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Stermel v. Workers' Compensation Appeal Board (City of Philadelphia)

Commonwealth Court of Pennsylvania

November 13, 2014

James Stermel, Petitioner
v.
Workers' Compensation Appeal Board (City of Philadelphia), Respondent

Argued, May 13, 2014

Appealed from No. A10-0226. State Agency: Workers' Compensation Appeal Board.

Michael N. Borish, Philadelphia, for petitioner.

Joseph P. Turchi, Philadelphia, for respondent.

BEFORE: HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE ANNE E. COVEY, Judge.

OPINION

Page 877

LEAVITT,  JUDGE

James Stermel (Claimant) petitions for review of an adjudication of the Workers' Compensation Appeal Board (Board) holding that the City of Philadelphia (Employer) was entitled to recover a portion of the Heart and Lung benefits it paid Claimant from Claimant's third party tort claim settlement. The Workers' Compensation Judge (WCJ) had granted Employer's subrogation request on the basis of a holding from this Court that Heart and Lung benefits were subject to subrogation by the employer. After the WCJ issued her decision, the Pennsylvania Supreme Court reversed this Court's holding. The Board acknowledged this development in the case law. Nevertheless, the Board determined that because part of the Heart and Lung benefits Employer paid were actually workers' compensation benefits, they could be recovered from a claimant's third party settlement. Concluding that the Board erred, we reverse.

Applicable Law

We begin with a review of the three statutes that govern this appeal. They are: the Workers' Compensation Act, the Heart and Lung Act and the Motor Vehicle Financial Responsibility Law.

The Workers' Compensation Act[1] provides compensation to employees who are injured at work to cover their medical bills and lost wages. Where a work injury prevents an employee from doing his pre-injury job, he is entitled to total disability benefits in the amount of two-thirds of his pre-injury wages. Section 306(a) of the Workers' Compensation Act; [2] Vista International Hotel v. Workmen's Compensation Appeal Board (Daniels), 560 Pa. 12, 742 A.2d 649, 654 (Pa. 1999). All employers, public and private, are subject to the requirements of the Workers' Compensation Act.

The act commonly known as the Heart and Lung Act,[3] provides police officers and other public safety employees, who are temporarily unable to perform their duties because of a work injury, their full salary. The more favorable wage loss benefit in the Heart and Lung Act enables public employers to " attract employees to and keep them in the essential and dangerous jobs." McWreath v. Department of Public Welfare, 26 A.3d 1251, 1255 (Pa. Cmwlth. 2011). Public safety employees are also entitled to benefits under the Workers' Compensation Act. However, any workers' compensation disability compensation received by the public safety employee collecting Heart and Lung benefits " must be turned over to [the public employer] ... and paid into the treasury thereof." Section 1(a) of the Heart and Lung Act.[4] Self-insured

Page 878

public employers that pay Heart and Lung benefits do not also make workers' compensation payments because they would simply be returned. Wisniewski v. Workmen's Compensation Appeal Board (City of Pittsburgh), 153 Pa.Cmwlth. 403, 621 A.2d 1111, 1113 (Pa. Cmwlth. 1993). Nevertheless, self-insured employers paying Heart and Lung benefits issue a notice of compensation payable to acknowledge the work injury. City of Philadelphia v. Workers' Compensation Appeal Board (Ford-Tilghman), 996 A.2d 569, 573 (Pa. Cmwlth. 2010).

Where a compensable work injury has been caused by a third party, Section 319 of the Workers' Compensation Act gives the employer a right of subrogation against the employee's tort recovery.[5] The Heart and Lung Act contains no such provision, but it has been construed as giving the employer the right to subrogate. Fulmer v. Pennsylvania State Police, 167 Pa.Cmwlth. 60, 647 A.2d 616, 619 (Pa. Cmwlth. 1994). The policy behind subrogation is threefold:

First, it prevents double recovery for the same injury by the claimant. Second, it prevents the employer from having to make compensation payments which resulted from the negligence of a third party. Finally, it prevents a third party from escaping liability for his negligence.

Murphy v. Workers' Compensation Appeal Board (City of Philadelphia), 871 A.2d 312, 317 (Pa. Cmwlth. 2005).

In 1984, the legislature enacted the Motor Vehicle Financial Responsibility Law, 75 Pa. C.S. § § 1701-1799.7. In doing so, the legislature abolished the employer's ability under Section 319 of the Workers' Compensation Act to subrogate its compensation payments against a claimant's motor vehicle tort recovery. Specifically, Section 1720 of the Motor Vehicle Financial Responsibility Law states as follows:

In actions arising out of the maintenance or use of a motor vehicle, there shall be no right of subrogation or reimbursement from a claimant's tort recovery with respect to workers' compensation benefits, benefits available under section 1711 (relating to required benefits), 1712 (relating to availability of benefits) or 1715 (relating to availability of adequate limits) or benefits paid or payable by a program, group contract or other arrangement whether primary or excess under section 1719 (relating to coordination of benefits).

75 Pa. C.S. § 1720 (emphasis added). The language " benefits paid or payable by a program, group contract or other arrangement whether primary or excess" was added to Section 1720 in a 1990 amendment.

Page 879

Act of February 7, 1990, P.L. 11. It replaced language that read " benefits in lieu thereof paid or payable." Act of February 12, 1984, P.L. 26. This Court has interpreted both versions of Section 1720 to designate Heart and Lung benefits as a type of benefit not eligible for subrogation where the injury arises from a motor vehicle accident. Fulmer, 647 A.2d at 618-19.

Section 1720's exclusion of workers' compensation and Heart and Lung benefits from subrogation is explained by Section 1722 of the Motor Vehicle Financial Responsibility Law, which prohibits a plaintiff from recovering from the third party tortfeasor lost wages covered by workers' compensation or Heart and Lung benefits. Specifically, Section 1722 states as follows:

In any action for damages against a tortfeasor, or in any uninsured or underinsured motorist proceeding, arising out of the maintenance or use of a motor vehicle, a person who is eligible to receive benefits under the coverages set forth in this subchapter, or workers' compensation, or any program, group contract or other arrangement for payment of benefits as defined in section 1719 (relating to coordination of benefits) shall be precluded from recovering the amount of benefits paid or payable under this subchapter, or workers' compensation, or any program, group contract or other arrangement for payment of benefits as defined in section 1719.

75 Pa. C.S. § 1722 (emphasis added). Thus, as of 1984, a plaintiff injured in a motor vehicle accident could not include workers' compensation or Heart and Lung benefits as an item of damages in his tort action. Our Supreme Court has explained the purpose behind Section 1722 as follows:

Facially, Section 1722 reflects the Legislature's intent to shift a substantial share of the liability for injuries...from automobile insurance carriers to collateral source providers (many of which previously held subrogation interests), ...

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