Opinion
No. 1350 C.D. 2011
06-01-2012
Joanne Haynes, Petitioner v. Workers' Compensation Appeal Board (City of Philadelphia), Respondent
BEFORE: HONORABLE BERNARD L. McGINLEY, Judge HONORABLE MARY HANNAH LEAVITT, Judge HONORABLE P. KEVIN BROBSON, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE LEAVITT
Joanne Haynes (Claimant) petitions for review of an adjudication of the Workers' Compensation Appeal Board (Board) that affirmed the Workers' Compensation Judge's (WCJ) decision granting, on remand, the petition to review compensation benefit offset filed by the City of Philadelphia (Employer). In doing so, the Board concluded that Employer is entitled to recover the workers' compensation benefits it paid to Claimant by way of a subrogation lien against Claimant's third party tort claim settlement and by the disability pension it is paying Claimant. Finding no error, we affirm.
The parties have been engaged in litigation for several years. We begin with a recitation of that history.
Claimant was employed as a truck driver by Employer's Department of Streets. On July 14, 1993, Claimant slipped and fell, injuring her low back. Employer issued a Notice of Compensation Payable (NCP), and began paying $328.07 in weekly workers' compensation total disability benefits as of November 6, 1993. Prior to that date Claimant received injured-on-duty pay in lieu of workers' compensation.
Claimant then pursued a tort claim against Waste Management, owner of the premises where she fell, for which she received a settlement in the amount of $225,000. Employer filed a review petition when Claimant refused to honor Employer's subrogation lien against that settlement, as required by Section 319 of the Workers' Compensation Act (Act), Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §671. Section 319 of the Act requires the employer to pay its proportionate share of the claimant's legal expenses in order to exercise its subrogation rights against a tort claim payment. The employer's proportionate share is determined by the proportion that its accrued workers' compensation lien bears to the total third-party settlement amount. P&R Welding & Fabricating v. Workmen's Compensation Appeal Board (Pergola), 549 Pa. 490, 497-498, 701 A.2d 560, 564 (1997).
Section 319 of the Act 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 employe.... 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...and shall be treated as an advance payment by the employer on account of any future installments of compensation.77 P.S. §671.
In January 2002, the WCJ granted Employer's review petition. The WCJ found that as of August 24, 1999, Employer's workers' compensation payments to Claimant had accrued to $115,151.83, for which it was entitled to subrogation from Claimant's $225,000 settlement. The WCJ directed Employer to calculate its subrogation lien using the Bureau's Third Party Settlement Agreement Form (LIBC-380) and ordered Claimant to reimburse Employer's lien. Neither party appealed this decision.
Employer had paid $15,830.67 in medical expenses and $94,484.15 in workers' compensation disability benefits. Employer had also paid $5,441.37 in injured-on-duty benefits in lieu of workers' compensation prior to issuing the NCP, and the WCJ included $4,837.01 of that amount in the lien, representing sixty-six and two thirds percent of Claimant's salary for that time period.
On February 21, 2002, Employer granted Claimant a service-connected disability pension retroactive to May 4, 1996, paying $1,492.69 per month. The disability pension payments are 70 percent of Claimant's final annual salary. Because the disability pension was larger than her workers' compensation disability payments, it offset all of her workers' compensation disability paid after the effective date of the pension. Employer had paid Claimant workers' compensation in the amount of $102,685.91 for the period of May 4, 1996 to February 2002. Employer retained $102,685.91 of the $107,324.41 retroactive pension as an offset against compensation benefits it had already paid.
This Court has held that the City of Philadelphia and its Pension Board are considered to be the same entity because "the City is the source of funding both for [employees'] [p]ensions and for their workers' compensation benefits." Tiller v. City of Philadelphia Board of Pensions and Retirement, 806 A.2d 477, 482 (Pa. Cmwlth. 2002).
