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City of Philadelphia v. Zampogna

Commonwealth Court of Pennsylvania

December 27, 2017

City of Philadelphia, Appellant
v.
Frank Zampogna

          Argued: October 19, 2017

          BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge.

          OPINION

          MARY HANNAH LEAVITT, PRESIDENT JUDGE

         The City of Philadelphia (City) appeals an order of the Court of Common Pleas of Philadelphia County, First Judicial District (trial court) granting declaratory judgment in favor of a City employee, Frank Zampogna. The trial court held that Section 1720 of the Motor Vehicle Financial Responsibility Law, 75 Pa. C.S. §1720, prohibited the City from subrogating its payment of Heart and Lung Act[1] benefits to Zampogna from his third-party tort recovery. For the reasons that follow, we affirm the order of the trial court.

         The facts of this case are not in dispute. On November 1, 2007, Zampogna, a City police officer, was a passenger in a police cruiser participating in a roadblock at the intersection of 22nd Street and Lehigh Avenue in Philadelphia. A private vehicle went through the police roadblock and collided with the cruiser occupied by Zampogna. As a result, Zampogna suffered serious injuries and was unable to work as a police officer for several years. The City, which is self-insured for workers' compensation, issued a Notice of Compensation Payable (NCP) accepting liability for the injury. The NCP also stated that the City was paying Zampogna Heart and Lung Act benefits in lieu of workers' compensation benefits. Reproduced Record at 46a (R.R. ___). From November 2, 2007, to September 27, 2011, the City paid Zampogna a total of $286, 447.77 in Heart and Lung benefits.[2]

         On November 3, 2009, Zampogna filed a tort action against the driver of the vehicle involved in the accident. The City petitioned to intervene in Zampogna's tort action to protect the subrogation lien it intended to assert against any recovery. The third-party tort action settled in 2014 for $245, 000, which was placed in escrow while the parties litigated the City's entitlement to its asserted lien. On April 9, 2015, the City initiated a declaratory judgment action to establish its right to recover the Heart and Lung Act benefits it paid to Zampogna from his settlement.

         A trial was conducted on August 1, 2016, after which the trial court granted judgment in favor of Zampogna. It held that Section 1720 of the Motor Vehicle Financial Responsibility Law prohibited the City's subrogation against Zampogna's tort recovery. The City appealed the judgment.

         We begin with a review of the three statutes governing a public employer's subrogation against an employee's third-party recovery for his work injury caused by a motor vehicle accident. The three statutes are: the Workers' Compensation Act, [3] the Heart and Lung Act, and the Motor Vehicle Financial Responsibility Law.[4]

         The Workers' Compensation Act compensates employees who are injured at work for their medical bills and lost wages. Where a work injury prevents an employee from performing 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, 77 P.S. §511. Both public and private employers are subject to the requirements of the Workers' Compensation Act.

         The statute commonly referred to as the "Heart and Lung Act" applies only to public employers. It requires the payment of full salary to police officers and other public safety employees who are temporarily unable to perform their job because of a work injury. Section 1 of the Heart and Lung Act, 53 P.S. §637. This more favorable wage loss benefit assures "those undertaking dangerous employment in certain institutions that they will continue to receive full income when they are injured while performing their duties [and] by offering such assurance, the Commonwealth can 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). Police officers and public safety employees are also entitled to benefits under the Workers' Compensation Act. However, "any workmen's compensation, received or collected" by a public employee collecting Heart and Lung benefits "shall be turned over to the [public employer] and paid into the treasury thereof[.]" Section 1(a) of the Heart and Lung Act, 53 P.S. §637(a). Self-insured public employers that pay Heart and Lung benefits do not make workers' compensation payments because they would simply be returned to the employer. Wisniewski v. Workmen's Compensation Appeal Board (City of Pittsburgh), 621 A.2d 1111, 1113 (Pa. Cmwlth. 1993). Nevertheless, self-insured public employers issue a notice of compensation payable to employees receiving Heart and Lung benefits. Stermel v. Workers' Compensation Appeal Board (City of Philadelphia), 103 A.3d 876, 878 (Pa. Cmwlth. 2014).

