Argued: June 5, 2019
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge,
HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE P.
KEVIN BROBSON, Judge, HONORABLE MICHAEL H. WOJCIK, Judge,
HONORABLE ELLEN CEISLER, Judge
HANNAH LEAVITT, PRESIDENT JUDGE
Kenney (Claimant), a police officer for Lower Pottsgrove
Township (Employer), petitions for review of an adjudication
of the Workers' Compensation Appeal Board (Board) that
reversed, in part, the decision of the Workers'
Compensation Judge (WCJ). In so doing, the Board held that
Delaware Valley Workers' Compensation Trust (Trust), a
group self-insurance fund, was entitled to subrogate against
Claimant's third-party tort recovery. Claimant argues
that because he was paid only Heart and Lung benefits, the
Trust had no right of subrogation. We reverse the Board.
facts of this case are not in dispute. On September 22, 2014,
Claimant was injured in a work-related motor vehicle accident
when his police cruiser was struck by another vehicle.
Claimant was out of work until March 16, 2015, when he
returned to light duty. He returned to full duty on July 25,
his injury, the Trust issued a Notice of Compensation Payable
(NCP) accepting liability for wage loss compensation in the
amount of $932 per week. Reproduced Record at 226 (R.R.).
However, Employer continued to pay Claimant full wages. The
Trust sent Claimant's workers' compensation
disability checks to Employer, and Claimant signed them over
to Employer. Employer did not advise Claimant that its
payment of his full wages constituted Heart and Lung
January 21, 2015, a union member advised Claimant that he
should apply for Heart and Lung benefits. Claimant did so on
January 28, 2015, by emailing the police chief a document
titled "Application for Heart and Lung Act
Benefits." R.R. 230. By a letter dated March 2, 2015,
Employer acknowledged receipt of Claimant's request for
Heart and Lung benefits and "agreed to accept the claim
in accordance with applicable law." R.R. 231. On April
9, 2015, Employer issued Claimant a check in the amount of
$5, 198.94 to reimburse him for taxes that had been deducted
from his paychecks.
filed a tort action against the driver of the vehicle
involved in the accident. The Trust asserted a workers'
compensation lien in the amount of $85, 237.63, which was
comprised of $25, 375.86 in wage loss compensation and $59,
861.77 in medical compensation.
January 14, 2016, Employer filed a petition to review
compensation, seeking a determination "with respect to
Employer/Insurer's worker[s'] compensation lien
rights." Certified Record (C.R.), Item No. 2, at 1.
Claimant responded that he "has not settled any personal
injury action against any third party[, ]" and, in any
event, Employer cannot subrogate Heart and Lung benefits.
C.R., Item No. 4, at 1. On June 1, 2016, Employer filed a
second petition to review compensation benefits requesting a
determination as to "whether benefits were properly paid
under the Workers' Compensation Act[." C.R., Item
No. 6, at 1. Claimant responded that all benefits should have
been paid pursuant to the Heart and Lung Act.
consolidated Employer's petitions. Claimant presented his
deposition testimony and a transcript of his testimony at a
hearing before the Lower Pottsgrove Board of
Commissioners that established the above-recited facts.
Employer presented the deposition testimony of Richard Lee,
the administrator of the Trust, who explained the Trust and
testified that the Trust was established by "a group of
homogeneous employers to pool their liabilities [for]
Workers' Compensation[.]" Notes of Testimony (N.T.),
9/13/2016, at 4-5; R.R. 323-24. The Trust is an approved
group self-insurance fund that provides workers'
compensation coverage to municipal employers, townships and
boroughs. The Trust's premium rates are regulated by the
Bureau of Workers' Compensation and are set at the level
needed to cover all claims and expenses of the group. The
Trust uses the same payroll classifications as the
Pennsylvania Compensation Rating Bureau, which sets
workers' compensation rates for the insurance industry.
Lee stated that "excess funds that are not needed"
are refunded by the Trust to members in various forms such as
cash dividends or premium reductions. Id. at 11;
to Lee, a member of the Trust does not apply to the Bureau of
Workers' Compensation to become an approved self-insurer;
a member simply notifies the Bureau that it "has agreed
to join [the] [T]rust." Id. at 10; R.R. 329.
Each member has the right to appoint a trustee to the
Trust's board of trustees, which further elects five
executive committee members to "direct and operate"
the Trust. Id. at 12; R.R. 331. Lee stated that
subrogation "is referenced in the trust agreement as
something that the [T]rust can pursue." Id. at
31; R.R. 350. Since its inception, the Trust has asserted
workers' compensation lien rights "when
appropriate[.]" Id. at 33; R.R. 352.
also offered the deposition testimony of Linda Bengera, an
employee of the Trust, who managed Claimant's
workers' compensation claim. According to Bengera, the
Trust paid wage loss and medical benefits to Claimant in
accordance with the Workers' Compensation Act. The
workers' compensation checks were set up on "auto
pay" and sent to Employer because they "ha[d]
something to do" with Claimant's Heart and Lung
benefits. N.T., 4/13/2016, at 29-30; R.R. 299. The
Trust's "protocol" is to send the checks to the
employer. Id. at 30; R.R. 299.
found the testimony of Claimant, Lee, and Bengera credible.
The WCJ granted Employer's second review petition,
concluding that Claimant's workers' compensation
benefits were paid as required by the Workers'
Compensation Act. The WCJ denied Employer's first review
petition, concluding that Employer could not subrogate
against Claimant's tort recovery. The WCJ reasoned
Claimant received Heart and Lung benefits and, thus, could
not plead those benefits as an item of damages in his tort
action. Accordingly, the Trust could not subrogate the same
from Claimant's tort recovery. The WCJ held this outcome
was required by this Court's holding in Stermel v.
Workers' Compensation Appeal Board (City of
Philadelphia), 103 A.3d 876 (Pa. Cmwlth. 2014). The WCJ
noted that Employer was not "a single self-insured
entity" but, rather, a member of a self-insurance group
fund. WCJ Decision at 7, Conclusion of Law No. 3; C.R., Item
No. 10, at 7. Nevertheless, the WCJ concluded that this fact
did not distinguish the present case from Stermel.
appealed to the Board, arguing that the WCJ's reliance on
Stermel was misplaced because Employer "has all
of the attributes of an insured employer and none of the
attributes of a self-insured." C.R., Item No. 11, at 1.
Accordingly, Employer asserted that the Trust can subrogate
its payment of workers' compensation benefits from
Claimant's third-party tort recovery.
Board affirmed the WCJ's decision granting Employer's
second review petition but reversed the WCJ's decision on
Employer's first review petition. The Board distinguished
Stermel, which involved a self-insured employer that
paid only Heart and Lung benefits. By contrast, the Trust,
acting in the same manner as an insurance carrier, paid
Claimant workers' compensation benefits that were
"completely separate from [Employer's] payment of
Heart and Lung benefits." Board Adjudication at 8; C.R.,
Item No. 15, at 10. The Board reasoned, "while
[Employer] may not be eligible for subrogation in terms of
its payment of Heart and Lung benefits, [the Trust] itself,
acting as [Employer's] workers' compensation insurer,
is entitled to subrogation in terms of the ...