In August 2002, Employer filed a suspension petition and review offset petition, which are the subject of the current litigation. Employer asserted that Claimant had refused to comply with the WCJ's January 2002 order and requested enforcement of its subrogation right. Claimant answered that Employer had already taken an offset against her pension benefits for the workers' compensation it had paid her and, thus, Employer had been made whole. Claimant also asserted that after May 4, 1996, Employer paid her only disability pension benefits, not workers' compensation. Because it did not pay her workers' compensation, it had no right of subrogation to exercise.
Employer also filed a review petition. It was dismissed and is not at issue on appeal.
In October 2004, the WCJ granted Employer's suspension and review offset petitions. The WCJ determined that Employer's service-connected disability pension could be offset against Claimant's workers' compensation payments. Because workers' compensation payments had already been made, those payments could be credited towards Claimant's retroactive disability pension. The WCJ also determined that Employer had already established its right to subrogation in the 2002 WCJ decision, which was not appealed. The WCJ ordered Claimant to honor Employer's subrogation lien and specified that if Claimant failed to do so, Employer could recover that unpaid lien by withholding it from her on-going service-connected disability pension payments.
Claimant appealed. The Board held that Employer was entitled to a pension offset against the workers' compensation paid to Claimant from 1996 to 2002. However, the Board held that the WCJ erred in giving Employer a dollar-for-dollar offset, because the offset is limited to the extent by which an employer had funded the pension. The Board remanded for this determination. The Board also affirmed the WCJ's determination that Employer was entitled to subrogation against Claimant's third-party tort settlement. Otherwise Claimant would receive a double recovery of her loss of earnings. Finally, the Board determined that the WCJ lacked authority to permit Employer to stop paying disability pension benefits and reversed that portion of the decision.
On remand, Employer presented testimony from its deputy pension director and from the chief actuary for the City's pension fund. Based on the credited actuarial evidence, the WCJ found that Employer had contributed 77.913 percent of Claimant's service-connected disability pension and was entitled to an offset based on that percentage contribution. The WCJ again granted Employer's review offset petition. Claimant appealed, and the Board affirmed. Claimant then petitioned for this Court's review.
This Court's review of an order of the Board is limited to determining whether the necessary findings of fact are supported by substantial evidence, whether Board procedures were violated, whether constitutional rights were violated or an error of law was committed. City of Philadelphia v. Workers' Compensation Appeal Board (Brown), 830 A.2d 649, 653 n.2 (Pa. Cmwlth. 2003).
On appeal, Claimant argues that the Board erred. Claimant argues that Employer's subrogation reduced her previously paid workers' compensation benefits to zero. Accordingly, an offset of the service-connected disability pension benefits is impossible. In the alternative, Claimant argues that when Employer took the pension offset, it recouped all previously-paid workers' compensation benefits, which extinguished its right to subrogation. We disagree.
At issue is Claimant's workers' compensation disability paid from July 1993 to February 2002 for which Employer seeks offsets. Claimant asserts that Employer can offset her workers' compensation during that period by her pension or her tort claim settlement, but not both. However, the Act allows both types of subrogation, so long as the claimant receives no less than an amount equal to her workers' compensation disability.
Subrogation is established in Section 319 of the Act, 77 P.S. §671. The employer's right to subrogation is absolute. Thompson v. Workers' Compensation Appeal Board (USF&G Co.), 566 Pa. 420, 432-33, 781 A.2d 1146, 1153-54 (2001). The policy for subrogation is threefold:
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). Our Supreme Court has deemed subrogation to be
just, because the party who caused the injury bears the full burden; the employee is "made whole," but does not recover more than what he requires to be made whole; and the employer, innocent of negligence, in the end pays nothing.Dale Manufacturing Co. v. Bressi, 491 Pa. 493, 496, 421 A.2d 653, 654 (1980) (emphasis added) (quoting Arnold v. Borbonus, 390 A.2d 271, 274 (Pa. Super. 1978) (Spaeth, J., concurring and dissenting)).
