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Commonwealth v. Workers' Compensation Appeal Board (Piree)

Commonwealth Court of Pennsylvania

April 4, 2018

Commonwealth of Pennsylvania, Petitioner
v.
Workers' Compensation Appeal Board (Piree), Respondent

          Submitted: November 22, 2017

          BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE DAN PELLEGRINI, Senior Judge.

          OPINION

          RENÉE COHN JUBELIRER, Judge.

         The Commonwealth of Pennsylvania (Employer) petitions for review of the Order of the Workers' Compensation Appeal Board (Board) that reversed, in part, a decision by a Workers' Compensation Judge (WCJ) and held that Employer was not entitled to subrogation of a workers' compensation (WC) lien claimed in a Third Party Settlement Agreement for the time period in which Jeffrey Piree (Claimant) was eligible for benefits under both the act commonly known as the Heart and Lung Act[1] and the Workers' Compensation Act (WC Act).[2] [3] The issue on appeal is whether Employer, which is self-insured, is entitled to subrogation against Claimant's Third Party Settlement for those benefits he received during the time period in which he was receiving his full salary under the Heart and Lung Act. Because under our precedent, Employer was not entitled to subrogation for the period in which Claimant was eligible for both Heart and Lung and WC benefits, we affirm the Board's Order so holding. This is so even though as part of his Third Party Settlement, he recovered the amounts Employer would have received had it been entitled to subrogation. However, because, as the Board recognized, Claimant has begun to receive benefits solely under the WC Act, this matter is remanded for a determination regarding Employer's subrogation rights related to those benefits.

         Claimant, an agent for Employer's Office of Attorney General (OAG), sustained injuries in a work-related motor vehicle accident. Employer accepted the injuries, in the nature of "left tibial, lateral plateau fracture, " pursuant to a Notice of Compensation Payable (NCP). (WCJ Decision, Findings of Fact (FOF) ¶ 2.) The NCP indicated that Claimant's average weekly wage was $1, 152.71, resulting in a weekly disability rate of $768.48. Claimant was eligible for, and did receive, the payment of his full salary from the OAG's payroll fund pursuant to Section 1(a) of the Heart and Lung Act, 53 P.S. § 637(a).[4] Employer had its WC Third Party Administrator, Inservco, pay Claimant's weekly WC payments from Employer's WC fund directly to OAG's payroll fund. On October 31, 2014, Claimant received a letter from OAG indicating that his Heart and Lung benefits were ending because his injuries were found to be permanent in nature and that he would begin receiving his WC benefits on November 4, 2014.[5] (Reproduced Record (R.R.) at 77a.) Claimant ultimately took a disability retirement from his position.

         On December 1, 2014, Employer and Claimant entered into a Third Party Settlement Agreement, reflecting that: Claimant obtained a third party recovery in the amount of $1.255 million; there was an accrued WC lien in the amount of $311, 824.92; the balance of recovery was $943, 175.10; and the net lien amount was $204, 672.78. (Id. at 71a; FOF ¶ 3.) Thereafter, both Claimant and Employer filed Petitions to Review Compensation Benefits, seeking a determination on whether Employer was entitled to reimbursement of the $204, 672.78 under Section 319 of the WC Act, 77 P.S. § 671.[6] Claimant requested that the WCJ "review [the] subrogation agreement to remove payments made pursuant to the Heart and Lung Act from the calculation of the lien." (R.R. at 3a.) Employer responded that the amounts included in the Third Party Settlement Agreement were only the amounts payable under the WC Act and asserted that it had not yet been paid its net WC lien. (Id. at 9a, 12a.) The Petitions were consolidated and assigned to a WCJ for resolution.

