Automobile Insurance SubrogationAutomobile Total Loss ThresholdsDeductible ReimbursementDiminution of ValueFirst Come, First Served: Subrogating Multiple Claims in Excess of Policy LimitsFuneral Procession Traffic LawsImputing Contributory Negligence of Driver to Vehicle OwnerKeep Right Traffic LawsLaws Regarding Using Cell Phones/Headphones/Texting While DrivingLoss Of UseMed Pay/PIP SubrogationOwner Liability For Stolen VehiclesPayment of Sales Tax After Vehicle Total LossPedestrian and Crosswalk LawsRental Car Company Physical Damage and Loss of Use ClaimsRental Car Company’s Liability Insurance Primary or ExcessSudden Medical Emergencies While DrivingSuspension of Drivers’ LicensesUse of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Federal , State, and Local Governmental EntitiesMunicipal/County/Local Governmental Immunity and Tort LiabilityState Sovereign Immunity And Tort Liability
General Tort Laws/StatutesAnti-Indemnity StatutesContribution ActionsContributory Negligence/Comparative FaultDog Bite LawsEconomic Loss DoctrineParental ResponsibilitySpoliationStatute of LimitationsStatute of Limitations Exceptions
Health Insurance SubrogationHealth and Disability Insurance
InvestigationAdmissibility of Expert TestimonyPre-Suit Disclosure of Liability Policy Limits in Third-Party ClaimsRecording Conversations
Product Liability SubrogationProduct Liability Law
Property Subrogation“Matching Regulations” And Laws Affecting Homeowners Property ClaimsCondominium/Co-Op Waiver of Subrogation LawsDamage to Property Without Market ValueGeneral Contractor Overhead And Profit Payments In First-Party ACV Property Damage ClaimsLandlord/Tenant Subrogation
Subrogation GenerallyAnti-Subrogation RuleCriminal RestitutionMade Whole DoctrineMedical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Workers’ CompensationEmployee Leasing LawsHospital Lien LawsOCIP/CCIP Subrogation In Workers’ Compensation Construction CasesRecovery Of Increased Workers’ Compensation Premiums By EmployerWhich Workers’ Compensation “Benefits” Can Be Subrogated?Workers’ Compensation Subrogation Waiver EndorsementsWorkers’ CompensationWorkers’ Compensation Claims by Undocumented Employees
Automobile Insurance Subrogation
Automobile Total Loss Thresholds
Total Loss Formula (TLF).
The extent of repairs to vehicle would exceed the value of the repaired vehicle. Doesn’t include antique or classic cars. 75 Pa. Cons. Stat. Ann. § 102.
Automobile: Pro-Rata. 31 Pa. Admin. Code § 146.8(c) provides: “Insurers shall, upon request of claimant, include first-party claimant’s deductible, if any, in subrogation demands. Subrogation recoveries shall be shared on proportionate basis with first-party claimant, unless deductible amount has been otherwise recovered. A deduction for expenses cannot be made from deductible recovery unless outside attorney is retained to collect recovery. The deduction may then be for only pro-rata share of allocated loss adjustment expense.” 31 Pa. Admin. Code § 146.8 is a valid law promulgated by the Pennsylvania Insurance Commissioner. The Made Whole Doctrine has no applicability with regard to reimbursement of deductibles. The Made Whole Doctrine does not apply in collision coverage policy cases, and the practice of pro-rate reimbursement does not violate the Made Whole Doctrine. Jones, supra.
Deductible must be included in any collision subrogation demand upon claimant’s request.
Related Case Law: Harnick v. State Farm Mut. Ins. Co., 2009 WL 579378 (E.D. Pa. 2009); Jones v. Nationwide Property & Cas. Ins. Co., 995 A.2d 1233 (Pa. Super. 2010).
Diminution of Value
First Party: The Supreme Court specifically noted that, with regard to remedial damage to realty, a plaintiff may recover only the cost of repair or restoration without regard to the diminution in value of the property, and has also stated in a separate case that it was unaware of any circumstances where an insurance company reimbursed the insured for diminished value. The Court also held that such payment would not be the norm, and could not form the basis for a reasonable expectation by the public. Lobozzo v. Adam Eidemiller, Inc., 263 A.2d 432 (Pa. 1970); Munoz v. Allstate Ins. Co., No. 9906-2855 (Pa. Comm. Pl. 1999).
Third Party: When the vehicle is not a total loss, the plaintiff may recover (a) the difference between the market value of the vehicle before the harm and the value after the harm, or, at the plaintiff’s election, the reasonable cost of repair or restoration where feasible, with due allowance for any difference between the original value and the value after repairs, and (b) the loss of use. Holt v. Pariser, 54 A.2d 89, 91 (Pa. Super. 1947); Horton v. Philadelphia Rapid Transit Co., 94 Pa. Super. 553, 555-56 (Pa. 1928); Bauer v. Armour & Co., 84 Pa. Super. 174 (Pa. 1924).
First Come, First Served: Subrogating Multiple Claims in Excess of Policy Limits
A liability insurer has no duty to judge the seriousness of each of multiple claims against its insured before it settles with less than all of them. Scharnitzki v. Bienenfeld, 534 A.2d 825 (Pa. Super. 1987). The carrier does not act in bad faith if it settles with one of the multiple claimants, provided the settlement is reasonable under the circumstances. Id. One court has stated that if an insurer cannot obtain a global settlement, then it may arrange a less comprehensive settlement and will be subject to a bad faith suit only if the process used in reaching the settlement was in bad faith. Anglo-Am. Ins. Co. v. Molin, 670 A.2d 194 (Pa. Cmwlth. Ct. 1995).
Funeral Procession Traffic Laws
Pennsylvania law allows vehicles in a funeral procession to proceed past a red light or stop sign if the lead vehicle entered the intersection while the light was green or if it made a full stop at the stop sign. Each vehicle in the procession must have its headlights lit, emergency flashers on, and a flag or other insignia indicating it is part of the procession. They must yield the right-of-way to emergency vehicles. 75 Pa. Cons. Stat. Ann. § 3107.
Imputing Contributory Negligence of Driver to Vehicle Owner
Imputed Contributory Negligence Law: Negligence of the driver will not be imputed to the owner/passenger unless the owner/passenger would be vicariously liable as a defendant for the driver’s negligent actions. Smalich v. Westfall, 269 A.2d 476 (Pa. 1970).
Negligence of driver not imputed to owner with regard to claim for property damage of owner’s vehicle, unless driver was servant of owner. Turley v. Kotter, 398 A.2d 699 (Pa. Super. 1979).
Vicarious Liability/Family Purpose Doctrine: No Vicarious Liability Statute.
Family Purpose Doctrine is not recognized in Pennsylvania. Cade v. McDanel, 451 Pa. Super. 368, 679 A.2d 1266 (1996).
