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Whitmoyer v. Workers' Compensation Appeal Board (Mountain Country Meats)

Supreme Court of Pennsylvania

June 19, 2018


          ARGUED: April 11, 2018

          Appeal from the Order of the Commonwealth Court at No. 614 CD 2015 dated December 1, 2016 Affirming the Order of the Workers' Compensation Appeal Board at No. A13-1373 dated March 20, 2015




         The Pennsylvania Workers' Compensation Act ("WCA")[1] makes an employer liable for paying the disability benefits and medical expenses of an employee who sustains an injury in the course of his or her employment. See 77 P.S. §§ 431 (disability), 531 (medical). This liability attaches without regard to the employer's negligence. See id; see also Heckendorn v. Consolidated Rail Corp., 465 A.2d 609, 613 (Pa. 1983). Under section 319 of the WCA, however, employers (or their insurance carriers) are "subrogated to the right of the employe" and therefore entitled to reimbursement for certain expenses where a third party caused the employee's injury. 77 P.S. § 671. The instant matter addresses a specific question about the scope of this reimbursement.

         Section 319 of the WCA provides, in pertinent part:

Where the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right of the employe, his personal representative, his estate or his dependents, against such third party to the extent of the compensation payable under this article by the employer; reasonable attorney's fees and other proper disbursements incurred in obtaining a recovery or in effecting a compromise settlement shall be prorated between the employer and employe, his personal representative, his estate or his dependents. The employer shall pay that proportion of the attorney's fees and other proper disbursements that the amount of compensation paid or payable at the time of recovery or settlement bears to the total recovery or settlement. Any recovery against such third person in excess of the compensation theretofore paid by the employer shall be paid forthwith to the employe, his personal representative, his estate or his dependents, and shall be treated as an advance payment by the employer on account of any future instalments of compensation.

77 P.S. § 671 (internal footnote omitted) (emphasis added). We granted allowance of appeal to determine whether the Commonwealth Court erred in concluding that the term "instalments of compensation" in section 319 encompasses both disability benefits and payment of medical expenses.[2]

         We recognize that the word "compensation, " as used elsewhere in the WCA (including elsewhere in section 319), refers variously to one or both of these types of benefits. See Giant Eagle, Inc. v. W.C.A.B. (Givner), 39 A.3d 287, 294 (Pa. 2012) (plurality). "Instalments of compensation, " however, is a more specific term. As discussed herein, we find that it means what it says: compensation that is paid in installments. Under the WCA, disability benefits are required to be paid in this manner, namely, "in periodical installments, as the wages of the employe were payable before the injury." See 77 P.S. § 601. Medical expenses are not. See 77 P.S. § 531. Accordingly, when a workers' compensation claimant recovers proceeds from a third-party settlement (following repayment of compensation paid to date) as prescribed by section 319, the employer (or insurance carrier) is limited to drawing down against that recovery only to the extent that future disability benefits are payable to the claimant. Accordingly, and as explained herein, we reverse the decision of the Commonwealth Court.

         In January 1993, Craig Whitmoyer ("Whitmoyer") suffered a work-related injury that resulted in the amputation of part of his arm. Starting at that time, his employer, Mountain Country Meats ("MCM"), or MCM's insurance carrier, Selective Insurance ("Selective"), paid all of Whitmoyer's medical expenses related to this injury. A few months later, the parties reached an agreement related to Whitmoyer's disability benefits - he was entitled "to a 20 week healing period and 370 weeks of specific loss benefits [at $237.50 per week after May 22, 1993]." Judge's Exhibit 3 (Supplemental Agreement for Compensation for Disability or Permanent Injury, 4/29/1993) (providing that "weekly wages must be computed in accordance with Section 309 of the [WCA]").[3] Whitmoyer subsequently petitioned for a commutation of these weekly payments. In December 1994, the Workers' Compensation Judge ("WCJ") granted his petition and directed MCM or Selective to pay Whitmoyer a lump sum payment of $69, 994.64. While this commutation resolved his entitlement to disability benefits entirely, MCM remained responsible for Whitmoyer's ongoing medical bills. Judge's Exhibit 4 (Commutation Decision and Stipulation of Facts, 12/27/1994).

         Several years later, Whitmoyer obtained a $300, 000 settlement from third parties related to his injury and, in April 1999, he entered a third-party settlement agreement (the "TPSA") with Selective providing that as to past-paid compensation, Selective was entitled to a net subrogation lien of $81, 627.87. See Selective's Exhibit 7 (TPSA).[4] The net subrogation lien represents the difference between Selective's total accrued subrogation lien ($110, 583.73) and Selective's pro rata share of the third-party litigation expenses ($28, 955.86). Id. Thus, under the terms of the TPSA, Whitmoyer's "balance of recovery" was $189, 416.27. Id. This term is defined on the form as a "fund for credit against future workers' compensation payable, subject to reimbursement to claimant of expenses of recovery at the rate of 37% on credit used." Id.

