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Kalmanowicz v. Workers' Compensation Appeal Board

Commonwealth Court of Pennsylvania

July 7, 2017

Anthony Kalmanowicz, Petitioner
v.
Workers' Compensation Appeal Board (Eastern Industries, Inc.), Respondent

          Submitted: March 17, 2017

          BEFORE: HONORABLE P. KEVIN BROBSON, Judge HONORABLE ANNE E. COVEY, Judge HONORABLE JOSEPH M. COSGROVE, Judge

          P. KEVIN BROBSON, Judge

         Petitioner Anthony Kalmanowicz (Claimant) petitions for review of an order of the Workers' Compensation Appeal Board (Board). The Board affirmed the decision of Workers' Compensation Judge Howard Spizer (WCJ), concluding that Eastern Industries, Inc. (Employer) is entitled to subrogation of Claimant's workers' compensation benefits. We now affirm.

         On June 1, 2009, during the course of his employment as a truck driver for Employer, Claimant was injured in a motor vehicle accident, resulting in a chest wall contusion, a wrist contusion, and post-traumatic stress disorder (PTSD). Claimant filed a claim petition on April 26, 2010, which was assigned to Workers' Compensation Judge Patrick J. Cummings (WCJ Cummings). On or around April 27, 2011, Claimant entered into a settlement agreement with a third-party involved in the June 1, 2009 motor vehicle accident in the amount of $15, 000.00, with a net recovery (after attorneys' fees and costs) of $9, 498.25. On October 11, 2011, after holding a hearing and receiving briefs from the parties, WCJ Cummings granted Claimant's claim petition, awarding benefits for the injuries, including PTSD, sustained during the June 1, 2009 accident. The October 11, 2011 decision and order also required Employer to pay Claimant's reasonable and necessary medical expenses. (Reproduced Record (R.R.) at 104a.)[1]

         On June 13, 2012, Employer filed a petition to modify or suspend Claimant's benefits (Suspension Petition), alleging that Claimant had failed to reimburse Employer a subrogation lien as required by Section 319 of the Workers' Compensation Act.[2] By opinion and order circulated on June 10, 2013, the WCJ concluded that, at the time of Claimant's settlement of the third-party claim, Employer had not sought subrogation or accepted Claimant's work injuries. Thus, the WCJ held that there were no funds available to Employer for subrogation and denied Employer's Suspension Petition. Employer appealed the June 10, 2013 order to the Board.

         By opinion and order dated September 10, 2015, the Board reversed, concluding that Section 319 of the Act granted Employer an absolute right to subrogation, which could only be abrogated by consent. The Board explained that there was "no indication that [Employer] sought to relinquish or waive its right to subrogation and, to the contrary, it clearly argued for subrogation." (R.R. at 60a.) Accordingly, the Board reversed the order of the WCJ and remanded for further proceedings to take evidence and make findings on Employer's entitlement to subrogation.

         On remand, by order and opinion dated May 13, 2016, the WCJ disposed of the matter by adopting and incorporating by reference a stipulation of facts agreed to by the parties. In pertinent part, the parties' stipulation provided that "the subrogation amount being sought by [Employer] equals $9, 498.25. . . . Claimant agrees [Employer] is entitled to take a credit of $65.00 per week against the Claimant's ongoing receipt of indemnity benefits until such time that the $9, 498.25 subrogation lien is paid in full." (R.R. at 84a.) The stipulation also provided that "nothing in this [s]tipulation of [f]acts will prevent either party from filing an appeal from [the WCJ's order dated May 13, 2016]." (Id.) Thus, the WCJ concluded that Claimant was entitled to workers' compensation benefits subject to deductions as set forth in the parties' stipulation of facts. Claimant appealed from the WCJ's May 13, 2016 order.