However, noting that other states do apply the doctrine, Pennsylvania courts have indicated that the owner of the family vehicle is vicariously liable for the negligence of the driver if the driver is acting as an agent of the owner. Adams v. Williams, 39 Pa. D. & C. 307 (Pa. Cmwlth. Pl. 1940).
Sponsor Liability for Minor’s Driving: No Sponsorship Liability Statute.
Keep Right Traffic Laws
Statute: 75 P.S. § 3301(a), (b), 75 P.S. § 3313(d)(2) and 75 P.S. § 3303.
Summary: Drivers must drive in the right lane except when overtaking and passing another vehicle; when an obstruction exists making it necessary to drive to the left of the center of the roadway; when official traffic-control devices are in place designating otherwise; upon a roadway restricted to one-way traffic; and when making a left turn. Slower traffic must keep right. Vehicle or combination over 10,000 lbs. may not drive in the left-hand lane of limited access highway with three or more lanes, except to turn left.
Flow of Traffic: The left lane may be used for passing, traveling at a speed greater than the traffic flow, when moving left to allow traffic to merge, and preparing for a left turn. Except when overtaking and passing on the right is permitted, the driver of an overtaken vehicle shall not increase the speed of the vehicle until completely passed by the overtaking vehicle and shall give way to the right in favor of the overtaking vehicle on suitable signal.
Laws Regarding Using Cell Phones/Headphones/Texting While Driving
Cell Phone/Texting: No driver shall operate a motor vehicle on a highway or in traffic way while using a wireless communications device to send, read, or write text-based messages while the vehicle is in motion. 75 Pa. C.S.A. § 3316.
Other Prohibitions: No driver shall operate a vehicle while wearing or using one or more headphones or earphones. Exceptions include hearing aids or other devise for improving the hearing of driver, cell phone headsets that cover one ear only, communication equipment used by driver of emergency vehicles or by motorcycles if the equipment is in the helmet. 75 Pa. C.S.A. § 3314.
Comments: Any local laws regarding texting while driving are preempted. 75 Pa. C.S.A. § 3316.
Loss Of Use
Loss of Use: Yes. The owner of a vehicle which is damaged, whether repairable or not, may recover loss of use in addition to other damages claimed relating to the loss. This is calculated by the time needed to obtain a functional substitute on the market, not necessarily the time for repair or rebuilding. Nelson v. Johnson, 55 Pa. D. & C.2d 21, 32 (Pa. Com. Pl. 1970). Any reasonable expense naturally and proximately resulting from loss of, or damage to, property, even though not actually paid out, usually is a proper element of recovery. This likely includes the cost of renting a substitute vehicle. Id.
Lost Profits: Yes. If reasonably certain. A plaintiff seeking damages for anticipated lost profits must offer evidence providing a basis for estimating them “with reasonable certainty.” Exton Drive-In, Inc. v. Home Indemnity Co., 261 A.2d 319 (Pa. 1969). Although a new business with no record of profitability cannot usually satisfy this standard, there is an exception for new businesses that can show a “significant interest” in its product or service before the contract breach occurred. Delahanty v. First Pa. Bank, N.A., 464 A.2d 1243 (Pa. 1983).
Med Pay/PIP Subrogation
Med Pay: Coverage not required but subrogation rights similar to PIP subrogation below.
PIP: PIP Subrogation historically prohibited in any action arising out of use or maintenance of motor vehicle. 75 P.S. § 1720. However, an unreported Superior Court decision affirms that § 1720 does not prevent PIP subrogation where insured is made whole and subrogation does not interfere with the insured’s claim. State Farm Mut. Auto. Ins. Co. v. Soxman, J-A13040, No. 2659 EDA 2010 (Pa. Super. 2011) (unreported decision). Section 1720 only bars subrogation or reimbursement “from a claimant’s tort recovery.” However, the decision mistakenly maintained that § 1722 still prohibited subrogation – even when there wasn’t going to be a double recovery. That obstacle is avoided by a direct action against a tortfeasor’s liability carrier.
- Choice No-fault State. Verbal threshold. Enacted in 1976. Repealed strict no-fault in 1984, but maintained compulsory PIP coverage. In 1990, Pennsylvania allowed consumers to choose tort limitations in exchange for premium discount on liability insurance. Insured can choose “limited tort option” which has lower premiums but limits recovery to economic damages (unless “serious injury”). Other choice is “full tort option”, which allows third-party suit for economic and non-economic damages.
Made Whole: Doctrine passively applies. Lexington Ins. Co. v. Q-E Mfg. Co., Inc., 2006 WL 2136244 (M.D. Pa. 2007).
Statute of Limitations: The two (2) year personal injury statute of limitations runs from the date of the insured’s accident. 42 P.S. § 5524 (1987 and Supp. 2000).
Owner Liability For Stolen Vehicles
Key In The Ignition Statutes: 75 P.S.§ 3701.
Common Law Rule: To hold the owner of a vehicle liable for the tortious conduct of an unauthorized driver, the plaintiff must plead that the defendant-owner knew or should have known that the defendant-driver would take the vehicle without authorization and that the unauthorized driver would operate it in the tortious manner that he or she did. Furthermore, 75 P.S. § 3701 is a regulatory statute meant to deal with safe use of motor vehicles, not prevention of theft. Estate of O’Loughlin, ex rel. O’Loughlin v. Hunger, 2009 WL 1084198 (E.D. Pa. 2009); Santarlas v. Leaseway Motorcar Transport Co., 689 A.2d 311 (Pa. Super. Ct. 1997).
Payment of Sales Tax After Vehicle Total Loss
First-Party Claims: A total loss is settled based upon the pre-loss fair market value of the damaged vehicle plus the state sales tax on the cost of a replacement vehicle. 27 Pennsylvania Bulletin 306131; Pa. Code § 62.3 (E)(4).
Third-Party Claims: 31 Pa. Code § 146.2 defines “claimant” as a first-party claimant, a third-party claimant, or both. However, no other applicable statute, or case law governing recovery of sales tax.
Pedestrian and Crosswalk Laws
75 P.S. § 3542, § 3542: When traffic signal is not in place, vehicles must yield to pedestrian in crosswalk on vehicle’s half of road or close to it. Pedestrians must not step off curb and into path of vehicle when vehicle does not have time to stop.
75 P.S. § 3542, § 3543: Pedestrians must yield to vehicles when crossing outside crosswalk. Pedestrians must use crosswalk at intersections with traffic control devices. Pedestrians must not cross diagonally.
Summary: Driver cannot carelessly inflict injuries on pedestrians, regardless of who has the right-of-way. Morris v. Moss, 435 A.2d 184, 290 Pa. Super. 587 (1981). Person crossing at other than crosswalk is bound to exercise a higher degree of care for their own safety. Stong v. Com., 817 A.2d 576 (Pa. Cmwlth. 2003), app. den., 831 A.2d 601, 574 Pa. 763.
