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ROLLINS OUTDOOR ADVERTISING AND AMERICAN AND FOREIGN INSURANCE COMPANY v. WORKMEN'S COMPENSATION APPEAL BOARD AND JOSEPH MAAS (02/06/85)

decided: February 6, 1985.

ROLLINS OUTDOOR ADVERTISING AND AMERICAN AND FOREIGN INSURANCE COMPANY, APPELLANTS,
v.
WORKMEN'S COMPENSATION APPEAL BOARD AND JOSEPH MAAS, APPELLEES



NO. 72 E.D. Appeal Docket, 1984, Appeal by Allowance from the Order of the Commonwealth Court of Pennsylvania Dated November 21, 1983, at Docket No. 915 C.D. 1982, 78 Pa. Commonwealth Ct. 437, Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ. Larsen, J., files a concurring and dissenting opinion in which Papadakos, J., joins. Nix, C.j., did not participate in the consideration or decision of this case.

Author: Flaherty

[ 506 Pa. Page 594]

OPINION OF THE COURT

We granted the petition for allowance of appeal of an employer and its insurance carrier under the Pennsylvania Workmen's Compensation Act, Act of June 2, 1915, P.L. 736, art. 1, § 101, et seq., as amended, 77 P.S. § 1, et seq. (hereinafter "the Act"), to determine the relative rights and liabilities of an employer and a Workmen's Compensation claimant (1) under an illegal subrogation agreement, and (2) for attorney's fees in connection with (a) successful prosecution of a third-party tort action and (b) subsequent proceedings

[ 506 Pa. Page 595]

    under the Act. This matter has been considered twice by the referee, twice on appeal to the Workmen's Compensation Appeal Board and once by Commonwealth Court. 78 Pa. Commw. 437, 467 A.2d 1191. Curiously, despite this seemingly inordinate amount of litigation, facts remain in dispute. Resolution of most of the issues presented hinges on ascertainment of the basic amounts of money involved and computations based upon those amounts. As will be seen infra, nearly every dollar amount in the case is still disputed. Indeed, the record is devoid of testimony and stipulations regarding the figures in issue. All of this leads us to question the quality of the advocacy below. Because resolution of the issues depends upon determination of the exact dollar figures, remand is inescapable. Nevertheless, for the sake of judicial economy, we will review the legal issues, using where we can the figures provided by the parties for illustrative purposes only. In addition, the evolution of the orders entered below is so complicated and fraught with misapprehensions and misapplications of the pertinent statutes that we will not even attempt to summarize here all the differences in the various orders. To do so would surely mire the reader in confusion and contempt for the appellate process. Applicable accounts of the evolution of the issues will, thus, be reserved for the discussion of those issues.

Appellee Joseph Maas was injured in a work-related accident on April 20, 1967, resulting in his total disability. Maas and his employer, Rollins Outdoor Advertising, appellant herein, entered into a compensation agreement that Maas would receive compensation in the amount of $52.50 per week. At that time, Maas was represented by Thomas F. McDevitt, Esq. Subsequently, on December 24, 1973, in an action against the third-party tortfeasors, Maas received a settlement of $67,000 for injuries sustained in the work-related accident. Maas entered into an agreement with employer's insurance carrier, Royal Globe Insurance Co.,*fn1

[ 506 Pa. Page 596]

    whereby Royal Globe agreed to accept $10,000 in full settlement of its accrued subrogation lien of $27,003.53*fn2 in return for Maas' agreement to waive any future compensation payable under the Act. Both parties to this agreement were represented by counsel. Maas' counsel at this time was his attorney in the third-party action, Martin M. Krimsky, Esq. In February of 1975, appellants filed a termination petition alleging that Maas was no longer totally disabled as of January 29, 1974, and that Maas had received a substantial third-party settlement as a result of the accident causing his disability. Maas then employed his original counsel, Mr. McDevitt, who successfully defended the termination petition.

I. ACCRUED SUBROGATION LIEN

An employer who pays compensation is subrogated to the right of the employe against a third-party tortfeasor. Section 319 of the Act provides, in pertinent part, as follows:

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 . . . against such third party to the extent of the compensation payable under this article by the employer . . . . 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 instalments of compensation.

77 P.S. § 671 (Supp. 1984-1985). Thus, the compensation paid by the employer to the date of the third-party recovery constitutes a claim against the recovery, payable immediately upon recovery to the employer. Any recovery in excess

[ 506 Pa. Page 597]

    of the compensation paid to the date of the recovery constitutes an advance of future compensation payable. Assuming, arguendo, Maas had actually received $27,003.53 in compensation benefits, then appellants had a claim for subrogation for the entire amount of $27,003.53.

Appellants agreed to accept $10,000 in full settlement of their accrued subrogation interest in return for a promise that Maas would forego his right to any future compensation benefits. This agreement was illegal under the terms of Section 407 of the Act. That section provides in relevant part:

[A]ny agreement made . . . permitting a commutation of payments contrary to the provisions of this act, or varying the amount to be paid or the period during which compensation shall be payable as provided in this act, shall be wholly null and void.

77 P.S. § 731 (Supp. 1984-1985). (Emphasis added.) This provision clearly announces the public policy of this Commonwealth to protect the interests of compensation claimants, and there seems to be no disagreement either among the parties to the agreement or among the lower courts that Maas' waiver of his right to future compensation payments was illegal and unenforceable.

All the lower courts agree that Maas is entitled to reinstatement of his compensation benefits as long as his disability continues. Appellants argue that, as the statutory provision declares the agreement terminating compensation benefits to be "wholly null and void," the entire agreement is avoided with the result that appellants are entitled to subrogation for the unreimbursed $17,003.53, this amount being the difference between the total compensation paid prior to the recovery in the third party action, $27,003.53, and the $10,000 amount they actually received from Maas.*fn3 We agree.*fn4

[ 506 Pa. Page 598]

In Bair v. Susquehanna Collieries Co., 335 Pa. 266, 6 A.2d 779 (1939), this Court considered the applicability of Section 407 to an agreement where an employe accepted compensation in an amount different from the amount prescribed under the Act in return for his employer's promise to employ him as long as he was able to work. When the employer discharged the employe without cause, this Court refused to award the employe damages in assumpsit. The employe argued that the contract should be enforced on the ground the statutory prohibition was enacted for the employe's sole benefit. We expressly rejected this argument, holding, instead, that the agreement was wholly null and void and, thus, void for all purposes. Thus, it is of no import that the provision sought to be avoided benefits the employe.

When construing statutes, we are guided by the admonitions of the General Assembly that words and phrases be construed according to their common and approved usage, 1 Pa.C.S.A. § 1903(a), and that, when the words of a statute are clear and free from all ambiguity, the letter of the statute is not to be disregarded under the pretext of pursuing its spirit, 1 Pa.C.S.A. § 1921(b). The intent of the General Assembly, as stated in Section 407, is clear: agreements which vary the amount or time for payment of compensation benefits are "wholly null and void" and, thus, unenforceable as to all the provisions of the agreement and as to ...


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