         On appeal to the Board, Claimant argued that Employer was not entitled to subrogation because Employer was contesting Claimant's claim petition at the time the third-party settlement funds were distributed. By order and opinion dated October 5, 2016, the Board affirmed the WCJ's order, concluding that it had previously addressed the issue raised by Claimant in its September 10, 2015 opinion and order. The Board also noted that Claimant had followed proper procedure to preserve his claim for further appellate review. Claimant subsequently filed the instant petition for review, asserting this claim of error by the Board. [3]

         In workers' compensation matters, subrogation serves several goals: (1) it prevents a claimant's double recovery for the same injury; (2) it protects an employer from incurring liability for the negligence of a third party; and (3) it prevents a third party from evading liability for his negligent conduct. Dale Mfg. Co. v. Bressi, 421 A.2d 653, 654 (Pa. 1980). Section 319 of the Act provides that an employer is entitled to recover its expenses when a third party causes the work injury "in whole or in part." We have held that "subrogation is automatic and by its terms, admits no express exceptions, equitable or otherwise." Serrano v. Workers' Comp. Appeal Bd. (Ametek, Inc.), 154 A.3d 445, 450 (Pa. Cmwlth. 2017). An employer bears the burden to establish its right to subrogation by demonstrating "that it was compelled to make payments due to the negligence of a third party and that the fund against which the employer seeks subrogation was for the same injury for which the employer is liable under the Act." Young v. Workers' Comp. Appeal Bd. (Chubb Corp.), 88 A.3d 295, 302 (Pa. Cmwlth.), appeal denied, 97 A.3d 746 (Pa. 2014).

         Claimant does not suggest that Employer failed to meet the first prong of the test set forth in Young by failing to demonstrate that it was compelled to make payments due to the negligence of a third party. Claimant argued before the Board that because the third-party settlement funds were distributed prior to Employer accepting Claimant's work-related injury, there was no "fund against which [E]mployer [may] seek[] subrogation, " but Claimant does not raise this argument on appeal to this Court. See Young, 88 A.3d at 302. Instead, Claimant contends that Employer effectively waived its right to subrogation by contesting Claimant's claim petition. We disagree.

         There are very narrow circumstances in which a court may find that an employer waived its right to subrogation under the Act. An employer may agree via contract to waive its right to subrogation of accrued liens as well as future third-party settlements. Fortwangler v. Workers' Comp. Appeal Bd. (Quest Diagnostics), 113 A.3d 28, 35 (Pa. Cmwlth. 2015). Such a contract, however, must expressly waive the right to subrogation. Id. at 36 (concluding that settlement contract did not include waiver of future subrogation rights because such rights were not expressly provided for in contract). We have held that a party's failure to exercise "due diligence" in pursuing a claim-i.e. failing to raise a claim for subrogation until fourteen months after a claimant settled his or her claim-may constitute waiver of the right to subrogation. Independence Blue Cross v. Workers' Comp. Appeal Bd. (Frankford Hosp.), 820 A.2d 868, 872 (Pa. Cmwlth. 2003). Absent bad faith or "dereliction of duty, " we have never concluded that an employer has waived its right to subrogation under the Act without an express agreement to waive that right. Glass v. Workers' Comp. Appeal Bd. (City of Philadelphia), 61 A.3d 318, 326 (Pa. Cmwlth. 2013), (quoting Thompson v. Workers' Comp. Appeal Bd. (USF & G), 781 A.2d 1146, 1154 (Pa. 2001)).

         Claimant cites no precedent to support his argument that an employer consents to forego subrogation by contesting a claim petition. Instead, Claimant asserts that he and others similarly situated would be "held hostage with regard to the settlement and distribution of third[-]party claims when their employer refuses to accept a work[-]related injury claim." (Claimant's br. at 10.) Claimant develops no argument other than his bald assertion that an employer may not recover a subrogation lien if a third party settles the claim prior to an employer accepting liability for the asserted injury. To the contrary, such a conclusion would hold an employer "hostage" by forcing them to accept any injury alleged by a claimant when a third party is involved in the incident. Any employer failing to accept a claim would expose itself to the possibility that a Claimant may protect a third-party settlement from subrogation by settling the third-party claim while the employer contests the claim petition. Furthermore, Employer was well within its rights to contest Claimant's claim petition and was under no obligation to accept the work-relatedness of any injury Claimant sustained in the June 1, 2009 motor vehicle accident.[4]

         In the instant case, we discern no evidence that could support a conclusion that Employer acted in bad faith or failed to exercise due diligence in enforcing its subrogation rights, and we decline to expand our definition of conduct by which an employer may implicitly waive its absolute right to subrogation. See Thompson, 781 A.2d at 1151. Thus, Employer did not waive ...


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