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McKenna v. Workers' Comp. Appeal Bd.

COMMONWEALTH COURT OF PENNSYLVANIA
Apr 10, 2015
No. 1101 C.D. 2014 (Pa. Cmmw. Ct. Apr. 10, 2015)

Opinion

No. 1101 C.D. 2014

04-10-2015

William McKenna, Petitioner v. Workers' Compensation Appeal Board (City of Philadelphia and Comp Services, Inc.), Respondents


BEFORE: HONORABLE BERNARD L. McGINLEY, Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE ANNE E. COVEY, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION BY JUDGE McGINLEY

William McKenna (Claimant) seeks review of the Workers' Compensation Appeal Board (Board) Order which reversed the Workers' Compensation Judge's (WCJ) dismissal of the City of Philadelphia's (Employer) Petition to Modify Compensation Benefits (Modification Petition).

The WCJ made the following findings of fact:

1. On December 6, 2011 Defendant [Employer] filed a Petition for Modification seeking to recoup a lien against a third party recovery.

2. Claimant sustained a work related motor vehicle injury on June 7, 2008.

3. A Notice of Compensation Payable was issued on July 31, 2008. The notice by Defendant [Employer] accepting liability for Claimant's work injury indicated that Claimant is receiving Heart and Lung Benefits in lieu of workers' compensation.
4. Benefits were payable to Claimant up through September 18, 2008 when Claimant returned to his pre injury [sic] job duties of police officer.

5. Claimant filed a third party action arising from the motor vehicle accident and received a gross sum of $31,000.00. An Order to Settle Discontinue and End was filed with the civil court on November 16, 2010.

6. In connection with the third party action, Claimant's counsel prepared a settlement sheet, setting forth deductions for costs ($1,831.89) and attorney's fees ($10,323.00). The amount of $13,049.79 was deducted for net workers' compensation lien. The amount designated for the workers' compensation lien was put in escrow pending the outcome of the Pennsylvania Supreme Court case of Oliver v. City of Pittsburgh. Following the decision rendered in Oliver v. City of Pittsburgh, 1138 A.3d 960 (Pa. 2011), the funds previously held by Claimant's counsel were distributed.

7. Defendant [Employer] filed the Petition for Modification seeking to recoup a lien to the extent of 2/3rds of the Heart and Lung Benefits paid to Claimant in lieu of workers' compensation benefits arising out of the work related motor vehicle accident and medical benefits paid to Claimant. Defendant [Employer] seeks a determination of whether it is entitled to subrogation of the entire Heart and Lung benefits...based on the date of the third party settlement.

8. The Judge has carefully reviewed and considered the evidence, and the arguments set forth in Claimant's and Defendant's [Employer's] respective briefs, and is persuaded that her authority follows the law set forth in Oliver. She denies Defendant's [Employer's] request.

9. This Judge finds Defendant's [Employer's] contest to be entirely reasonable in this case. (Footnote omitted).
WCJ'S Decision, August 15, 2012, Findings of Fact (F.F.) Nos.1-9 at 2.

Employer appealed. The Board reversed and determined that the WCJ erred when she denied Employer's Modification Petition. The Board reasoned that "there is no statutory, policy, or precedential impediment to a self-insured public employer's right to subrogation against an injured employee's third-party recovery to the extent that two-thirds of Heart and Lung benefits the employer paid represented workers' compensation." Board's Decision, May 28, 2014, at 9.

Applicable Law

Three statutes are involved in this appeal: the Workers' Compensation Act (Act), the Heart and Lung Act and the Motor Vehicle Financial Responsibility Law (MVFRL), 75 Pa.C.S. §§ 1701-1799.7.

Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1-1041.4, 2501-2708.

Act of June 28, 1935, P.L. 477, as amended, 53 P.S. §§ 637-638.

The Act provides compensation to employees who are injured at work to cover their medical bills and lost wages. Where a work injury prevents an employee from doing 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 Act; Vista International Hotel v. Workmen's Compensation Appeal Board (Daniels), 742 A.2d 649, 654 (Pa. 1999). All employers, public and private, are subject to the requirements of the Act.