Rental Car Company Physical Damage and Loss of Use Claims
Recovery From Renter: Recovery of physical damage and loss of use are not prohibited or otherwise regulated. Terms of rental agreement control. Collision Damage Waivers not regulated.
Recovery From Third-Party: When a fleet is involved, such as with a rental car company, the owner is still entitled to reasonable loss of use damages. Benson v. Budget Rent A Car Sys. Inc., 2011 WL 4528334 (E.D. Pa. 2011). However, a person claiming loss of use damages when the property is not repairable must show that the method of acquiring a replacement for the property and the time taken for the replacement were reasonable. Kintner v. Claverack Rural Electric Co-Operative, Inc., 478 A.2d 858 (Pa. Super. 1984). In Benson v. Budget Rent a Car System, Inc., the rental car company located replacement vehicles within one day but argued it should be entitled to recover loss of use damages until the vehicle is repaired and sold at auction (capped at 30 days). There is no hard and fast rule – only that the loss of use period must be reasonable.
Rental Car Company’s Liability Insurance Primary or Excess
Summary: Every policy must state whether it covers rental vehicles. Pa. Stat. 75 P.S. § 1725. No case or statutory law dealing specifically with car rental companies. Terms of rental agreement and renter’s liability policy should be compared to determine which is primary. If both policies are excess, the loss will be shared equally by the insurers. Continental Casualty v. Aetna Casualty, 33 Pa. D. & C.2d 293 (Pa. Common Pleas 1963).
Sudden Medical Emergencies While Driving
Sudden Medical Emergency Doctrine. An operator of an automobile who, while driving, is suddenly stricken by an unforeseeable loss of consciousness is not chargeable with negligence. Freifield v. Hennessy, 353 F.2d 97 (3rd Cir. 1965); Shiner v. Ralston, 64 A.3d 1 (Pa. 2013).
Defendant’s coughing fit while driving falls within the Sudden Medical Emergency Doctrine and is not foreseeable. License of Norvell, 85 Pa. D. & C. 385 (Pa. Com. Pl. 1953).
Suspension of Drivers’ Licenses
Administrative Suspension: If Department determines that the owner/driver of a vehicle involved in an accident did not maintain financial responsibility at the time of the accident, the Department will suspend the operating privilege of the owner and registration of the vehicle. 75 P.S. § 1785. The suspension will last for three (3) months. 75 P.S. § 1786.
Judgment: Upon receipt of judgment, the Department must suspend the driver’s license of the judgment debtor. 75 P.S. § 1772. Suspension will last until the judgment is satisfied or stayed. 75 P.S. § 1773.
Contact Information: State of Pennsylvania, Department of Transportation, Bureau of Driver Licensing, 1101 South Front Street, Harrisburg, PA 17104, (717) 412-5300, http://www.dmv.state.pa.us/centers/licenseidcenter.shtml.
Use of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Authority: 31 Pa. Admin. Code § 62.3(10.)
Summary: An appraisal that uses non-OEM parts must clearly state that the appraisal includes the use of non-OEM parts and a disclosure statement must be included with the appraisal. If the use of non-OEM parts voids the warranty of the part being replaced or any other part, the non-OEM part must include a warranty equivalent to or better than the remainder of the warranty that is voided. All non-OEM parts must be identified as such.
Federal , State, and Local Governmental Entities
Municipal/County/Local Governmental Immunity and Tort Liability
Political Subdivision Tort Claims Act: 42 Pa. C. S. §§ 8541, 8542. Immunity not waived for local governmental entities (local agency), unless exception in statute. 42 Pa. C. S. §§ 8541. “Local Agency” means a government unit other than the Commonwealth government. 42 Pa. C. S. § 8501.
Notice Deadlines: Notice of Intention to Make Claim against “Local Agency” must be made within six months after cause of action accrued. 42 Pa. C. S. § 5522. No notice needed where “dangerous condition” of real estate, highways, and sidewalks. Potholes require actual written notice and time to fix. Actual or constructive notice okay. 42 Pa. C. S. § 5522(a)(3). No notice required for claim arising from the “care, custody or control” of its real property. 42 Pa. C. S. § 8542(b)(3).
Local Agency liable when:
- Operation of motor vehicle;
- Care custody and control of personal property;
- Care custody and control of real property;
- Dangerous conditions of trees, traffic signs, lights or other traffic controls;
- Dangerous conditions of facilities of steam, sewer, water, gas or electric systems;
- Dangerous condition of streets;
- Dangerous conditions of sidewalks; and
- Care custody or control of animals.
42 Pa. C. S. § 8542.
Comments/Exceptions: No subrogation claims against local agencies. 42 Pa. C. S. § 8553(d).
Damage Caps: No Limit Per Person. $500,000 Per Occurrence. 42 Pa. C. S. § 8553. Pain and suffering is only permitted for permanent loss of bodily function, permanent disfigurement or permanent dismemberment where medical expenses exceed the sum of $1,500. Walsh v. City of Philadelphia, 585 A.2d 445 (Pa. 1991).
State Sovereign Immunity And Tort Liability
Tort Claims Act: Pennsylvania Sovereign Immunity Act. 42 Pa. Cons. Stat. Ann. § 8501, et seq. (1988).
Commonwealth Court has jurisdiction over civil actions brought against the “Commonwealth government” with four specific exceptions. 42 Pa. Cons. Stat. Ann. § 761.
Notice Deadlines: Notice of Intention to Make Claim against “Commonwealth Party” must be made within six months after cause of action accrued. 42 Pa. Stat. Cons. Stat. Ann. § 5522. No notice needed where “dangerous condition” of real estate, highways, and sidewalks. Potholes require actual written notice and time to fix. 42 Pa. Cons. Stat. Ann. § 8522(b)(4).
Claims/Actions Allowed: Sovereign Immunity Act waives Commonwealth immunity for damages arising out of a negligent act where the damages would be recoverable by private person. 42 Pa. Cons. Stat. Ann. § 8522(a). It includes:
(1) motor vehicle operation;
(2) medical profession;
(3) care, custody, control of personal property;
(4) real estate, highways, sidewalks;
(5) potholes and dangerous conditions;
(6) control of animals; and
42 Pa. Cons. Stat. Ann. § 8522(b).
Comments/Exceptions: Exceptions to sovereign immunity. Plaintiff cannot recover under motor vehicle exception if fleeing apprehension of resisting arrest by a police officer. 42 Pa. Cons. Stat. Ann. §§ 8522(b) and 8542(b). No property damage recoverable under potholes and dangerous conditions. 42 Pa. Cons. Stat. Ann. § 8528(c)(5).
Damage Caps: $250,000 per person.
$1,000,000 per occurrence. Can only recover:
(1) past and future loss of earnings;
(2) pain and suffering;
(3) medical expenses;
(4) loss of consortium; and
(5) property losses.
