The opinion of the court was delivered by: DITTER
The question in this case is whether an employer should be denied subrogation rights granted by the Workmen's Compensation laws of Pennsylvania. It arises after the settlement of a claim against third parties who allegedly were responsible for plaintiff's injuries.
Noah Curtis was driving a truck for Multipane, Inc., U.S.A., his employer. While descending a long and steep hill, the vehicle's brakes failed and it went out of control. Several people, including Curtis, were injured and one man was killed in the ensuing collisions. Three federal suits and one state action were filed to recover damages. All have been completely resolved except this one, brought by Curtis, alleging that Multipane's truck was negligently repaired and maintained by Simpson Chevrolet and Broad Motors.
After five days of trial on the issues of liability, the case was settled except as to the one matter now before the court.
During the pendency of the litigation, Curtis received Workmen's Compensation benefits from Bituminous Casualty Company, the insurance carrier for Multipane. Under Pennsylvania's Workmen's Compensation law,
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 employe . . . Any recovery against such third person in excess of the compensation theretofore paid by the employer shall be paid forthwith to the employe . . . and shall be treated as an advance payment by the employer on account of any future installments of compensation. . . . 77 P.S. § 671.
It is Curtis' theory that Multipane and Bituminous had an affirmative duty to assist him in his efforts to recover against the third parties. He maintains that Multipane and Bituminous did not take even rudimentary steps to help him, much less do their utmost.
Therefore, he asserts that on equitable principles Bituminous should not share in the recovery he obtained.
Against this argument must be weighed the plain wording of the statute. It does not give the employer a mere right to be subrogated but says that the employer "shall be subrogated." There are no exceptions. In addition, the other provisions of this section show Pennsylvania's legislature clearly intended an employer was to be repaid from a third-party recovery. First, the employer can obtain payment even though it shares responsibility with the third party for the injury. Second, the employer is entitled to the full amount of its compensation lien, even if asserting it completely exhausts the recovery against the third party. This follows from the provision that the employee is entitled to the excess of amounts previously paid by the employer. Finally, any balance of the award still remaining will be applied against future compensation benefits. The legislative mandate is clear -- the employer is to have a right to full subrogation -- and the courts have interpreted the statute accordingly. In Smith v. Yellow Cab Co., 288 Pa. 85, 89, 135 A. 858 (1927) it was held that subrogation was available against the proceeds of a settlement as well as against a jury verdict. An attempt to circumvent the act by allocating a portion of the settlement to pain and suffering was unsuccessfully attempted in Bumbarger v. Bumbarger, 190 Pa. Super. 571, 155 A. 2d 216 (1959). For the purposes of an employer's subrogation claim, it makes no difference whether payment is made under the Survival Act to the employee's estate or to his next of kin under the Death Act. In either case, subrogation is allowed for the amount paid: Skoda v. National Mines Corporation, 213 Pa. Super. 489, 492, 249 A. 2d 829 (1968).
The prevention of a double recovery by an employee is given as one reason for allowing an employer's subrogation rights: Skoda v. National Mines Corporation, supra. This is a matter of public policy. An even more important reason for affording protection to Pennsylvania employers who have paid Workmen's Compensation benefits is found in O'Neill v. United States, 450 F.2d 1012 (3rd Cir. 1971). There the question was whether a defendant could obtain indemnification from plaintiff's employer in an amount which exceeded Workmen's Compensation benefits. The Court observed that because of certain provisions in the Pennsylvania Constitution, a compulsory Workmen's Compensation Act is not permissible. Thus, the legislature enacted a voluntary system. If unlimited indemnification was required of employers, it would encourage them to reject the act because participation in and contribution to the program would not limit liability. The same reasoning would apply in the instant case. One of the inducements for taking part in the Pennsylvania Workmen's Compensation plan is provided by the grant of subrogation rights. If this right is eroded, employer participation may suffer.
Arendas is distinguishable, however, from the instant circumstances. Here there is no charge that Multipane's counsel failed to assist plaintiff's counsel during trial or deliberately withheld any information prior to trial. At most, plaintiff has listed a series of incidents which might have been managed in a way that would have made trial preparation easier. In view of the unequivocal statutory language, the interpretations of this section, and the public policy reasons enunciated, plaintiff's assertions are insufficient. There was no showing of bad faith, no dereliction of duty, and no deliberate failure to help. Equally important, there was no showing of any prejudice to plaintiff. I have reviewed the plaintiff's charges, discussed below in detail, and am convinced that neither individually nor collectively would they support the striking of Multipane's lien.
A few weeks after the accident, the truck which Curtis had been driving was sold for salvage. Before its disposition, an automobile expert retained by Multipane, Walter Van Ness Pruyn, examined the vehicle and took from it those components which he deemed relevant to possible litigation. He did not remove the brakedrums because it was his theory that a loss of hydraulic fluid had caused the brakes to fail rather than any problem with the drums. However, the brakedrums were later recovered and made available to experts for both sides. The parts he did take and his report were furnished to plaintiff's counsel and Mr. Pruyn testified extensively on plaintiff's behalf at trial.
Plaintiff now contends that the sale of the truck was adverse to his interests: first, because a metallurgist retained by plaintiff could not examine the drums before they were tested on behalf of the defendants, and second, because allegations made by Ford Motor Company about design characteristics could not be disproved. However, plaintiff's metallurgist did see the brakedrums before trial, removed portions of them, and made all tests he felt were required. It is not argued that the condition of the brakedrums had changed after the accident and prior to his analysis. So far as Ford was concerned, it is not contended the braking system in this truck was different in any material way from the systems found in all other trucks of the same model. Any one of them could have been obtained for examination, experimentation, or whatever else might have been required to contest ...