Section 306(a) states, in relevant part, that:

The following schedule of compensation is hereby established: For total disability, sixty-six and two-thirds per centum of the wages of the injured employe[.]
77 P.S. § 511(1).

The Heart and Lung Act provides full wage benefits for some public safety employees who are temporarily unable to perform their duties because of a work injury. These employees are also entitled to benefits under the Act. However, according to Section 1(a) of the Heart and Lung Act, any workers' compensation received by the public safety employees collecting Heart and Lung benefits "must be turned over to [the public employer]...and paid into the treasury thereof." Self-insured public employers that pay Heart and Lung benefits do not also make workers' compensation payments because they would simply be returned. Wisniewski v. Workmen's Compensation Appeal Board (City of Pittsburgh), 621 A.2d 1111, 1113 (Pa. Cmwlth. 1993). Self-insured employers issue a Notice of Compensation Payable (NCP) to acknowledge the work injury. City of Philadelphia v. Workers' Compensation Appeal Board (Ford-Tilghman), 996 A.2d 569, 573 (Pa. Cmwlth. 2010).

Where a compensable work injury has been caused by a third party, Section 319 of the Act gives the employer a right of subrogation against the employee's tort recovery. The Heart and Lung Act does not contain a provision addressing subrogation, but it has been construed as giving the employer the right to subrogate. Fulmer v. Pennsylvania State Police, 647 A.2d 616, 619 (Pa. Cmwlth. 1994).

It states, in relevant part, as follows:

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...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 the employe...The employer shall pay that portion 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...and shall be treated as an advance payment by the employer on account of any future installments of compensation.
77 P.S. § 671.

In 1984, the Pennsylvania legislature enacted the MVFRL. This abolished the employer's ability under Section 319 of the Act, 77 P.S. § 671, to subrogate its compensation payments against a claimant's motor vehicle tort recovery. Section 1720 of the MVFRL prohibits a plaintiff from recovering from the third party tortfeasor lost wages covered by workers' compensation or Heart and Lung benefits.

Specifically, Section 1720 of the MVFRL states 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 or other arrangement whether primary or excess under section 1719 (relating to coordination of benefits).
75 Pa.C.S. § 1720.

Then, the Pennsylvania legislature enacted the Act of July 2, 1993, P.L. 190 (Act 44), of the MVFRL to allow employers to obtain subrogation of an employee's third-party recovery related to motor vehicle accidents that cause work injuries for which the employer pays workers' compensation benefits. Section 25(b) of Act 44 provided that the non-subrogation "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." Consequently, employers that paid workers' compensation benefits for a work injury sustained in a motor vehicle accident after the enactment of Act 44 are entitled to subrogation of any third-party recovery the claimant makes as a result of that accident to the extent the employer has paid workers' compensation benefits.

Oliver v. City of Pittsburgh

Oliver v. City of Pittsburgh, 11 A.3d 960 (Pa. 2011), involved a police officer injured in a motor vehicle accident while at work, and a self-insured public employer that paid Heart and Lung benefits to the officer.

In Oliver, our Supreme Court held that Section 25(b) of Act 44 restored an employer's right of subrogation for workers' compensation payments but did "not impact any anti-subrogation mandates pertaining to [Heart and Lung Act] benefits." Id. at 966. Because the language of Section 25(b) was clear, the Supreme Court explained that principles of statutory construction had no application. Simply stated, an employer may not recover Heart and Lung benefits against the third party tortfeasor whose negligence involving a motor vehicle causes the injury to the public safety employee. The Court ultimately determined that the City was not entitled to subrogation because the Act 44 amendments to the MVFRL did not repeal the subrogation bar for benefits paid under the Heart and Lung Act; rather, it only repealed that bar with respect to benefits paid pursuant to the Act. The Court noted that "Section 25(b) of Act 44 is unambiguous in its straightforward application to benefits under the Workers' Compensation Act," and reasoned that although the Heart and Lung Act and the Act embody similar remedial schemes, the two acts are distinguishable for the purpose of subrogation as contemplated by the MVFRL:

The HLA [Heart and Lung Act] applies to protect employees serving the public in essential, high-risk professions. The design is to ensure that, if they are temporarily disabled in the performance of their duties, these critical-services personnel do not suffer salary losses or incur the expense of medical care and treatment.... Although the WCA [Workers' Compensation Act] also embodies a similar remedial scheme, the HLA's [Heart and Lung Act] more favorable treatment of public-safety employees who are temporarily disabled suggests against treating an overlap as an equivalency.

