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Commonwealth Court Argument On Subrogation Issue

  • Dave Brown, Esquire
  • 06/18/2024

In April 2024, PA workers’ compensation lawyer Dave Brown of Pearson Koutcher Law participated in an oral argument in Philadelphia before a three-judge panel of the Commonwealth Court of Pennsylvania. The argument involved an issue pertaining to an important concept in workers’ compensation law – subrogation. We’ll start by describing what subrogation is and how it applies in workers’ comp. cases and then explain the specific issue that Dave argued before the Commonwealth Court.

What Is Subrogation?

Subrogation is a way for an insurance company to recoup money that it has paid out in a previous claim. Within the realm of workers’ compensation, it is the mechanism through which the employer’s insurance company can receive part of the money that you are awarded in a case against a third party which caused your work injury.

When Does Subrogation Occur?

For subrogation to arise, there must be a third-party claim — in other words, a claim by you that someone other than your employer negligently caused your work injuries. For example, suppose you drive a truck for a sanitation company and another vehicle rear-ends your truck. Because you were injured while doing your job, you are entitled to workers’ compensation benefits – money for your lost wages and payment of your medical bills. However, you could also potentially pursue a claim against the driver of the other vehicle on the basis that this person’s negligence caused your injuries. Let’s say you file both claims, and eventually you enter into a settlement of your PA workers’ comp. claim. At that point, the workers’ compensation insurance company is entitled to a subrogation lien based on the total amount of money that it paid out in your claim, which includes payment of wage loss and medical benefits. If the lawyer in your third-party cases reaches a settlement in that case for you, based on a formula provided by the PA Workers’ Compensation Act, the employer’s insurance company can “stick its hand in” and take some of this money. The rationale behind this principle is that had it not been for the negligence of the third party – the other driver in this hypothetical — you would not have been injured and the workers’ comp. insurance company would not have been required to pay out any money. Because you now have received money from this third party in the other claim, the workers’ comp. carrier should be entitled to recoup some of this money.

Dave Brown’s Commonwealth Court Case

In Dave’s Commonwealth Court case, his client, the injured worker, was employed as a police officer and was injured in a work-related motor vehicle accident. The injured worker received workers’ comp. benefits for a period of time and hired a personal injury lawyer to pursue a third-party case against the driver who caused the accident. In the process of trying to negotiate a settlement of that case, the lawyer was told by the claims adjuster for the employer that the amount of the final subrogation lien was about $14,000. The lawyer relied on that information in settling the workers’ comp. case the following month.
Several months after the third-party case settled, for the first time, the claims adjuster’s supervisor informed the personal injury lawyer that the adjuster made a mistake when calculating the amount of the subrogation lien, and the amount actually was $48,000. The supervisor demanded that the personal injury lawyer reimburse the employer based on the revised subrogation lien amount of $48,000, instead of $14,000. The lawyer refused, noting that he had relied on the original information provided by the claims adjuster when settling the injured worker’s third-party case.

Petition Filed By The Employer

The employer filed a petition, seeking a determination that the amount of the lien which it is entitled to recoup is the $48,000 figure. Pearson Koutcher Law represented the injured worker in this matter, which was assigned to Workers’ Compensation Judge Erin Young. After holding hearings and admitting deposition testimony, Judge Young found that the personal injury lawyer should have known that the lien figure was greater than the $14,000 figure provided by the claims adjuster because the lawyer acknowledged at a deposition of the injured worker that he believed, among other reasons, that while she was out of work, she received money that was paid by the workers’ compensation carrier.

Judge’s Decision Appealed

Judge Young’s Decision was appealed to the PA Workers’ Compensation Appeal Board, which affirmed. Pearson Koutcher Law, on behalf of the injured worker, then appealed to the Commonwealth Court, and after the lawyers on both sides submitted legal briefs, the Court held oral argument.

Personal Injury Lawyer Relied In Good Faith

Dave argued to the Court that the personal injury lawyer relied in good faith on explicit statements that the claims adjuster made to him regarding the amount of the subrogation lien. There was no fraud involved, and the adjuster was not under duress when making the statements.

Adjuster’s Statement Amounts To An Agreement

Dave stressed that the statements conveyed by the adjuster to the personal injury lawyer amounted to an agreement, an implied contract, between the injured worker and the employer. Furthermore, the employer, through the adjuster’s supervisor, should not be able to retract its agreement based on the mistake that was discovered several months after the settlement in the personal injury case was finalized. Dave further emphasized that if the Decisions of Judge Young and the Appeal Board stand, this could have a chilling effect on the ability of a lawyer to rely on the representations of a workers’ compensation claims adjuster while attempting to settle a third-party case when there is a subrogation lien component. The Commonwealth Court is expected to issue its Decision this summer.

Hurt At Work | Call Pearson Koutcher Law

Here’s the bottom line: If you injure yourself at work – whether you have a third-party case or not — we urge you to contact Pearson Koutcher Law. Our PA workers’ compensation lawyers as we specialize in representing injured workers. One of our experienced, highly skilled lawyers will work hard to get you the best result possible in your case – either by obtaining a favorable settlement or taking your case to trial before the Workers’ Compensation Judge and hopefully receiving a favorable decision. Please contact Pearson Koutcher Law today for a free consultation.