefit at least in the amount of $5,000. 75 P.S. § 1711.
When a Pennsylvania PIP carrier makes medical and/or lost wage benefit payments for an accident that was work-related, the issue arises as to whether the PIP carrier can seek reimbursement from the workers’ compensation carrier.
The Pennsylvania Commonwealth Court recently decided a case which made it quite clear that with regard to the rights of the PIP carrier to seek reimbursement from a workers’ compensation claim, § 319 is going to be taken quite literally. In Liberty Mutual Ins. Co. v. Excalibur Management Services, 2013 WL 5962794 (Pa. Cmwlth. Ct. 2013), Catherine Lamm was involved in a work-related auto accident in January 2010. This led to a July 2010 workers’ compensation claim against her employer, whose workers’ compensation carrier was Excalibur. At the same time, Lamm had a personal auto policy with Liberty Mutual, which paid $15,912.48 in medical benefits under its PIP coverage. In July 2010, Excalibur had denied workers’ compensation benefits to Lamm, but that workers’ compensation claim was later resolved in a March 2011 compromise agreement between Lamm and Excalibur, prior to which Liberty Mutual took no action to secure its subrogation interest.
In March 2012, Liberty Mutual filed suit against Excalibur seeking reimbursement of the PIP payments it had made. Citing the primacy of workers’ compensation over auto insurance benefits, Liberty Mutual alleged three theories of recovery:
- Reimbursement under § 1719 of the Motor Vehicle Responsibility Law (MVFRL) – the coordination of benefits provisions;
- Common law contribution; and
- Common law reimbursement/indemnity.
Excalibur argued to the trial court that the case should be dismissed because Pennsylvania Rule of Civil Procedure No. 1028(a)(7) required Liberty Mutual to first exhaust its statutory remedies (i.e., § 319). The Court of Common Pleas granted the dismissal noting that Liberty Mutual was aware of the pendency of the workers’ compensation claim prior to the March 2011 settlement and could and should have secured and perfected its subrogation/reimbursement rights in that proceeding.
The decision underscores the fact that, in Pennsylvania, workers’ compensation is primary over PIP when an accident occurs during the course and scope of employment. Section 319 of the Workers’ Compensation Act (Pennsylvania’s Workers’ Compensation Subrogation Statute) speaks to this issue and says:
Where an employee has received payments for the disability or medical expense resulting from an injury in the course of his employment paid by the employer or an insurance company on the basis that the injury and disability were not compensable under this act in the event of an agreement or award for that injury the employer or insurance company who made the payments shall be subrogated out of the agreement or award to the amount so paid, if the right to subrogation is agreed to by the parties or is established at the time of the hearing before the referee or the board. 77 P.S. § 671.
This statute contemplates subrogation under such circumstances either by contract (“agreed to by the parties”) or by litigation (“established at the time of the workers’ compensation hearing”). However, in order to establish subrogation rights under this section the PIP carrier must show that it has a right of subrogation at the time of the hearing before the Workers’ Compensation Judge or Board. Industrial Recision Services v. Workmen’s Comp. Appeal Board (Farbo), 808 A.2d 994 (Pa. Cmwlth. Ct. 2002); Baierl Chevrolet v. Workmen’s Comp. Appeal Board (Schubert), 613 A.2d 132 (Pa. Cmwlth. Ct. 1992). This type of PIP subrogation/reimbursement from the workers’ compensation carrier must be done before the compromise and release is signed in the workers’ compensation claim and it must be done in the workers’ compensation court. Liberty Mut. Ins. Co. v. Excalibur Management Services, 2013 WL 5962794 (Pa. Cmwlth. Ct. 2013).
PIP subrogation against traditional third-party tortfeasors in Pennsylvania is complicated, arguably hampered by the anti-subrogation provisions and “preclusion” requirements contained in § 1720, which is a subject worthy of an article unto itself. However, the Liberty Mutual v. Excalibur decision underscores the necessity of acting promptly on a PIP carrier’s right to seek reimbursement from a workers’ compensation claim when an accident is deemed to be work-related.
If you should have any questions regarding this article or subrogation in general, please contact Gary Wickert at firstname.lastname@example.org.