42 Pa. Cons. Stat. Ann. § 8528.
General Tort Laws/Statutes
68 P.S. §491. Anti-indemnity statute limited to invalidating agreements in which architects, engineers, or surveyors are indemnified for preparation or approval of drawings, designs, or specifications or the giving of instructions or directions which cause damage. 68 P.S. § 491. No statutory prohibition with respect to indemnification agreements in connection with construction projects in general, or with respect to indemnification agreements calling for a party to be indemnified for its own acts of negligence. Hutchinson v. Sunbeam Coal Corp., 519 A.2d 385, 390 (Pa. 1986).
Modified Joint and Several Liability. Several Liability, except for intentional torts and when defendants are more than 60% at fault. 42 P.S. § 7102.
Contribution allowed among joint tortfeasors. Any defendant who pays more than his percentage may seek contribution in underlying action or as a separate action. 42 P.S. § 7102; McMeekin v. Harry M. Stevens, Inc., 530 A.2d 462 (Pa. Super. 1987). Section 8324 provides for contribution among joint tortfeasors provided the contribution plaintiff has discharged the common liability or paid more than his share. If there is a settlement, the contribution plaintiff must extinguish the liability of the contribution defendant in order to pursue contribution from him. To prove they are joint tortfeasors, actual liability of both tortfeasors must be established. Undecided if settling defendant can seek contribution from a non-party to the original suit. If there is a judgment, however, he can. Two (2) years statute of limitations from date of judgment or settlement. Hughes v. Pron, 429 A.2d 9 (Pa. Super. 1981).
Contributory Negligence/Comparative Fault
Modified Comparative Fault: 51% Bar. Damaged party cannot recover if it is 51% or more at fault. If 50% or less at fault, it can recover, although its recovery is reduced by its degree of fault. Plaintiff’s negligence will diminish, but not bar, his recovery, unless he was more negligence than defendants. 42 P.S. § 7102.
Dog Bite Laws
Dog owner will be strictly liable if they had knowledge of their dog’s violent propensities. If the dog owner did not know, they will be liable for all damages (medical plus other damages) for severe injuries, but only liable for medical damages for non-severe injuries. Pennsylvania law does not impose absolute liability upon dog owners from torts caused by their dogs. McCloud v. McLaughlin, 837 A.2d 541 (Pa. Super. 2003) (citing Deardorff v. Burger, 606 A.2d 489 (Pa. Super. 1992)). The plaintiff must prove that the dog owner acted negligently. Pennsylvania has abolished the “one free bite” rule, which required that an owner restrain his or her dog only after its behavior evidenced viciousness. Villaume v. Kaufman, 550 A.2d 793 (Pa. Super. 1988) (citing Freeman v. Terzya, 323 A.2d 186 (Pa. Super. 1974)). A plaintiff cannot recover for injuries sustained in an incident involving a dog bite by merely establishing that the dog had a propensity for viciousness and the owner was aware of the same, the plaintiff must demonstrate that the owner failed to take proper precautions to preclude the dog from acting in a vicious manner. Darby v. Clare F. and R. Co., 170 A. 387 (Pa. Super. 1934). Circumstances that constitute knowledge of the dog’s viciousness or dangerous propensities include but are not limited to: (1) complaints brought to the owner’s attention; (2) fighting with other dogs; (3) frequent confinement of the dog; (4) warning signs on the owner’s premises; and (5) statements by the owner as to the dog’s character. Sheptak v. Wagner, 23 Pa. D. & C.3d 46 (1982). Pennsylvania case law clearly adopts the defense of assumption of the risk for dog bite cases. Groner v. Hedrick, 169 A.2d 302 (Pa. 1961).
Economic Loss Doctrine
Majority Rule. Under Pennsylvania law, the ELD “prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract.” Werwinski v. Ford Motor Co., 286 F.3d 661, 671 (3rd Cir. 2002) (quoting Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 618 (3rd Cir. 1995)). It is “designed to…establish clear boundaries between tort and contract law.” Id. at 680. Accordingly, where a “plaintiff’s only alleged damage is a diminution in the value of a product plaintiff has purchased, Pennsylvania law says that plaintiff’s redress comes from the law of contract, not the law of tort.” Martin v. Ford Motor Co., 765 F. Supp.2d 673, 684 (E.D. Pa. 2011) (quoting Stein v. Fenestra Am., L.L.C., 2010 WL 816346 (E.D. Pa. 2010)); Murphy v. State Farm Mut. Auto. Ins. Co., 2016 WL 4917597 (E.D. Pa. 2016). Recovery is permitted only when there is injury or damage to other property. R.E.M. Coal Co., Inc. v. Clark Equip. Co., 563 A.2d 128 (Pa. Super. 1989). Where a plaintiff sues a component manufacturer, rather than the manufacturer of a final assembled product, a court must not look to the component part to define the product; rather, the relevant “product” remains “what the plaintiff bargained for,” i.e., the fully assembled product that the plaintiff ultimately purchased. Commercial Union Ins. Co. v. Kirby, 149 F.3d 1163 (3rd Cir. 1998). The ELD also applies to service contracts. Valley Forge Convention and Visitors’ Bureau v. Visitors’ Services, Inc., 28 F.Supp.2d 947 (E.D. Pa. 1998). However, there is a negligent misrepresentation exception to the ELD. A reasonable reading of this exception is that now any deviation from the standard of care in the design documents prepared by an architect is sufficient to meet the requirements of the negligent misrepresentation criteria adopted by this Pennsylvania court. Bilt-Rite Contractors, Inc. v. The Architectural Studio, 866 A.2d 270 (Pa. 2005). There is also an exception for claims based on fraud in the inducement where the fraud is “extraneous to the contract, not interwoven with the breach of contract.” Reilly Foam Corp. v. Rubbermaid Corp., 206 F. Supp.2d 643 (E.D. Pa. 2002).
Personal Injury. Liability imposed on parents when child is found liable or adjudged guilty of tortious act that causes injury to another person. 23 Pa. Code §§ 5502, 5505.
The limits of liability are $1,000.00 per person injured by the child’s act and $2,500.00 per incident, regardless of the number of injured persons. Child must be under 18-years-old.
Minor’s Driving. If a minor is found to be operating a vehicle in a negligent manner on the highway without a driver’s license, and in an unlicensed vehicle, a court could conclude that the minor committed a willful tortious act, and 23 Pa. Code §§ 5502 would apply. Kelly v. Seachrist, 18 Pa. D. & C.4th 514 (Com. Pl. 1993).