         In communicating with Selective about the TPSA, Whitmoyer's counsel sent two letters to Jodi Bell ("Bell"), Selective's claims adjuster. In the first letter, dated March 8, 1999, counsel forwarded the TPSA, noted that "the lien of [Selective] can be satisfied in full with payment of $81, 627.87" pursuant to section 319, and asked "that [Selective] remain responsible for payment of future medical expenses incurred by Mr. Whitmoyer." Selective's Exhibit 6 (March Letter from Donald F. Smith, Jr.). In the second letter, dated May 26, 1999, counsel enclosed a check for $81, 627.13 and advised Selective of Whitmoyer's position that "no credit can be applied to future medical bills" because "under Section 319 such credit only applies to 'future installments of compensation', " which does not encompass "future medical expenses." Selective's Exhibit 8 (May Letter from Donald Smith, Jr.). Selective cashed the check but did not respond to the letter. The TPSA, dated April 8, 1999, bears Bell's name and signature but was never signed by Whitmoyer's counsel.

         Selective continued to pay Whitmoyer's work-related medical expenses in full (without taking credit under the TPSA) for approximately thirteen years, until September 2012. At that time, Selective filed a modification petition requesting an adjustment to the TPSA to reflect the medical expenses incurred since the parties entered the agreement. Crediting the testimony of Bell that she did not have authority to agree to counsel's interpretation of "future installments of compensation" as set forth in his May 1999 letter, the WCJ granted Selective's petition. In addition, the WCJ found as a matter of fact that the TPSA made Selective liable to Whitmoyer "for 37% of future medical expenses, up to the balance of recovery." See Decision and Order of the WCJ, 10/17/2013, at 2. The WCJ also found, per the parties' stipulation, that Selective had paid $206, 670.88 for Whitmoyer's work injury as of February 2013. Id. The WCJ ordered that Selective's percentage credit be reduced to 26.09% of future medical expenses, up to Whitmoyer's balance of recovery amount of $189, 416.27. Id. at 4.

         Whitmoyer appealed to the Workers' Compensation Appeal Board (the "Board"), arguing that the TPSA was unenforceable because neither he nor his counsel had signed it. Board Op. at 2. He also argued that the WCA only allows credit on account of future installments of compensation, namely, "indemnity benefits, " none of which, in his case, remained to be paid. Id. Finally, citing his attorney's March and May 1999 letters and Selective's course of conduct since that time, he urged that the parties had agreed that no credit would be applied toward future medical bills, and that Selective had waived its subrogation rights and should be equitably estopped from now raising this claim. Id.

         The Board affirmed, finding no merit to Whitmoyer's claim that the TPSA was unenforceable or that the March and May 1999 letters created a binding agreement barring Selective from taking a credit on future medical expenses. Id. at 6-7. As to Whitmoyer's argument that section 319 does not permit credit to be taken on future medical expenses because they are not "instalments of compensation, " the Board held that "it is well settled that medical expenses are compensation payments subject to subrogation rights against a claimant's recovery from a third party and subject to credit toward future compensation where the recovery exceeds compensation paid at the time of recovery." Id. at 7 (citing Deak v. W.C.A.B. (USX Corp.), 653 A.2d 52 (Pa. Commw. 1994)) (emphasis added). Moreover, the Board explained that Bell's credible testimony belied the assertion that Selective chose to waive its subrogation right, which is generally "absolute and can be abrogated only by choice." Id. at 9 (noting that Bell did not have the authority to agree to, nor did she respond to, any of the assertions in counsel's letters). Finally, the Board concluded that equitable estoppel was inappropriate under the circumstances because Selective never agreed to forgo its right to subrogation for future medical expenses, and the WCA contains no equitable exceptions. Id. at 9-10.

         In a divided en banc opinion, the Commonwealth Court affirmed. The intermediate appellate court first outlined the three objectives underlying section 319, as identified by this Court in Dale Mfg. Co. v. W.C.A.B. (Bressi), 421 A.2d 653, 654 (Pa. 1980): (1) to prevent double recovery by a claimant, (2) to ensure that a non-negligent employer avoids responsibility for compensation payments necessitated by a negligent third party, and (3) to prevent a negligent third party from escaping liability.[5]Whitmoyer v. W.C.A.B. (Mountain Country Meats), 150 A.3d 1003, 1014 (Pa. Commw. 2016) (en banc). It then reasoned that Pennsylvania appellate courts have concluded on multiple occasions that medical expenses constitute "compensation" under section 319. Id. at 1012-13 (discussing Deak, 653 A.2d at 54, Dasconio v. W.C.A.B. (Aeronca, Inc.), 559 A.2d 92, 103 (Pa. Commw. 1989), and Haley to Use of Martin v. Matthews, 158 A. 645, 646-47 (Pa. Super. 1932)). Even while recognizing that no court, least of all this one, has addressed whether the General Assembly's use of the distinct term "instalments of compensation" in the last ...

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