The opinion of the court was delivered by: Renee Cohn Jubelirer, Judge
Submitted: November 30, 2012
BEFORE: HONORABLE RENEE COHN JUBELIRER, Judge HONORABLE MARY HANNAH LEAVITT, Judge HONORABLE ANNE E. COVEY, Judge
OPINION BY JUDGE COHN JUBELIRER
Jason P. Glass (Claimant) petitions for review of the Order of the Workers' Compensation Appeal Board (Board) that affirmed the decision of a Workers' Compensation Judge (WCJ) granting the Petition to Review Compensation Benefits Offset (Review Petition) filed by The City of Philadelphia (Employer), which asserted its entitlement to subrogation against Claimant's third-party recovery. On appeal, Claimant argues that Employer's subrogation right should have been extinguished pursuant to Thompson v. Workers' Compensation Appeal Board (USF&G), 566 Pa. 420, 781 A.2d 1146 (2001), because Employer acted in deliberate bad faith when it did not ensure that evidence critical to Claimant's third-party action was preserved or because one of Employer's employees was derelict in her duty to assist Claimant in his third party action. Because we discern no error in granting the Review Petition, we must affirm.
On April 12, 2006, Claimant, a police officer, sustained injuries when he lost control of the motorcycle on which he was training and it fell on top of him. Employer accepted Claimant's injuries as being work related and paid Claimant Injured-On-Duty (IOD) benefits, as well as for his medical treatment. Shortly thereafter, Claimant filed a third-party tort action against Philadelphia Cycle Center (PCC), alleging that improper maintenance caused him to lose control of the motorcycle resulting in the crash and his injuries. Claimant ultimately obtained an arbitration award in the amount of $490,000 in his lawsuit against PCC on February 11, 2009. Employer filed the Review Petition on March 25, 2009, asserting that it was entitled to subrogation and its lien was $219,755.63 based on its payment of medical expenses and IOD benefits. Claimant objected to the Review Petition, claiming that Employer had acted in bad faith by allowing for the spoliation of evidence, which affected his third-party recovery and, therefore, Employer's subrogation right should be extinguished pursuant to Thompson. The matter was assigned to a WCJ, who accepted deposition and documentary evidence from both Claimant and Employer. (WCJ Decision, Findings of Fact (FOF) ¶¶ 1-5.)
Employer submitted a Report and Award from Claimant's arbitration, indicating that Claimant obtained an award in the third-party litigation in the amount of $490,000. Employer also presented a packet of information in support of its subrogation lien. The packet contained documentation of Employer's payment of medical expenses and IOD benefits in the amount of $219,755.63. (FOF ¶¶ 3, 5.)
In addition, Employer offered Claimant's engineer's (Engineer) report from the third-party action, which indicated that Claimant informed Engineer that, while he was operating the motorcycle on April 12, 2006, the motorcycle's clutch was "grabby," difficult to modulate, and the engine was cutting out while Claimant accelerated. (FOF ¶ 4b.) Engineer inspected the motorcycle on January 31, 2007 and found that its clutch lever had been replaced with a non-brand clutch lever, which, because it was not the correct lever for the motorcycle, was filed to fit into the clutch lever holder assembly, but still did not fit properly into the holder assembly. Engineer also noted that the clutch lever lacked lubrication. Additionally, Engineer noted that the motorcycle's drive chain and sprockets were worn and due for repair. Noting that the training "was made unnecessarily difficult due to excessive driveline lash, increased pull force on the clutch lever and poor engine operation," Engineer opined that the motorcycle had been improperly maintained and that this improper maintenance caused Claimant to lose control of the motorcycle and crash. (FOF ¶ 4d-e.)
Claimant offered the deposition testimony of a senior legal assistant (Legal Assistant) in the Claims Unit of Employer's Law Department (Law Department), who testified as follows. By letter dated May 3, 2006 (May 2006 Letter), Claimant's counsel (Counsel) informed Employer of the April 12, 2006 incident and Claimant's injuries, and requested that Employer direct its Police Department to refrain from altering the motorcycle, particularly the clutch mechanism, until Claimant could have the motorcycle inspected by an engineer. The May 2006 Letter also advised Employer that allowing the motorcycle to be altered prior to any inspection "would be tantamount to spoiling evidence." (May 2006 Letter at 1, R.R. at 124a.) Legal Assistant, whose duties included reading complaints and determining which of Employer's departments could have documents related to a particular complaint, received the May 2006 Letter on May 4, 2006. Legal Assistant's superior directed her to contact the Police Department to assure that the motorcycle would not be altered or modified before an inspection could be performed. Legal Assistant contacted the Police Academy, where the accident occurred, and was directed to contact the 8th police district, where the motorcycles were located. She emailed Counsel on May 5, 2006 to inform him that no inspection had been permitted because Claimant had not complied with a particular police directive requiring him to notify the Police Department of his lawsuit and indicated that, once Claimant complied with that directive, Engineer would be given access to the motorcycle. Legal Assistant indicated that she spoke with a Lieutenant in the 8th police district on May 5, 2006, who informed Legal Assistant that Engineer could not inspect the motorcycle until Claimant complied with the police directive; Legal Assistant stated that she advised Lieutenant of the request not to have the motorcycle altered until Engineer could inspect it. (FOF ¶ 6a-d.)