Tort of Spoliation: Spoliation of evidence is not recognized as a separate cause of action under Pennsylvania law. The Supreme Court of Pennsylvania “has not recognized a cause of action for negligent spoliation of evidence,” and given the opportunity, it declined to do so. Pyeritz v. Pennsylvania, 32 A.3d 687, 695 (Pa. 2011); A. States Ins. Co. v. Copart, Inc., 2022 WL 3722081 (E.D. Pa. 2022). Erie Insurance Exchange v. USAA, 2022 WL 17422030 (Pa. Super. 2022). “Generally, the law does not impose affirmative duties absent the existence of some special relationship, be it contractual or otherwise.” Elias v. Lancaster Gen. Grp., 710 A.2d 65, 68 (Pa. Super. 1998) (citing Brandjord v. Hopper, 688 A.2d 721, 723 (Pa. Super. Ct. 1997)). Under Pennsylvania law, “more than a mere gratuitous promise is necessary to raise such a duty, i.e., an actual entry upon the performance of such promise.” Brown v. T.W. Phillips Gas & Oil Co., 195 F.2d 643 (3rd Cir. 1952). “A person who makes an engagement, even though gratuitous, and actually enters upon its performance, will incur tort liability if his negligence thereafter causes another to suffer damages.” Pirocchi v. Liberty Mut. Ins. Co., 365 F. Supp. 277 (E.D. Pa. 1973) (citing Pascarella v. Kelley, 105 A.2d 70 (Pa. 1954)).
In Erie Ins. Exch. v. United Services Automobile Assn., 2022 WL 17422030 (Pa. Super. 2022), the plaintiff contended that Pyeritz does not bar a claim for spoliation brought on a theory of promissory estoppel. The court acknowledged that no court has addressed whether Pyeritz bars or permits a non-tort claim for damaged caused by negligent spoliation of evidence, many federal courts have characterized Pyeritz as broadly holding that no cause of action for damages for negligent spoliation exists, and it didn’t limit its holding to “tort liability.” Therefore, there is no cause of action for negligent spoliation even in the light of a gratuitous agreement to indefinitely preserve evidence for a plaintiff’s benefit.
Sanctions: Parties can be sanctioned for spoliation of evidence. Id. Pennsylvania law provides that a party cannot benefit from its own withholding or destruction of evidence by creating an adverse inference that the evidence is unfavorable to that party. Manson v. Southeastern Transp. Auth., 767 A.2d 1, 5 (Pa. 2001). Whether and how to sanction a party is within the discretion of the court. Eichman v. McKeon, 824 A.2d 305, 312-314 (Pa. Super. Ct. 2003). A determination of the appropriate sanction requires the court to determine three factors: (1) the degree of fault of the parties who alter or destroy the evidence; (2) the degree of prejudice suffered by the opposing parties; (3) the availability of a lesser sanction that will protect the opposing parties’ rights and deter future similar conduct. Id. (citing Schroeder v. Commonwealth Dep’t of Transp., 710 A.2d 23 (Pa. 1998) (adopting the test from Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76 (3rd Cir. 1994)). However, in State Farm Fire & Cas. Co. v. Cohen, 2020 WL 5369626 (E.D. Pa. 2020), the court held that a spoliation sanction requires proof that the alleged spoliation was beyond accident or mere negligence. The party seeking a spoliation sanction must demonstrate it was intentional and that the alleged spoliator acted in “bad faith” before adverse inferences will be provided. In short, parties seeking an adverse inference in cases of spoliation cannot rely on negligence alone.
Statute of Limitations
Personal Property2 Years42 P.S. § 5524
Personal Injury/Death2 Years42 P.S. § 5524
Breach of Contract/Written4 Years42 P.S. § 5525(7)(8)
Breach of Contract/Oral4 Years42 P.S. § 5525(3)
Breach of Contract/Sale of Goods6 Years42 P.S. § 36-2-725
Statute of Repose/ProductsNone
Statute of Repose/Real Property12 Years – 42 P.S. § 5536*
Breach of Warranty/U.C.C.4 Years42 P.S. § 5525
Workers’ Comp Third-Party Case2 Years77 P.S. § 671
Strict Product Liability2 Years42 P.S. § 5524
Statute of Limitations Exceptions
*12 years from substantial completion of improvement, but it generally does not apply to manufacturers. Period extended to 14 years if injury occurred between 10th and 12th year after completion of improvement. 42 P.S. § 5536; Venema v. Moser Builders, Inc., 2022 WL 4860130 (Pa. Super. 2022).
Health Insurance Subrogation
Health and Disability Insurance
Statute of Limitations: 2 Years. 42 P.S. § 5524.
Subrogation of Medical Benefits is allowed with the limited exception of auto accidents. Compare 75 P.S. § 1720, which provides “no right of subrogation … with respect to …or workers’ comp benefits or benefits paid or payable by a program, group contract or other arrangement” in regard to automobile accidents with Armstrong v. Antique Auto. Club of Am., 670 F. Supp. 2d 387, 394 (M.D. Pa. 2009) (subrogation allowed where policy delivered in another state).
Subrogation of Disability Benefits is allowed. 75 P.S. § 1720 does not apply to policies delivered outside Pennsylvania or for vehicles not registered in Pennsylvania. SeeNat’l Union Fire Co. of Pittsburgh, PA. v. Toland, 2016 WL 873005 (D. Wyo., Feb. 17, 2016).
Made Whole Doctrine applies. Nationwide Mut. Ins. Co. v. DiTomo, 330 Pa. Super. 117, 118, 478 A.2d 1381, 1382 (1984) (per curiam) and Lexington Ins. Co. v. Q-E Mfg. Co., Inc., 2006 WL 2136244 (M.D. Pa., July 28, 2006)(unpublished). However, a plaintiff is made-whole by a voluntary settlement within policy limits. Associated Hosp. Serv. of Philadelphia v. Pustilnik, 396 A.2d 1332 (1979), vacated on other grounds, 439 A.2d 1149 (Pa. 1981); Curran v. Germes, 2012 WL 12525505, at *5 (N.D. Tex. Jan. 11, 2012). Common Fund Doctrine applies. 42 P.S. § 2503 (1978).
Admissibility of Expert Testimony
Admissibility Standards: Frye
Case/Statutory Law: Pa. R.E. 702(c); Snizavich v. Rohm and Haas Co., 2013 Pa. Super. 315 (Pa. Super. 2010).
Comments: Pa. R.E. 702(c) applies the “general acceptance” test for the admissibility of scientific, technical, or other specialized knowledge testimony.
Note that Pa. R.E. 702(c) differs from F.R.E. 702 in that it reflects Pennsylvania’s adoption of the standard in Frye v. United States, 293 F. 1013 (D.C. Cir. 1923). The rule applies the ‘‘general acceptance’’ test for the admissibility of scientific, technical, or other specialized knowledge testimony. This is consistent with prior Pennsylvania law. Grady v. Frito-Lay, Inc., 576 Pa. 546, 839 A.2d 1038 (2003). The rule rejects the federal test derived from Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).
