Appealed From No. A94-1580. State Agency Workmen's Compensation Appeal Board.
Before: Honorable Joseph T. Doyle, Judge, Honorable Bernard L. McGINLEY, Judge, Honorable Samuel L. Rodgers, Senior Judge.
The opinion of the court was delivered by: Rodgers
Joseph Emanuel (Claimant) petitions for review of an order of the Workmen's Compensation Appeal Board (Board) which affirmed a decision by a workers' compensation Judge (WCJ) granting the modification petition filed by Coco Brothers, Inc. (Employer). The issue before the Court is whether the WCJ erred in applying the net method, rather than the gross method, to determine Employer's subrogation rights and liabilities with respect to a third-party settlement. *fn1
On December 24, 1985, Claimant sustained a work-related injury when the scaffold on which he was working collapsed and he fell approximately fifty-six feet to the ground. Employer issued a notice of compensation payable which provided compensation for total disability at the weekly rate of $276.63. On October 12, 1990, Employer filed a petition for termination or suspension of benefits and, after Claimant filed a timely response, the case was assigned to a WCJ.
On February 23, 1993, Employer filed a modification petition, alleging that, on January 20, 1993, Claimant had amicably settled a third-party action which resulted in the payment of $725,000.00 to Claimant; Employer sought reimbursement of its subrogation lien and a credit against future benefits to which Claimant may be entitled. Claimant filed an answer in which he acknowledged Employer's right to subrogation, but averred that calculations should be made employing the gross method, as opposed to the net method suggested by Employer.
The WCJ denied Employer's petition for termination or suspension based on findings that Claimant remained totally disabled. The WCJ granted Employer's modification petition and, reasoning that Employer was entitled to choose the method of calculation to be used, applied the net method to calculate Employer's entitlement.
Claimant appealed to the Board, arguing that the WCJ committed an error of law by not utilizing the gross method of calculation. Claimant argued that there is no provision in the Act and no case law that permits employers to choose the method of calculation.
The Board observed that there is no authority, statutory or otherwise, which addresses the specific issue raised. The Board concluded that the WCJ did not commit reversible error and affirmed the WCJ's decision.
On appeal, *fn2 Claimant contends that this Court has consistently approved the gross method as the simplest and fairest method for both parties.
Subrogation under the Act
Section 319 of the Act provides:
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, his personal representative, his estate or his dependents, against such third party to the extent of the compensation payable under this article by the employer; reasonable attorney's fees and other proper disbursements incurred in obtaining a recovery or in effecting a compromise settlement shall be prorated between the employer and employe, his personal representative, his estate or his dependents. The employer shall pay that proportion of the attorney's fees and other proper disbursements that the amount of compensation paid or payable at the time of recovery or settlement bears to the total recovery or settlement. Any recovery against such third person in excess of the compensation theretofore paid by the employer shall be paid forthwith to the employe, his personal representative, his estate or his dependents, and shall be treated as an advance payment by the employer on account of any future installments of compensation.
A Bureau regulation sets forth the procedures by which the mandate of the statute is carried out:
§ 121.18 Subrogation procedure.
(a) In the event of third party recovery under section 319 of the Workers' Compensation Act (77 P.S. § 671), Third Party Settlement Agreement, Form -380, shall be executed by parties thereon.
(b) If credit is requested against future compensation payable, Supplemental Agreement, Form LIBC-337, shall also be filed with the Department of Labor and Industry indicating the amount and periodic method of pro rata reimbursement of attorney fees and expenses.