Pension offsets are provided in Section 204(a) of the Act, 77 P.S. §71(a), which was enacted as part of Act 57. However, the pension offset antedates the statutory offset in Section 204(a). Case law precedent had established that an employer is entitled to an offset if it proves that it paid pension benefits in lieu of compensation, i.e., in relief of the claimant's inability to labor. City of Philadelphia v. Workers' Compensation Appeal Board (Andrews), 948 A.2d 221, 226 (Pa. Cmwlth. 2008) (citing Toborkey v. Workmen's Compensation Appeal Board (H.J. Heinz Co.), 655 A.2d 636, 640 (Pa. Cmwlth. 1995)). Here, Claimant was injured before the 1996 amendment to Section 204(a) of the Act. Accordingly, Employer's right to a pension offset is derived from the pre-1996 case law precedent.
Pension offsets were added to Section 204(a) by the Act of June 24, 1996, P.L. 350, commonly referred to as Act 57. --------
A pension offset against workers' compensation disability prevents "a self-insured employer from having to pay twice for the same disability" and prevents the claimant from being unjustly enriched. Murphy, 871 A.2d at 317. In Murphy, this Court addressed a nearly identical factual circumstance. There, the claimant, who also worked for the City of Philadelphia, was injured in 1993 and received workers' compensation benefits. The claimant also received (1) a third-party settlement and (2) a retroactive service-connected disability pension for that same injury. The employer successfully asserted a subrogation lien against the third-party settlement for workers' compensation it had paid. The employer also offset the claimant's pension payments against the claimant's workers' compensation. The claimant acknowledged the employer's right to subrogation but argued that the employer was not also entitled to the pension offset.
This Court held that the employer was entitled to both. We explained that the underlying policy behind subrogation and pension offsets, or credits, is to prevent a claimant from recovering twice for his work injury at the expense of the employer. Id. at 317. Subrogation and pension offsets "are not duplicative" because they prevent "two different types of double recovery." Id. Subrogation prevents the claimant from receiving "compensation for an injury [from the employer] when the responsible third party is also providing the required compensation," and a pension offset "prevents the employer from having to provide both payments in lieu of compensation and also workers' compensation payments for the same injury." Id. We then held:
[W]ere we to preclude the pension offset merely because subrogation is appropriate, we would be permitting Claimant to receive for the same injury, both Employer-funded payments in lieu of compensation (from the pension) and workers' compensation benefits. That is not consistent with the Act.Id. at 318 (emphasis in original).
Murphy controls here. Claimant complains that Employer seeks to recover twice "against the same pool of money," that is, the workers' compensation benefits that Employer paid to Claimant. Claimant's Brief at 10. However, the focus is not on what Employer recoups but, rather, what Claimant receives. Claimant always receives an amount at least equal to her workers' compensation disability, but she is entitled to no more.
Because the third party tortfeasor has paid Claimant for her injury, she must honor Employer's subrogation lien pursuant to Section 319 of the Act. This lien dates back to the injury date of July 1993. Under Toborkey, 655 A.2d 636, Employer is also entitled to offset its pension payments against her workers' compensation, which began on May 4, 1996. Employer used those payments as a credit towards the disability pension it owes Claimant. Because Employer has paid workers' compensation or its equivalent since 1993, both offsets are authorized beginning in July 1993. By not honoring Employer's subrogation lien, Claimant is being paid for her loss of wages twice, in the form of workers' compensation disability and the tort settlement. As the WCJ correctly explained, without the pension offset, Claimant would receive "an unintended windfall (i.e. disability pension payments plus [the] third party award)." WCJ Decision, October 14, 2004, at 7; Reproduced Record at 41a. Even after both offsets, however, Claimant never receives less than her workers' compensation disability.
Accordingly, the order of the Board is affirmed.
/s/_________
MARY HANNAH LEAVITT, Judge
ORDER
AND NOW, this 1st day of June, 2012, the order of the Workers' Compensation Appeal Board dated June 22, 2011, in the above captioned matter is hereby AFFIRMED.
/s/_________
MARY HANNAH LEAVITT, Judge