Pre-Suit Disclosure of Liability Policy Limits in Third-Party Claims
Duty To Disclose: No.
Failure To Disclose A Basis For Bad Faith: An insurer’s decision to litigate rather than settle can be the basis for third-party bad faith claims. The decision must be reasonable. Birth Center v. St. Paul Companies, Inc., 567 Pa. 386 (Pa. 2001).
All-Party Consent: It is unlawful to record an electronic or in-person communication without the consent of all parties. 18 Pa. Cons. Stat. § 5702 to § 5704. However, “interception” of or mere listening in to a call using a telephone is not prohibited because the term “electronic, mechanical or other device” does not include a telephone. Using a cell phone’s “voice memo” application would be considered a “device” and would be prohibited. Com. v. Smith, 136 A.3d 170, 171 (Pa. Super. 2016); Com. v. Spence, 91 A.3d 44, 44–45 (Pa. 2014).
Product Liability Subrogation
Product Liability Law
Statute of Limitations/Repose: 2 years for personal injury and wrongful death. 42 Pa. C.S.A. § 5524(2). Discovery Rule applies.
Liability Standards: Strict Liability, Warranty.
Fault Allocations: Modified Comparative. 42 P.S. § 7102.
Non-Economic Caps/Limits On Actual Damages: No.
Punitive Y/N and Limits: Yes.
Heeding Presumption?: Yes. Coward v. Owens-Corning Fiberglas Corp., 729 A.2d 614, 620-21 (Pa. Super. 1999).
Innocent Seller Statute: No.
Joint and Several Liability: Yes, if > 60%. 42 P.S. § 7102
Available Defenses: Assumption of Risk; Misuse; Alteration; Learned Intermediary; Government Contractor Defense; Presumption; Sophisticated User.
Restatement 2nd or 3rd?: Restatement 3rd
“Matching Regulations” And Laws Affecting Homeowners Property Claims
Caselaw: Where an insurance policy mandates that the insurer replace the damaged portion of property, the insurer is not required to replace undamaged portions of the property. Enwereji v. State Farm Fire & Cas. Co., No. 10-CV4967, 2011 WL 3240866 (E.D. Pa., July 28, 2011); see also Greene v. United Services Auto. Ass’n, 936 A.2d 1178 (Pa. Super. 2007).
“Like kind and quality” does not require identical replacement. Collins v. Allstate Ins. Co., 2010 WL 2510376 (E.D. Pa. 2010) (noting that policy terms such as “like kind and quality” and “equivalent construction” were similar to the “like construction” term of the policy in Greene, which was interpreted to require “repair of the damaged slope … with shingles similar to the damaged shingles” rather than “replacement with the identical item damaged”).
Comments: An insured’s demand for “matching” could be “unreasonable” without sufficient proof to support it. St. Paul Fire & Marine Ins. Co. v. Darlak Motor Inns, Inc., 3:97-CV-1559-TIV, 1999 U.S. Dist. LEXIS 23283 (M.D. Pa. Mar. 9, 1999).
Condominium/Co-Op Waiver of Subrogation Laws
Associations must maintain property insurance and general liability insurance on the common elements and units. Insurer must waive rights to subrogation against any unit owner and member of their family. Section 3312 bars a condo association’s insurer from subrogating against a condo owner. 68 Pa. C.S. § 3312.
Damage to Property Without Market Value
Service Value: “Depreciation principles have not been applied in such cases, and we are of the opinion that they should not be given consideration here.” Pennsylvania Power & Light Co. v. Decker, 1 Pa. D. & C. 3d 303 (Pa. Ct. Com. Pl. 1966).
Intrinsic Value: “Where there is the destruction of personal property without a market value… It is entitled to damages based upon its special value to the plaintiff.” Rhoades, Inc. v. United Airlines, Inc., 224 F. Supp. 341 (W.D. Pa. 1963).
Sentimental Value: The measure of damages for dog would be the market value and owner’s sentimental attachment to dog does not make it unique chattel under the law. Daughen v. Fox, 539 A.2d 858 (Pa. Super. 1988).
General Contractor Overhead And Profit Payments In First-Party ACV Property Damage Claims
Payment And Depreciation Of GCOP/Sales Tax: Follows “replacement cost less depreciation” rule. When more than one trade is required to perform repairs, it is “reasonably likely” that a general contractor will be required, and GCOP must be paid as part of an ACV claim payment. This is true even if the insured makes the repairs himself, hires a handyman instead of a team of contractors, or chooses not to make the repairs. Gilderman v. State Farm Ins. Co., 649 A.2d 941 (Pa. Super. 1994); Mee v. Safeco Ins. Co. of Am., 908 A.2d 344 (Pa. Super. 2006); Gilderman v. State Farm Ins. Co., 649 A.2d 941 (Pa. Super. 1994).
Insurers required to include GCOP in ACV payments for losses where repairs would be reasonably likely to require a general contractor. Court said this reflects the majority approach across jurisdictions. Mills v. Foremost Ins. Co, 511 F.3d 1300 (11th Cir. 2008). General contractor and contractor’s 20% GCOP applied. Insurer’s duty of good faith and fair dealing requires reasonable investigation into whether general contractor reasonably likely. Gilderman, supra. Three Trade Rule seemingly applies.
In one federal court case, Allstate began arbitrarily paying 5% GCOP instead of the industry-wide standard of 20-25%, to claimants covered under RC policies. Allstate tried to differentiate between the use of a “specialty” contractor, who would receive 5% and a general contractor, who would receive 20-25%. Class certification was denied. Allen-Wright v. Allstate Ins. Co., 2008 WL 5336701 (E.D. Pa. 2008).
Until recently, Pennsylvania had only one case speaking to this issue. If the lease requires the landlord to provide fire insurance, the landlord’s carrier cannot subrogate against the tenant. If the lease requires the tenant to obtain fire insurance, the landlord’s carrier can subrogate. Remy v. Michael D’s Carpet Outlets, 571 A.2d 446 (Pa. Super. 1990). It depended on the lease language.
In the 2019 Superior Court decision of Joella v. Cole, 221 A.3d 674 (Pa. Super. 2019), the landlord’s (Joella) insurance company (Erie Insurance Exchange) filed a subrogation suit against a tenant (Cole) to recover for damages from a fire caused when Cole ran an extension cord across metal hinges to a microwave. Joella who carried insurance through Cole responded by arguing that the lease required Joella to maintain fire insurance and, therefore, she was an implied co-insured. The lease provided that the tenant had the right to maintain fire insurance to cover property not covered by the landlord’s policy. Until this decision, Remy had been the only case discussing the issue. The trial court held that the reasonable expectation of the tenant was that she was an implied co-insured under the policy. On appeal, however, the Superior Court noted that while the Erie policy did not mention the tenant, it did say that the landlord would secure insurance for the building and the tenant had a right to get her own policy. Therefore, where the lease required the landlord to maintain insurance on the building, the reasonable expectations of the parties was that the tenant is an implied co-insured under the Erie policy and Erie cannot pursue the tenant in subrogation.