         Where a work injury is caused by a third party, Section 319 of the Workers' Compensation Act[5] states that "the employer shall be subrogated to the right of the employee … against [a] third party to the extent of compensation payable" under the Act. 77 P.S. §671. The Heart and Lung Act does not contain a similar provision, but it has long been understood that the common law authorizes public employers to subrogate their Heart and Lung payments from the employee's third party tort recovery. See, e.g., Topelski v. Universal South Side Autos, Inc., 180 A.2d 414, 420 (Pa. 1962). The public policy for subrogation has been explained as follows:

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).

         The 1984 enactment of the Motor Vehicle Financial Responsibility Law upended this paradigm on subrogation, at least with respect to work injuries arising from motor vehicle accidents. Section 1720 of the Law expressly abolished an employer's ability to subrogate workers' compensation payments. Section 1720, as enacted in 1984, stated 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 in lieu thereof paid or payable under Section 1719 (relating to coordination of benefits).

         Act of February 12, 1984, P.L. 53, No. 12, §3 (emphasis added).

         As noted, the goal of subrogation is to prevent double recovery for a single loss. The Motor Vehicle Financial Responsibility Law is also designed to prevent double recovery by those involved in work-related motor vehicle accidents. Section 1722 of the Motor Vehicle Financial Responsibility Law prohibits a plaintiff from including benefits, such as workers' compensation, in his claim for damages from the third party tortfeasor. Section 1722 states:

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). By precluding an employee injured in a work-related motor vehicle accident from pleading workers' compensation or Heart and Lung benefits as an item of damages in his tort action, the employee must look solely to the employer to be made whole. Thus, the tort victim cannot recover twice.

         In short, Section 1720 and 1722 work in tandem to shift the cost of work-related motor vehicle accidents from the motor vehicle insurer to the workers' compensation insurer. The object was to reduce the cost of motor vehicle insurance by making the workers' compensation carrier the primary insurer for injuries arising from work-related motor vehicle accidents.

         However, in 1993, the legislature revisited this paradigm with the Act of July 2, 1993, P.L. 190, No. 44 (Act 44), which amended the Workers' Compensation Act and the Motor Vehicle Financial Responsibility Law. Section 25(b) of Act 44 reinstated an employer's right of subrogation for workers' compensation benefits paid to a claimant whose work injury resulted from a motor vehicle accident. Section 25(b) states:

The provisions of 75 Pa. C.S. §§1720 and 1722 are repealed insofar as they relate to workers' compensation payments or other benefits under the Workers' Compensation Act.

         Act of July 2, 1993, P.L. 190, No. 44, §25(b). Accordingly, under Act 44, a plaintiff injured in a work-related motor vehicle accident may include workers' compensation payments as an item of damages sought against the tortfeasor, and his employer may subrogate the amount of workers' compensation from that tort recovery. This shifted the cost for work-related motor vehicle accidents from the workers' compensation carrier back to the motor vehicle insurer, as was the case prior to 1984.

         Notably, Act 44 reinstated a public employer's right to subrogate workers' compensation benefits from third-party tort recoveries by repealing the contrary language in Sections 1720 and 1722 of the Motor Vehicle Financial Responsibility Law. However, Act 44 did not revise the language of Sections 1720 and 1722, which continue to read as though there is no right to subrogation of workers' compensation benefits against a tort recovery arising from a work-related motor vehicle accident.

         Act 44 expressly addressed workers' compensation benefits, not Heart and Lung benefits. Act 44 is silent on Heart and Lung payments and the public employer's ability to subrogate. This silence led to litigation on whether a public employer may subrogate Heart and Lung Act benefits from third-party tort recoveries. We review the three leading cases ad seriatim.

         In Fulmer v. Pennsylvania State Police, 647 A.2d 616 (Pa. Cmwlth. 1994), a Pennsylvania State Police trooper sustained serious injuries in a motor vehicle accident while on duty. During his temporary incapacitation, the trooper received $22, 442.63 in Heart and Lung Act benefits from his employer. In 1989, prior to the enactment of Act 44, the trooper instituted a personal injury action against the driver of the other vehicle in the accident and recovered a settlement. The State Police sought to subrogate the amount it paid the trooper in Heart and Lung benefits from the trooper's tort settlement. In response, the trooper filed a declaratory judgment action requesting this Court to rule that Section 1720 of the Motor Vehicle Financial Responsibility Law precluded the State Police from seeking reimbursement of its payments made under the Heart and Lung Act.

         Notably, in 1990, the legislature amended the 1984 version of Section 1720 to read 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 ...

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