On February 10, 2017, a three-judge panel of the Pennsylvania Superior Court ruled in a published opinion captioned Hartford Insurance Group on Behalf of Chen v. Kamara, et al., 2017 Pa Super 31 (Feb. 10, 2017), that a workers’ compensation insurer can sue a responsible third party in the name of an injured worker to recover the workers’ compensation benefits it paid to the injured worker. This important opinion is the first appellate decision since Domtar Paper upholding the method by which a workers’ compensation insurer can pursue recovery when the injured worker is either reluctant or unwilling to pursue the claim.
Almost two years ago, the Pennsylvania Supreme Court’s pronouncement in Liberty Mutual v. Domtar Paper unintentionally gave opponents of subrogation some ammunition to challenge a workers’ compensation insurer’s attempt to recover benefits it paid to an injured worker from a responsible third party. Liberty Mut. Ins. Co. v. Domtar Paper Co., 113 A.3d 1230 (Pa. 2015). In Domtar, the Pennsylvania Supreme Court upheld the dismissal of the complaint filed by the workers’ compensation insurer ruling that it was “attempting to pursue its own subrogation claim” directly against the third party, rather than the claim of the injured party. The complaint in Domtar was dismissed because of procedural missteps, but the opinion created case law that has been a thorn in the side of subrogation professionals in Pennsylvania. However, as exemplified by the recent Superior Court opinion in Hartford v. Kamara, a careful reading of Domtar reveals that workers’ compensation subrogation remains viable for insurers in Pennsylvania so long as specific procedural mandates are followed.
The Supreme Court of Pennsylvania in Domtar found against the workers’ compensation insurer because of three words: “as Subrogee of.” In the caption of the complaint, the workers’ compensation insurer declared that it was suing Domtar Paper “as Subrogee of” the injured worker. The Court held 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 Mut. Ins. Co. v. Domtar Paper Co., 113 A.3d 1230, 1240 (Pa. 2015). The Court interpreted the plaintiff’s complaint in Domtar as being a direct claim by the workers’ compensation insurer against the third-party as opposed to acting on behalf of the injured employee.
Although the Domtar opinion created a nuisance for insurers and employers pursuing subrogation rights, primarily because of the widespread misunderstanding of Domtar’s breadth, it is important to understand that the Supreme Court never foreclosed a workers’ compensation insurer’s independent right to pursue a recovery in Pennsylvania. Rather, Domtar merely restates previously settled law that insurers or employers with a subrogation interest can bring a third-party claim on behalf of the injured employee. See e.g., Reliance Ins. Co. v. Richmond Mach. Co., 455 A.2d 686, 690 (Pa. Super. 1983). (See also, Motz v. Sherwood Bros., 116 Pa. Super 231, 176 A. 842, 843 (1935). Accordingly, if an insurer or employer properly bring a lawsuit on behalf of the injured employee, such lawsuit will not be barred by this precedent. The Supreme Court’s ultimate decision in Domtar to dismiss the Complaint on procedural grounds has provided some fodder for defense attorneys and liability adjusters alike who have used it to refuse settlement discussions with insurers, and either block or stall litigation. However, courts are now clearly articulating that the Domtar decision does not bar a workers’ compensation recovery when such lawsuits are properly filed.
In Hartford Insurance Group on Behalf of Chen v. Kamara, the Superior Court ruled that the workers’ compensation insurer correctly followed the procedures set forth in Domtar in a subrogation action the insurer filed to recover medical and wage benefits paid to a woman who was struck by a vehicle on a rental-car lot. The Court vacated the trial court’s decision to dismiss Hartford Insurance Group’s complaint, holding that, “[i]n the case at bar, the [workers’ compensation insurer] followed the above precedent and instituted suit against the Defendants as “The Hartford Insurance Group on behalf of” the injured employee, Chunli Chen. Within the complaint, the [workers’ compensation insurer] seeks to establish the liability of the third-party tortfeasors to Chen-and the [workers’ compensation insurer] seeks recovery in the full amount to which Chen is entitled due to the Defendants’ alleged negligence.” The Hartford Ins. Grp. on Behalf of Chen v. Kamara, 2017 PA Super 31 (Feb. 10, 2017). The Court recognized that the insurance company properly brought the claim on behalf of the injured employee and dismissed arguments by opposing counsel that Domtar barred all workers’ compensation subrogation recoveries when the injured party does not bring the lawsuit.
When pursuing a workers’ compensation subrogation recovery, it is important to rely on a partner that understands the nuances of this ever-changing and often-confusing area of law. A few misused words can mean the difference between a successful recovery, or dismissal of the complaint. If you have any questions about the implications of this important case, please contact John M. Popilock at PopilockJ@stutmanstaging.wpengine.com, or 215-283-1177 Ext. 121.