To determine whether a tenant is a co-insured under his landlord’s lease and, therefore, immune for a subrogation action by the landlord’s insurance company, Pennsylvania applies “the case-by-case approach….” Joella, 221 A.3d at 678. Under this approach “courts determine the availability of subrogation based on the reasonable expectations of the parties as expressed in the lease under the facts of each case.” Id. To make that assessment “the court will look to the lease agreement between the landlord and the tenant.” Thomas v. Jones, 2021 WL 462025 (Pa. Super. 2021).
An insurer cannot recover by means of subrogation against its own insured. Remy v. Michael D’s Carpet Outlets, 571 A.2d 446 (Pa. Super. 1990). An insurer cannot pay a general contractor for its losses and then attempt to recover from a subcontractor who is named, directly, or indirectly, as an additional insured in the same policy. Keystone Paper Converters, Inc. v Neemar, Inc., 562 F. Supp. 1046 (E.D. Pa. 1983).
Pennsylvania statute allows for a “victim” to recover the appropriate restitution from a liable criminal defendant. 18 Pa. C.S. § 1106(a). The applicable Pennsylvania case law and statutory language allow for classification of and insurer as a “victim” for purposes of restitution recovery. 18 Pa. C.S. § 1106(c)(1)(ii)(D); Commonwealth of Pennsylvania v. Pozza, 750 A.2d 889 (Pa. Super. Ct. 2000). A victim’s insurer is considered a victim under the Crime Victim’s Act, 18 Pa.C.S. §§ 11.101, et seq. Commonwealth of Pennsylvania v. Langston, 2018 WL 1062779 (Pa. Super. 2018). In criminal matters, a criminal “has no standing to question contractual or subrogation rights which govern disposition of moneys paid via restitution to the victim. Commonwealth v. Kerr, 444 A.2d 758 (Pa. Super. 1982). In Kerr, the Superior Court rejected the offender’s argument that a “right of subrogation transforms the sentence [ordering restitution] into an order directing payment to one who was not the victim of the crime.” Id. at 760-61.
In a Superior Court case, the court ordered the criminal to pay restitution to The Phia Group, which was merely the recovery and reimbursement subrogation vendor for HCR ManorCare, and didn’t actually pay the claims. Because § 1106 defines “insurance company” as “entity that compensates a victim for loss under an insurance contract” and says the court may order the defendant to pay restitution to “the insurance company”, the subrogation vendor was not entitled to any restitution. Commonwealth v. Wright, 2022 WL 1741121 (Super. 2022).
Made Whole Doctrine
Pennsylvania recognizes and applies the Made Whole Doctrine, although not very aggressively. Nationwide Mut. Ins. Co. v. DiTomo, 478 A.2d 1381 (Pa. Super. 1984). The Doctrine states that an insurer cannot enforce its right to subrogate an insured’s recovery from a third party unless that recovery is for the full amount of an insured’s damages. Accordingly, an insurer is generally not entitled to exercise a right to subrogation until its insured has been fully compensated for the insured’s injuries. Lexington Ins. Co. v. Q-E Mfg. Co., Inc., 2006 WL 2136244 (M.D. Pa. 2006) (unreported decision). However, there do not appear to be many cases which apply the Made Whole Doctrine to health insurance subrogation cases. Watson v. Allstate Ins. Co., 28 F.2d 942 (M.D. Pa. 1998); DiTomo, supra.
UM subrogation is allowed only upon the insurer’s showing that the sum of the insured’s recovery from the insurer and from persons legally responsible for the injury exceeds the insured’s loss. Id. The insurance policy may not renounce the right of the insured to be made whole. DeSantis v. American Mut. Liability Ins. Co., 53 Pa. D & C.2d 595 (Pa. 1969).
The Made Whole Doctrine in Pennsylvania is an equitable doctrine. DiTomo, supra; Watson, supra. When a subrogation claim arises out of a contract, equitable principles continue to apply. Valora v. Pennsylvania Employee’s Benefit Trust Fund, 939 A.2d 312 (Pa. S. Ct. 2007). However, if an insured settles his claim with the third party he is made whole as a matter of law. Associated Hosp. Service of Philadelphia v. Pustilnik, 396 A.2d 1332 (1979), vacated on other grounds, 439 A.2d 1149 (Pa. 1981). There is a line of cases in Pennsylvania which provides that when an injured party settles with the tortfeasor he waives his right to a judicial determination of his losses and conclusively establishes the settlement amount as full compensation for his damages. In those situations, it has been held that the insurance company has a right of subrogation attaching to the amount of the settlement. Illinois Auto Ins. Co. v. Braun, 421 A.2d 1074 (Pa. 1982).
In Pennsylvania, an insurer’s subrogation rights are not superior to the insured’s rights because subrogation does not arise until the insured has been made whole. DiTomo, supra. This rule of law has been sporadically applied by Pennsylvania courts to both equitable and contractual subrogation. Gallop v. Rose, 616 A.2d 1027 (Pa. Super. Ct. 1992). The Made Whole Doctrine is also applicable to statutory subrogation disputes in the absence of a legislative intent to displace the rule. City of Meadville v. Workers’ Comp. Appeal Bd., 810 A.2d 703, 706 (Pa. Commw. Ct. 2001). In implementing the Made Whole Doctrine, courts allow a subrogation recovery from the insured in the amount by which the sum received by the insured from the tortfeasor, together with the insurance payments made, exceeds the loss and expense incurred by the insured in realizing the claim against the wrongdoer. Nationwide Mut. Ins. Co. v. Butler, 28 Pa. D. & C.3d 627, 630 (Pa. Com. Pl. 1983). Pursuant to this measure, the expenses of making the recovery from the wrongdoer, including attorneys’ fees, must be taken into account in determining whether the insured has any excess recovery to which the insurer would be entitled under the doctrine of subrogation. Nationwide Mut. Ins. Co. v. Kintz, 27 Pa. D. & C.3d 164 (Pa. Com. Pl. 1983); Pustilnik, supra.
Medical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Collateral Source Rule: Common law CSR. Collateral source payments do not reduce amount recoverable from tortfeasor. Johnson v. Beane, 664 A.2d 96 (Pa. 1995). Such payments are also not admissible. Pusl v. Means, 982 A.2d 550 (Pa. Super. 2009).
Recovery OF Medical Expenses Rule: Plaintiff entitled to “reasonable value of medical expenses.” Only the amount actually paid by provider (or amount found by jury to be reasonable) is recoverable in a personal injury action. Moorhead v. Crozer Chester Medical Center, 765 A.2d 786 (Pa. 2001) was a Medicare and private insurance case. CSR not implicated because plaintiff could still recover every dollar that was “paid.” Pennsylvania makes no distinction between private insurance and Medicare/Medicaid.
