Legal Insights

PA Commonwealth Court: Employers/Workers' Compensation Insurers Entitled to Subrogation for Future Medical Expenses and Wage Loss Awarded in Third Party Medical Malpractice Actions

January 31, 2016
By: Karyn Dobroskey Rienzi and Patrice A. Toland

Note: This article also appeared on the Workers' Compensation Institute's (WCI) website on February 2, 2016. Click here to view.

The Pennsylvania Commonwealth Court recently held that an award for future medical expenses and wage loss benefits obtained in a claimant’s third party medical malpractice action is subject to subrogation by employers and their workers’ compensation insurance carriers. Protz v. Workers’ Comp. Appeal Bd. (Derry Area School District), No. 402 C.D. 2015 (Pa. Commw. January 6, 2016).

In Protz, the claimant (who is the same claimant who was involved in the appeal decided by the Commonwealth Court on September 18, 2015, in which the Court held that the use of the Fifth and Sixth Editions of the AMA Guides to the Evaluation of Permanent Impairment in the performance of Impairment Rating Evaluations is unconstitutional) sustained a work-related right knee injury in 2007, which the employer accepted. The work injury necessitated a total knee replacement resulting in an inadvertent transected popliteal artery. As a result, the claimant filed a medical malpractice action in the Court of Common Pleas of Westmoreland County, Pennsylvania. The action settled. The settlement and distribution sheet prepared by the claimant’s/plaintiff’s counsel in the medical malpractice action showed that all monies awarded were with regard to future medical expenses and lost wages, with none of the funds being set aside for the payment of past medical bills or lost wages.

The employer filed a Petition to Review Compensation Benefits, seeking to subrogate the claimant’s third party recovery in the medical malpractice action pursuant to Section 319 of the Workers’ Compensation Act, 77 P.S. § 671. At the hearing, the employer submitted the claimant’s medical malpractice complaints, the praecipe to settle and discontinue the malpractice actions and the settlement and distribution sheet. The employer also submitted, over claimant’s counsel’s hearsay objection, the report of Raymond M. Vance, M.D., who authored a report in the claimant’s medical malpractice action, which indicated that the claimant’s ongoing symptoms and disability were all causally related to the negligence of the medical malpractice defendants.

The Workers’ Compensation Judge awarded the employer and its workers’ compensation insurance carrier subrogation benefits from the time of the settlement forward. The Judge also ordered the employer and its workers’ compensation insurance carrier to reimburse the claimant for the attorney’s fees and costs that she incurred in obtaining the medical malpractice settlement. After determining that the cost of recovery for the third party settlement consumed 47 percent of the settlement, the Judge ordered that the employer and its workers’ compensation insurance carrier were entitled to a reduction of the Claimant’s medical benefits and wage loss benefits at the rate of 47 percent of the repriced amount for future bills and 47 percent of her weekly disability rate. The claimant appealed to the Workers’ Compensation Appeal Board, which affirmed the Judge’s Order. The claimant then filed a Petition for Review to the Commonwealth Court.

The Commonwealth Court noted that the right of subrogation under the Workers’ Compensation Act is an absolute right and serves the purposes of preventing double recovery by the claimant for the same injury, ensuring that the employer is not compelled to make compensation payments made necessary by the negligence of a third party, and to prevent a third party form escaping liability for his negligence.

The Court also noted that Sections 508(a) and (c) of the MCARE Act, 40 P.S. § 1303.508(a) and (c), preclude subrogation of a plaintiff’s medical malpractice proceeds to the extent that those proceeds include past medical expenses. However, these Sections of the MCARE Act are silent regarding subrogation of future medical expense and wage loss awards in medical malpractice actions. Accordingly, the Court determined that the Legislature did not intend to change the existing law by omission and preclude subrogation under Section 319 of the Workers’ Compensation Act with respect to future benefits when it enacted Section 508 of the MCARE Act. The Court therefore affirmed the Board’s order awarding the employer and its workers’ compensation carrier subrogation of the claimant’s third party medical malpractice recovery with respect to the award for future medical expenses and wage loss.

The claimant has not sought reconsideration from the Commonwealth Court or, to date, review by the Pennsylvania Supreme Court.

In light of the Commonwealth Court’s Opinion, employers and workers’ compensation insurance carriers should determine whether any of their claims involve subsequent, related medical malpractice actions (or potential future actions) and place the parties in the medical malpractice actions on notice of the employer’s/worker’s compensation insurance carrier’s lien with regard to any award for future wage loss and medical expense payments.

For more information concerning the Commonwealth Court’s decision, or if you have a question about a specific workers’ compensation claim, please contact Workers' Compensation Principal Patrice A. Toland at (215) 587-1093 or ptoland@PostSchell.com.

Disclaimer: this E-Flash does not offer specific legal advice, nor does it create an attorney-client relationship. You should not reach any legal conclusions based on the information contained in this E-Flash without first seeking the advice of counsel.