The issue before the Supreme Court was whether Section 319 of the Pennsylvania Workers’ Compensation Act confers on an employer or its workers’ compensation insurance carrier a right to seek reimbursement of a subrogation lien directly against a third-party tortfeasor when the claimant in the workers’ compensation matter chooses not to pursue a cause of action against the third party in question.
In 2015, the Pennsylvania Supreme Court decided the matter of Liberty Mutual Insurance v. Domtar Paper, 113 A.3d 1230 (Pa. 2015). The issue before the court was whether Section 319 of the Pennsylvania Workers’ Compensation Act confers on an employer or its workers’ compensation insurance carrier a right to seek reimbursement of a subrogation lien directly against a third-party tortfeasor when the claimant in the workers’ compensation matter chooses not to pursue a cause of action against the third party in question.
Although the court in Liberty Mutual upheld long-standing common law in refusing to allow the workers’ compensation insurance carrier to bring the case “as subrogee” of the injured worker, the 3-2 decision (the court had two vacancies at the time) was closer than it should have been. Moreover, the case was decided on technical grounds that did not speak to the main issue of whether a claimant had control over his own case and with it, the power to negotiate with a the workers’ compensation carrier to bring the third party case at all, where the lien exceeds a prospective recovery. The decision created concern in the claimant’s bar that were a subsequent, similar matter to come before the Supreme Court with the addition of two justices unfriendly to civil justice, the result might be catastrophic for the injured worker. It is conceivable that the departure of Justices Seamus McCaffery and Ronald Castille after accepting the case but before deciding it had a significant bearing on the final outcome of Liberty Mutual, as the ultimate decision, which took about two years to reach, was so limited in scope and result that it begged the question why the court took the case in the first place.
While the day has come when the Supreme Court has taken up the issue again in the recent decision of Hartford Insurance Group v. Kamara, the makeup of the court is much different than feared. Consequently, the right of the injured worker to control his own third-party case has been affirmed. Under normal circumstances, and now in perpetuity, if a subrogation lien is much larger than any prospective recovery, the injured worker can often negotiate a reduction in that lien, even to the point of agreeing to a one third split, affording the claimant/plaintiff, workers’ compensation carrier and the attorney equal shares of the proceeds of the third-party case. Should the carrier decide not to compromise the lien, an injured worker has little reason to bring the third-party case in the first instance. Were Liberty Mutual or Hartford Insurance Group, for that matter, to have been decided in favor of the insurer/employer, a carrier could have realized 100 percent of the recovery of a third-party case at the complete exclusion of the injured worker. What incentive would a carrier have had to negotiate even one penny off of an asserted lien?
A quick review of Liberty Mutual is warranted. The case stemmed from a civil action appeal to the Superior Court where the workers’ compensation carrier, Liberty Mutual, filed the case “as subrogee” of the injured worker. The trial court granted the tortfeasor’s preliminary objections, finding that according to case law, only the injured worker had a right of action against a third party tortfeasor and not the employer or its carrier. Since the injured worker had not sued the tortfeasor, did not assign his rights to the workers’ compensation carrier and was not joined or named in the carrier’s suit against the tortfeasor, the trial court ruled on the tortfeasor’s favor, negating the lawsuit for damages sustained by the injured worker.
The Superior Court affirmed the trial court’s grant of preliminary objections in favor of the tortfeasor,finding that the Section 319 right to subrogation must be asserted through an action brought in the name of the injured worker as a party plaintiff or “use plaintiff.” Specifically the court held: “the action against the third party tortfeasor must be brought by the injured employee … i.e., the employee-victim must sue, and the employer’s carrier is subrogated to the employee’s claim,” Liberty Mutual, 77 A.3d at 1288-89 (quoting Whirley Industries v. Segel, 462 A.2d 800, 802 (Pa. Super. 1983)) (emphasis in original).
The Supreme Court, for its part, concluded that existing precedent did not establish that Section 319 confers on an employer/insurer the statutory right to bring suit directly against a third-party tortfeasor where the injured worker had not sought recovery himself. The issue of whether an employer/insurer can sue directly was never previously addressed by the court. It was actually the Superior Court that had addressed the specific issue in the past and according to Liberty Mutual, had “consistently held” that an employer/insurer has no independent right to sue a tortfeasor without the injured worker’s direct involvement. However, the court relied on the hyper-technical distinction between the insurer suing as “the subrogee” of the injured worker and “in the name of” the injured worker in arriving at its conclusion.
In Hartford Insurance Group, the workers’ compensation carrier thought itself to be in the right by bringing the action “in the name of” the injured worker, which it appealed to Liberty Mutual to support the notion that it could bring the third-party case without the claimant’s involvement. However, Liberty Mutual never really supported that notion. The court there specifically declined to clarify the appropriate practice method for pursuing an action through a “use plaintiff” or even joining the injured employee in its action against the tortfeasor. The carrier’s reliance on Liberty Mutual was entirely unfounded.
The court in Hartford Insurance Group directly allowed review of whether a workers’ compensation carrier could file an action against a third party tortfeasor “on behalf of” the injured worker. While the court also allowed review of whether an insurance “workers’ compensation specialist” could sign the verification of a complaint in lieu of the plaintiff, that issue was never reached. Significantly, the court noted the amicus brief of the Pennsylvania Association for Justice which argued, inter alia, that the result is the same whether an action is brought “as subrogee” or “on behalf of” an injured worker. In fact, the court agreed: “we find it apparent that sanctioning a workers’ compensation carrier to pursue litigation of the injured employee merely by captioning the complaint as ‘on behalf of’ the employee and including a bald assertion seeking any recovery due the employee, contravenes the very jurisprudence establishing that it is the injured worker who retains the cause of action against the tortfeasor.”
While after Liberty Mutual was decided, most practitioners saw no substantive distinction in the way a third-party case is captioned when the claimant is not involved, it required a full compliment of justices to tell us, definitively. The issue presented in Liberty Mutual has, in fact, presented itself again. Thankfully for injured workers, the case did not turn on a procedural nuance this time and the rights of injured workers to control their own third party cases has been affirmed. Injured workers have the exclusive right to bring their own liability actions.