Applies Only to Defendants’ Evidence: CSR applies only to defense offers of evidence, not when plaintiff wanted jury to know he was receiving Social Security, which meant he was disabled. Simmons v. Cobb, 906 A.2d 582 (Pa. Super. 2006).
Employee Leasing Laws
Neither the Pennsylvania Workers’ Compensation Statute nor Pennsylvania case law sheds any light on the issue of whether or not an employee leasing company and the client company are entitled to protection under the Exclusive Remedy Rule in Pennsylvania. The determination of who is the employer in leasing situations is addressed via common law factors involving which entity controls and directs the details of the work being performed by the employee. American Rock Mechanics, Inc. v. W.C.A.B. (Bik & Lehigh Concrete Technologies), 881 A.2d 54 (Pa. Commw. Ct. 2005).
Hospital Lien Laws
Statute: No statutory provision in Pennsylvania.
Comments: Pennsylvania is one of nine states without statewide lien laws.
OCIP/CCIP Subrogation In Workers’ Compensation Construction Cases
OCIP Law: No statute or case law specifically dealing with effect of OCIP/CCIP.
Statutory Employer Law: A contractor who subcontracts all or part of a contract is liable for workers’ compensation benefits to the employees of the subcontractor unless the subcontractor (direct employer) has secured payment of such benefits. 77 P.S. §§ 461, 462.
Comments: A statutory employer is an employer who is not a contractual employer or a common law employer, but an employer as a result of the workers’ compensation law. A statutory employer is entitled to exclusive remedy protection as a matter of law, regardless of actual payment of benefits. Peck v. Delaware Cty. Bd. of Prison Inspectors, 814 A.2d 185 (Pa. 2002).
Recovery Of Increased Workers’ Compensation Premiums By Employer
Recovery For Increased Premiums? No.
Statute/Case Law: Whirley Indus., Inc. v. Segel, 462 A.2d 800 (Pa. Super. 1983); Southland Constr., Inc. v. Greater Orlando Aviation, 860 So.2d 1031 (Fla. App.2003) (applying PA law); Erie Castings Co. v. Grinding Supply, Inc., 736 F.2d 99 (3d Cir. 1984) (applying Pennsylvania law); Canada Dry Bottling Co. v. Mertz, 400 A.2d 186 (Pa. Super. 1979); Reliance Ins. Co. v. Richmond Machine Co., 455 A.2d 686 (Pa. Super. 1983).
Rule Summary: Increased workers’ compensation premiums resulting from a third-party tortfeasor’s injuries to employees are harms that are not reasonably foreseeable or are otherwise too remote to be subject to liability.
Which Workers’ Compensation “Benefits” Can Be Subrogated?
There is very little authority or precedent in Pennsylvania describing which types of “benefits” or payments are recoverable by the workers’ compensation carrier. Section 319 provides:
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 employee…against such third party to the extent of the compensation payable under this article by the employer. 77 P.S. § 671.
The word “compensation,” as used in the above statute, includes sums expended for medical and hospital bills. Haley, to Use of Martin v. Matthews, 158 A. 645 (Pa. Super. 1932). In fact, one court has said:
The Legislature, evidently intended that, where a third person is responsible for an injury to the employee the employer, who has been subrogated to the employee’s right, is substituted, not to a portion of, but to all his rights, until he is reimbursed for whatever sums he was required to pay the employee under the Compensation Act. There appears to be no sound reason why an employer should be obliged to pay medical and hospital expenses, when he is in no way responsible for the injury, and the wrongdoer escape the liability therefor. The wrongdoer would thus profit at the expense of the employer. In an action at law, the wrongdoer would undoubtedly be liable for medical and hospital expenses––they are proper elements of damages. We are dealing with an equitable doctrine. It rests on the principle that, if one is compelled to pay money through another’s neglect, a recovery may be had. Haley, to Use of Martin v. Matthews, 158 A. 645 (Pa. Super. 1932).
The above case law suggests that the carrier should be reimbursed for any sums paid “to the employee under the Compensation Act.” However, the Haley court stated:
We are dealing with an equitable doctrine. It rests on the principle that, if one is compelled to pay money through another’s neglect, a recovery may be had.
Workers’ Compensation Subrogation Waiver Endorsements
Subrogation Statute: 77 P.S. § 671
Waiver Allowed? Yes. Winfree v. Philadelphia Electric Co., 554 A.2d 794, 796 (Pa. 1985).
Effect Of Waiver Endorsement on Carrier’s Right To Assert A Lien On Claimant’s Recovery: Subrogation rights are statutorily absolute and cannot be abrogated without a specific waiver or the insurer’s consent. Lien remains against the claimant’s recovery unless specifically waived. See Winfree, supra. However, in Fortwangler v. W.C.A.B. (Quest Diagnostics), 113 A.3d 28 (Pa. Cmmw. 2015), the court held that a subrogation lien has two distinct aspects: (1) a past accrued lien, and (2) a right of subrogation against future disability and medical benefits. Both aspects of the subrogation lien must be explicitly addressed in a Third-Party Settlement Agreement to avoid confusion and possible litigation.
Other Applicable Law: Waiver of a future credit must be specifically contracted for in addition to a waiver of subrogation lien, in order to fully waive it. Boeing Helicopters v. W.C.A.B. (Kirkwood Constr.), 952 A.2d 748 (Pa. Cmmw. 2008).
Statute of Limitations: 2 Years. 77 P.S. § 671.
Can Carrier Sue Third Party Directly: No
Right to Intervene: Yes.
Recovery from UM/UIM Benefits: Employer – Yes | Employee – No | Other Person – Yes.
Subrogation Against Medical Malpractice: Future credit only. No reimbursement of past medical or lost wages.
Subrogation Against Legal Malpractice: Yes.
Recovery Allocation/Equitable Limitations: None.
Employer Contribution/Negligence: None, first money reimbursed.
Attorney’s Fees/Costs: Pro-Rata.
Future Credit: Yes, but as to indemnity benefits only.
Auto No-Fault: Yes.
Workers’ Compensation Claims by Undocumented Employees
Statute: The statute is silent on whether “aliens” are employees, and does not touch on “illegal” or “legal” status. 77 Pa. Cons. Stat. § 22.
Case Law: Reinforced Earth Co. v. Workers’ Comp. App. Bd., 810 A.2d 99 (Pa. 2002); Mora v. W.C.A.B. (DDP Contracting Co. Inc.), 845 A.2d 950 (Pa. Commw. Ct. 2004).
Comments/Explanation/Other: Reinforced Earth Company held that the claimant, who was an illegal alien, met all the requirements of the statute and was rightly entitled to benefits. Mora held that an undocumented worker is not eligible for partial disability benefits, but they are eligible for compensation for medical treatment and total disability benefits.