         The parties jointly submitted the Third Party Settlement Agreement and a Stipulation of Testimony of Claimant's Third Party Counsel from his personal injury action, which provided that Third Party Counsel would have testified as follows. There was no discussion between Inservco and Third Party Counsel about any other benefits Employer paid to Claimant, including his full salary under the Heart and Lung Act, or any discussion about "the interplay of benefits payable pursuant to the Heart and Lung Act, the [WC] Act, as well as the Medical Cost Containment Regulations." (FOF ¶ 4a; R.R. at 75a.) Third Party Counsel was not informed that the WC indemnity payments made by Inservco were being remitted to OAG while Claimant was receiving Heart and Lung benefits. In settling Claimant's third party action, Third Party Counsel advised the third party carrier that there was a recoverable WC lien in the amount of $299, 322.13.

         Employer presented the deposition testimony of Lisa Donovan, Inservco's claims adjuster for Claimant's WC claim, who explained how Employer, through Inservco, handles WC benefits for its employees who are also entitled to Heart and Lung benefits. Claimant was paid WC and Heart and Lung benefits concurrently until his retirement. Before Claimant retired, however, Inservco "reimbursed the Employer for the amount due under the [WC] claim, " Inservco paid "the benefits directly to [Claimant's] department [because he was] receiving Heart and Lung benefits"; and Employer paid Claimant the Heart and Lung benefits directly. (FOF ¶ 13c.) After Claimant's retirement, he received the WC benefits directly. The net subrogation lien listed in the Third Party Settlement Agreement has not been paid to Employer.

         Employer also offered the deposition testimony of Sherri Keiter-Reed, Director of the Bureau of Employee Absences and Safety in the Governor's Office of Administration, to further explain Employer's policies. Employer maintains a separate fund for WC payments to which its agencies contribute. Where an employee is injured on the job and is entitled to both WC and Heart and Lung benefits, the employee's Heart and Lung benefits are paid directly from Employer's salary system. The employee's WC benefit payments, once approved by Employer, are "transferred from the [WC] fund back to the agency's payroll fund, which is where Heart and Lung benefits are paid from." (Id. ¶ 14(b).) All medical bills are processed through the re-pricing system under the WC Act and then Employer pays the re-priced bills. Employer "seeks subrogation for only WC benefits." (Id. ¶ 14(d) (quoting R.R. at 275a).)

         Finding the testimony of Ms. Donovan and Ms. Keiter-Reed credible, the WCJ concluded that Claimant did not prove that: the amounts identified as the WC lien in the Third Party Settlement Agreement were anything other than compensation payable under the WC Act; there was a material mistake made in the preparation of that agreement; or the payments included in the WC lien were made pursuant to the Heart and Lung Act. The WCJ noted that Employer's lien was presented by Third Party Counsel during the course of Claimant's third party action. Accordingly, the WCJ found that Employer had met its burden of proving that it had a valid subrogation lien as set forth in the Third Party Settlement Agreement and that the lien had not yet been paid. Thus, the WCJ denied Claimant's Petition to Review Compensation Benefits and granted Employer's Petition to Review Compensation Benefits.

         Claimant appealed to the Board, arguing that the WCJ erred in concluding Employer was entitled to subrogation for benefits that were paid to him under the Heart and Lung Act. The Board reversed the WCJ's determination based on this Court's decision in Stermel v. Workers' Compensation Appeal Board (City of Philadelphia), 103 A.3d 876, 877 (Pa. Cmwlth. 2014). This Court, in Stermel, held that self-insured public employers compensating employees injured in motor vehicle accidents under both the WC Act and the Heart and Lung Act were excluded "from subrogating any indemnity or medical expenses, regardless of how they were categorized" by the self-insured employer, "because the claimant was still due full salary and benefits due to his coverage under the Heart and Lung Act." (Board Op. at 3.) Stermel's holding was reiterated by this Court in Pennsylvania State Police v. Workers' Compensation Appeal Board (Bushta), 149 A.3d 118 (Pa. Cmwlth. 2016), [7]in which the Court held that "[s]elf-insured employers are not entitled to be subrogated for [WC] when these funds are really used to reimburse Heart and Lung Act benefits." (Board Op. at 8.) Therefore, because Employer is self-insured and Claimant was entitled to Heart and Lung benefits concurrently with the WC benefits from his date of injury until his retirement, Employer was "not entitled to subrogation of the lien for [WC]." (Id. at 9.) The Board recognized, however, that Claimant's Heart and Lung benefits ended on November 4, 2014, and, therefore, Employer "is entitled to subrogation from this date and into the future as outlined in the Third Party Settlement Agreement." (Id. at 9 n.5.) Employer now petitions this Court for review.[8]