In summary, Section 25(b) repealed Sections 1720 of the MVFRL 'insofar as [it] relate[d] to workers' compensation payments or other benefits under the Workers' Compensation Act [Act]'.... By its plain terms, such provision does not impact any anti-subrogation mandates pertaining to HLA [Heart and Lung Act] benefits.
Oliver, 11 A.3d at 966.

Present Controversy

Claimant contends that Employer does not have a right of subrogation arising from Heart and Lung benefits paid in lieu of workers' compensation benefits to Claimant.

This Court's review is limited to a determination of whether an error of law was committed, whether necessary findings of fact are supported by substantial evidence, or whether constitutional rights were violated. Vinglinsky v. Workmen's Compensation Appeal Board (Penn Installation), 589 A.2d 291 (Pa. Cmwlth. 1991). --------

Unlike Oliver, this case does involve the MVFRL, and is directly on point with this Court's recent decision in Stermel v. Workers' Compensation Appeal Board, 103 A.3d 876 (Pa. Cmwlth. 2014). In Stermel, a police officer petitioned for review of an adjudication of the Board that determined that a city employer was entitled to recover a portion of the Heart and Lung benefits it paid the officer from the officer's third party tort claim settlement. This Court reversed and explained:

The MVFRL prohibits a plaintiff from including as an element of damages payments received in the form of workers' compensation or other 'benefits paid or payable by a program...or other arrangement.' 75 Pa.C.S. §1720. This language 'benefits paid or payable by a program' has been construed to include the program by which Heart and Lung benefits are paid. Fulmer, 647 A.2d at 618-19. Section 25(b) of Act 44 changed the Section 1720 paradigm only for workers' compensation benefits, not Heart and Lung benefits. This means Claimant continued to be 'precluded' from recovering the amount of benefits paid under the Heart and Lung Act from the responsible tortfeasors. 75 Pa.C.S. § 1722. There can be
no subrogation out of an award that does not include these benefits....

In its original version, the Motor Vehicle Financial Responsibility Law [MVFRL] made employers, not motor vehicle insurers, responsible for the payment of medical bills and lost wages on behalf of a person injured in a motor vehicle accident that occurred in the course of employment. With Act 44, the legislature shifted the responsibility for these costs from the employer or its workers' compensation insurer, to the tortfeasor, (or its insurer). However, Act 44 did not shift responsibility for Heart and Lung benefits, which remain with the employer.....

By treating a portion of the Heart and Lung benefits as workers' compensation payments, the Board extended the legislature's specific refinements beyond their plain terms.
Id. at 885-86.

The Board issued its decision prior to this Court's decision in Stermel. This Court believes that Stermel correctly interpreted Oliver and is directly on point here. Accordingly, this Court must reverse the Board.

/s/_________

BERNARD L. McGINLEY, Judge ORDER

AND NOW, this 10th day of April, 2015, the Order of the Workers' Compensation Appeal Board in the above-captioned matter is reversed.

/s/_________

BERNARD L. McGINLEY, Judge


Summaries of

McKenna v. Workers' Comp. Appeal Bd.

COMMONWEALTH COURT OF PENNSYLVANIA
Apr 10, 2015
No. 1101 C.D. 2014 (Pa. Cmmw. Ct. Apr. 10, 2015)
Case details for

McKenna v. Workers' Comp. Appeal Bd.

Case Details

Full title:William McKenna, Petitioner v. Workers' Compensation Appeal Board (City of…

Court:COMMONWEALTH COURT OF PENNSYLVANIA

Date published: Apr 10, 2015

Citations

No. 1101 C.D. 2014 (Pa. Cmmw. Ct. Apr. 10, 2015)