On May 25, 2006, Legal Assistant received a letter from Counsel, dated May 16, 2006, that satisfied the notice requirements of the police directive. Legal Assistant again contacted the Lieutenant, notified her of the May 2006 Letter, and informed her to make the motorcycle available for inspection and to make sure it had not been or would not be altered. Legal Assistant did not have any documentation to support this request or that Lieutenant complied with the request. Legal Assistant stated that, in a letter dated July 13, 2006, she informed Counsel that he had to contact a Lieutenant G., the officer who conducted the training exercise. However, in e-mails related to setting up the inspection, Legal Assistant did not advise Counsel that he had to contact Lieutenant G. to arrange for the inspection. Legal Assistant denied that, on December 21, 2006, Counsel informed Legal Assistant that the Police Department would not allow Engineer to inspect the motorcycle until Employer's Solicitor's office gave written permission. As of December 2006, Legal Assistant was unaware of any alterations made to the motorcycle, but did not make any follow up inquiries to determine whether the motorcycle had been altered. Legal Assistant also noted that she verbally communicated with a Sergeant several times regarding the motorcycle, but agreed that she did not send e-mails to any member of the Police Department regarding the request to not alter the motorcycle. Legal Assistant sent Sergeant a memorandum, dated January 18, 2007, informing him that the Law Department had agreed to allow Engineer to inspect the motorcycle. On May 17, 2007, Legal Assistant drafted another memorandum indicating that the motorcycle should not be destroyed or altered. (FOF ¶ 6d-g.)
On September 20, 2006, a repair order for the motorcycle was issued, indicating that the motorcycle's clutch lever had been replaced. Legal Assistant asserted that she was unaware of this repair, acknowledged that the motorcycle's clutch had been referenced in letters and emails regarding this matter, and that the clutch had been replaced four months prior to Engineer's inspection. Legal Assistant also acknowledged that, in a letter dated September 16, 2009, the Police Department's Special Advisor to the Commissioner informed Counsel that "no e-mails, letters, notes, telephone messages or other written communications regarding the matter exist to be provided by," among others, the Lieutenant and Sergeant. (FOF ¶ 6(h)-(i).)
Claimant also presented the depositions of the Sergeant, who is assigned to the 8th police district and controls the motorcycles in that district, and the Lieutenant, an administrative lieutenant in the 8th police district. Sergeant indicated that he was aware of Claimant's motorcycle accident on April 12, 2006, the motorcycle was returned to the 8th district, and the motorcycle was assigned to another officer between April 2006 and May 2007. Sergeant testified that any motorcycle repairs would be performed by PCC and denied seeing the May 2006 Letter from Counsel or the May 17, 2007 memorandum from Legal Assistant requesting that the motorcycle not be altered or discarded. He recalled receiving telephone calls from Legal Assistant in January 2007 regarding the inspection of the motorcycle, but did not recall any prior discussion with either Legal Assistant or the Lieutenant. Sergeant indicated that, had he been told or received something in writing about not altering the motorcycle, he would not have allowed the motorcycle's clutch lever to be replaced. (FOF ¶ 7.)
Lieutenant testified that she was aware of Claimant's April 12, 2006 injury, but that she was not directly aware of the May 2006 Letter. She stated that she recalled having one telephone conversation with a woman from Employer's Law Department, whose name she could not recall and on a date she could not recall, regarding the Law Department's decision to allow Claimant's Engineer to inspect the motorcycle. Lieutenant indicated that she told the woman that she could not authorize any outside inspection of Police property without a written subpoena or other documentation. She also testified that she probably indicated to the woman that the motorcycle had been in use since April 12, 2006. Lieutenant explained that she received nothing in writing regarding the motorcycle and denied having a discussion with anyone associated with Employer about not altering the motorcycle until after an inspection could occur. Lieutenant testified that, having not received such instructions, she did not advise Sergeant not to have the motorcycle altered before the inspection could occur. She denied that she would have indicated that an inspection was not permitted because Claimant had not complied with the police directive.*fn1 (FOF ¶ 8.)
The WCJ found Sergeant and Lieutenant more credible than Legal Assistant with regard to the communication that the motorcycle involved in the April 12, 2006 incident was not to be altered before it could be inspected. In doing so, the WCJ cited Legal Assistant's admissions that she did not make any written record of her communications with Sergeant or Lieutenant. Therefore, the WCJ found that Sergeant and Lieutenant "did not receive or issue orders that the motorcycle should not be modified." (FOF ¶ 11.) However, the WCJ found that Claimant did not establish, as required by Thompson, that Employer "undertook in deliberate bad faith to subvert a third party suit brought by" Claimant so as to extinguish Employer's subrogation lien. (FOF ¶ 12.) The WCJ determined that the testimony did not demonstrate deliberation; rather, it showed that "a series of apparent miscommunications within Employer resulted in the alteration of the motorcycle prior to its inspection." (FOF ¶ 12.) Because the WCJ found that there was no deliberate bad faith on Employer's part, he concluded that Employer was entitled to subrogation under Section 319 of the Workers' Compensation Act (Act).*fn2 (WCJ Decision, Conclusions of Law ¶ 1.)
Claimant appealed to the Board. The Board noted that there was no direct evidence of Employer's alleged deliberate bad faith and that, when relying on "circumstantial evidence and the inferences to be deduced therefrom, such evidence must establish the conclusion sought and must preponderate in favor of that conclusion so as to outweigh any other evidence and any inconsistent inferences." (Board Op. at 4 (citing Mathies Coal Co. v. Workmen's Compensation Appeal Board (Tau), 591 A.2d 351 (Pa. Cmwlth. 1991).) The Board concluded that it could "imagine any number of personal, emotional, or character flaws or weaknesses that could lead to one individual's failure to provide a needed notification to another, without requiring an 'undertak[ing] in deliberate bad faith to subvert a third party suit.'" (Board Op. at 10 (quoting Thompson, 566 Pa. at 432, 781 A.2d at 1154).) Accordingly, the Board held that ...