         On appeal, Employer argues that, under Section 319 of the WC Act, it is entitled to subrogation against the proceeds of Claimant's Third Party Settlement to the extent of the compensation payable under the WC Act notwithstanding Claimant's concurrent receipt of Heart and Lung benefits. Employer maintains that because WC indemnity benefits were still payable, albeit to Claimant's department rather than Claimant, while Claimant received Heart and Lung benefits, it should be able to subrogate Claimant's settlement proceeds by the amount its WC fund reimbursed its payroll fund. To hold otherwise, according to Employer, is contrary to precedent, such as Wisniewski v. Workmen's Compensation Appeal Board (City of Pittsburgh), 621 A.2d 1111 (Pa. Cmwlth. 1993), which provides that a claimant who sustains a work injury and is entitled to Heart and Lung benefits also has rights under the WC Act which can be pursued in the WC forum. Employer points to Nelson v. Workers' Compensation Appeal Board (Commonwealth of Pennsylvania) (Pa. Cmwlth., No. 692 C.D. 2015, filed December 10, 2015), as establishing that the payment of a claimant's full salary under the Heart and Lung Act should "actually . . . be considered [WC]" and "two-thirds of the amount paid automatically represents [WC] benefits." (Employer's Br. at 28 (citing Nelson and quoting Bureau of Workers' Comp. v. Workers' Comp. Appeal Bd. (Excalibur Ins. Mgmt. Serv.), 32 A.3d 291, 294-95 (Pa. Cmwlth. 2011)).) Employer contends that applying the bright-line rule set forth in Stermel and Bushta results in the conclusion that there is, in fact, no right to compensation under the WC Act in such circumstances.

         Alternatively, Employer argues Stermel is distinguishable and that Bushta followed Stermel without recognizing the difference in facts and legal arguments asserted by the employer there. Employer notes that unlike here where it presented evidence of exactly how much WC indemnity and medical benefits it paid, the employer in Stermel did not do the same. Finally, Employer argues it is not asserting, in contradiction of Oliver v. City of Pittsburgh, 11 A.3d 960 (Pa. 2011), that it is entitled to subrogate any of the amount Claimant received solely as Heart and Lung benefits and that unlike here there was no assertion in Oliver that the claimant received benefits other than Heart and Lung benefits. Thus, Employer urges the Court not to apply Oliver, Bushta, or Stermel in this matter and to reverse the Board's determination that it is not entitled to its subrogation lien.

         We begin with a review of the three statutes at issue here: the WC Act, the Heart and Lung Act, and the Motor Vehicle Financial Responsibility Law[9](MVFRL). Under the WC Act, employees who are injured at work are compensated for medical bills and lost wages, which is two-thirds of their pre-injury wages if they are prevented from returning to their pre-injury job. Section 306(a) of the WC Act, 77 P.S. § 511(1); Stermel, 103 A.3d at 877. However, certain employees who are injured performing their work duties and are temporarily unable to perform those duties are entitled, due to their positions with a public employer, to the payment of their full salaries as a result of their "serving the public in essential, high-risk professions." Oliver, 11 A.3d at 966; Stermel, 103 A.3d at 877. In these circumstances, both WC and Heart and Lung benefits are paid concurrently, but any WC payments the employee receives are required to be turned over to the public employer. Section 1(a) of the Heart and Lung Act, 53 P.S. § 637(a); Stermel, 103 A.3d at 877. Self-insured employers issue an NCP to acknowledge the work ...


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