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decided: May 30, 1986.


Appeal from the Order of the Workmen's Compensation Appeal Board in the case of Commercial Union Insurance Company v. Commonwealth of Pennsylvania, Bureau of Workers' Compensation, No. A-82424.


Wanda Whare, Assistant Counsel, with her, Vatche Kaloustian, Assistant Counsel, for petitioner.

Martin J. Fallon, Jr., Swartz, Campbell & Detweiler, for respondents.

Judges MacPhail and Doyle, and Senior Judge Barbieri, sitting as a panel of three. Opinion by Senior Judge Barbieri. Concurring Opinion by Judge MacPhail.

Author: Barbieri

[ 97 Pa. Commw. Page 521]

Before this Court is the Department of Labor and Industry of the Commonwealth of Pennsylvania in its capacity as custodian of the Workmen's Compensation Supersedeas Fund (Fund) under Section 443 of The Pennsylvania Workmen's Compensation Act, (Act),*fn1 seeking review of an order of the Workmen's Compensation Appeal Board (Board). The order reversed a referee's denial of reimbursement from the Fund for compensation allegedly overpaid by Commercial Union Insurance Company, Respondent, a workmen's compensation insurer of Fox Warehousing, employer of Gary Palmer, Claimant.

[ 97 Pa. Commw. Page 522]

Gary Palmer was paid workmen's compensation benefits at the rate of $171.00 for low back injuries sustained on October 20, 1975 in the course of his employment with Fox Warehousing. The Insurer petitioned on October 18, 1978 for a suspension of benefits on the ground that

Claimant recovered from injury of October 20, 1975 to the extent that by May 2, 1978 he was able to return to employment that has been determined to be available, and therefore defendant seeks suspension of compensation benefits designating instant petition as request for supersedeas.

Claimant filed answer under date of October 30, 1978, denying the Insurer's allegations as follows:

Claimant has not recovered from his injury of October 20, 1975 to the extent that he has been unable to return to any available employment.

In hearings held on Insurer's petition and the Claimant's answer thereto, it was established that Claimant had suffered a disc herniation, demonstrated by myelogram, as "almost complete block at the L5-6 area."*fn2 Surgery on December 5, 1975 was unsuccessful in that Claimant remained disabled for all except light duties.*fn3 The record establishes that such light work was unavailable to Claimant who testified to twenty-three attempts at securing such light work without success.

Supersedeas requested in the petition of October 18, 1978 was denied and at a referee's hearing on April 23, 1979 a renewed request for supersedeas was made,

[ 97 Pa. Commw. Page 523]

    but at a subsequent hearing on September 24, 1979, supersedeas was again denied. It was the hearing of September 24, 1979 at which the Claimant's incapacity to obtain available employment in keeping with his disability was recorded.*fn4

The instant controversy arose out of the circumstances that Claimant, having settled with a third party tortfeasor for $83,000.00, made an additional settlement with Insurer of its claim for $36,765.00, representing compensation benefits paid by it to Claimant, whereby Insurer agreed to accept out of the third party recovery only the sum of $7,500.00, but obtained an agreement from Claimant in the form of a stipulation, dated February 28, 1980, which contained the following:

3. It is now agreed between the parties that as of May 2, 1978, the Claimant was physically capable of returning to existing and available employment at wages equal to or in excess of his average weekly wage on the date of injury.

As previously noted, of course, this stipulation of facts is not supported by the record. Nevertheless, pursuant to the stipulation, the referee adopted certain of the assertions therein as his own Findings of Facts, concluding that "Claimant was able to return to existing and available employment effective May 2, 1978. . .," and granting Defendant's Petition for Suspension as of that date.

When the instant Petition for Reimbursement From the Supersedeas Fund came before the referee, in decision dated October 16, 1980, he made the following "Finding of Fact:" "Claimant received a Third Party Settlement in regards to the work-related injury and Defendant

[ 97 Pa. Commw. Page 524]

    waived its Right to Subrogation." He entered the following conclusion of law:

The Applicant in this matter waived its Right to any Subrogation of Claimant's Third Party Action; accordingly, Applicant shall not now seek reimbursement for monies paid to the Claimant from the Commonwealth, when in fact Applicant should have received any over-payment from Claimant's Third Party Settlement. Applicant's request shall be denied.

The referee's denial of reimbursement was appealed to the Board which remanded on the basis that the "Finding" above-quoted was insufficient for the Board's review, whereupon the referee filed more extensive findings including the following:

2. Thereafter, on February 28, 1980, a Stipulation of Fact agreed upon by respective counsel and with the express consent and approval of the Claimant was submitted to this Referee. In accordance with this Stipulation of Fact the Referee incorporated same into his decision and order dated April 28, 1980, granting Defendant's Petition for Suspension as of May 2, 1978.

3. During the course of the Workmen's Compensation litigation, Claimant had initiated a Third Party Action and said action was concluded by way of a settlement between the parties in that litigation. The Defendant/Employer Insurance Carrier waived its rights to any Subrogation Lien it may have had against Claimant's Third Party Settlement.

4. Defendant now seeks to recover those sums of money from the Commonwealth as conservator of the Supersedeas Reimbursement Fund.

[ 97 Pa. Commw. Page 525]

In again denying reimbursement, the referee made the following conclusion of law:

The Applicant/Insurer in this matter waived its Right to any Subrogation Lien of Claimant's Third Party Settlement; Applicant now seeks reimbursement of said monies paid to the Claimant from the Commonwealth of Pennsylvania in their roll [sic] as conservator of the Workmen's Compensation Supersedeas Fund. Applicant's waiver of their Right to Subrogation of said Third Party Action Settlement, acts as an estoppel to any claim against the Commonwealth of Pennsylvania, since said Subrogation was the Applicant's primary remedy.

On appeal by Insurer, the Board reversed, stating:

There is no precedent for the Referee's finding that reimbursement for excess compensation could be recovered through a compensation lien. Therefore, the Referee made an error of law in concluding that acceptance of a compensation lien waives the right to recover from the supersedeas fund for reimbursement of excess compensation.

On this appeal to us, the Fund contends that the Board erred in its order and that the Insurer does not have the right to reimbursement from the Supersedeas Fund compensation that was subject to the Insurer's right to subrogation under Section 319*fn5 of The Pennsylvania Workmen's Compensation Act. Pursuant to this major contention, the Fund argues that (1) the statutory scheme requires an insurer to recover from a liable third party, if available, rather than from the Supersedeas Fund; (2) that the insurer has executed with the Claimant an accord and satisfaction which bars it from

[ 97 Pa. Commw. Page 526]

    seeking reimbursement from the Fund for money not collected from the Claimant; (3) the insurer waived its statutory right to recover from the Supersedeas Fund; and (4) the insurer did not follow the regulatory requirements where a settlement is made with a third party and so is disqualified from receiving reimbursement from the Fund.

While there is some apparent merit in each of the four arguments by the Fund against the claimed reimbursement,*fn6 we note at the outset that the Insurer, Respondent herein, sought and obtained from the Board an order enforcing its claim against the Fund based upon an agreement to which the Fund was not a party. Indeed, the Insurer has conceded in its supplemental brief, citing Guzik v. Laurel Ridge Construction Company, 196 Pa. Superior Ct. 586, 176 A.2d 183 (1961), that the stipulation of the parties in this case is merely an agreement, with no formal judiciary effect such as

[ 97 Pa. Commw. Page 527]

    in Section 443(b) that "[t]he department shall be charged with the maintenance and conservation of this fund." Obviously, the Fund cannot meet that legislatively-imposed responsibility if it must pay out on claims based upon agreements to which it is not a party and clearly such an agreement can have no res judicata effect simply because it forms the basis for a referee's approval in the form of a decision. Spears. When an agreement is null and void between actually participating parties, Rollins, Spears, it certainly cannot be more valid as to one, the Fund, who is not even a party to it.*fn8

[ 97 Pa. Commw. Page 529]

We conclude that at the very least the Department as conservator of the Fund is entitled as the basis for reimbursement to have an arms length or adversary type determination, rather than agreement with or without a referee's approval, on which the Insurer bases its claim, that the "compensation was not, in fact, payable."*fn9

Accordingly, we hold that there was no determination as required to validate a claim against the Fund, but only an agreement on which to base the claim; that the Department was not a party to the agreement or on notice, either directly or by compliance with its regulations, 34 Pa. Code ยง 121.18; and, in any event, whether the Insurer by the settlement agreement to which the Fund was not a party "waived" any claim against the Fund, as the referee ruled, or simply accepted $7,500.00 in satisfaction of its claim for $36,765.00 which latter sum included the $10,308.91 claimed from the Fund, see Meehan v. Philadelphia, 184 Pa. Superior Ct. 659, 136 A.2d 178 (1957), no valid claim was presented under Section 443(a) of the Act. Accordingly, we will reverse the Board's order and reinstate the referee's denial of reimbursement.


Now, May 30, 1986, the order of the Workmen's Compensation Appeal Board, as of No. A-82424, dated July 14, 1983, is reversed and the referee's order, dated September 24, 1981, is reinstated.


Reversed. After Reconsideration, Prior Order Affirmed.

Concurring Opinion by Judge MacPhail:

I concur with the result reached by the majority opinion solely because I believe that the agreement

[ 97 Pa. Commw. Page 530]

    reached between the Insurer and the Claimant in this case was null and void under Section 407 of the Act for the reasons stated by the majority.

I do not agree with the majority opinion that an agreement between an insurer and a claimant, which is otherwise valid, is rendered invalid for reimbursement purposes because the Supersedeas Fund was not a party to such agreement. If the Supersedeas Fund is or may be subject to abuse by collusive agreements, the remedy should be provided by the Legislature, not this Court.

I further believe that it is unnecessary for us to address this issue in the case sub judice.


Now, September 29, 1986, having previously granted reconsideration, we hereby reaffirm our prior opinion and Order filed May 30, 1986.

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