gavel.gif (3462 bytes) Employers right to subrogation is absolute, Supreme Court rules

An employer has an absolute right to subrogation from a third-party claim when the employer is paying workers� compensation benefits, the Pennsylvania Supreme Court ruled in Thompson v. WCAB on Oct. 17, 2001. Justice Ronald D. Castille wrote the majority opinion.

According to the opinion, John Thompson was testing an Omni 60 aerial platform for his employer, Craig Welding and Equipment Rental (Craig). Craig intended to purchase the machine. While testing the Omni, Thompson was injured when the tip boom collapsed, causing injury to Thompson�s skull, jaw, ribs and teeth.

Thompson received workers� compensation benefits and medical benefits through Craig and its workers� compensation carrier, USF&G. He then filed a products liability suit against the manufacturer of the Omni.

Shortly after the accident, Craig inspected the Omni 60 to find the cause of the collapse. An expert was also present at the inspection. The subsequent report stated that three of the five bolts that hold the tip boom up had fallen out, and a fourth bolt was broken in two. The fifth bolt was never found. The expert said that the collapse resulted from three bolts working loose and the fourth snapping from the weight.

After the inspection, William Craig, the company�s owner, took possession of the bolts. At trial, the expert testified that he could identify whether the bolts were of the correct grade and whether they had been replaced since the machine�s manufacture if he could see the bolts. Craig had inadvertently lost the bolts by the time of trial 5 years after the accident.

The manufacturer filed a motion in limine to preclude Thompson from presenting medical or indemnity benefits, as he could not produce the bolts for inspection. The case settled for $300,000 dollars for pain and suffering and loss of consortium for Thompson�s wife. Craig and USF&G filed a petition to suspend compensation so they could subrogate the claim. Thompson argued that since the award was not for medical expenses, only for pain and suffering and loss of consortium, that it was exempt from subrogation. A workers� compensation judge ruled in favor of Craig. The Workers� Compensation Appeal Board (WCAB) affirmed the ruling. On appeal, the Commonwealth Court reversed.

The case then went to the state Supreme Court. The court looked at two issues in the present case. The opinion states, "The principal legal issue before this court is whether an employer�s subrogation right under section 319 is absolute. The secondary issue is whether ad hoc "equitable" factors such as those cited by the Commonwealth Court panel majority- William Craig�s inadvertent loss of the bolts resulting in the preclusion of evidence of medical bills and lost wages in the product liability action and appellants� failure to intervene in that action to further protect their subrogation interest- warrant a conclusion that the employer in this case is equitably estopped from seeking subrogation."

In looking at the Workers� Compensation Act with regard to this case, the court said that the statute is "clear and unambiguous. It is written in mandatory terms and, by its terms, admits of no express exceptions, equitable or otherwise."

In making its ruling, the Supreme Court referred to Winfree v. Philadelphia Electric. "It is the fact that the Winfree court addressed the equitable estoppel claim at all, of course, that led the Commonwealth Court panel majority here to conclude that the statutory subrogation right is subject to defeat under the ad hoc weighing of factors inherent in the doctrine of equitable estoppel. That Winfree addressed and rejected the particular claim of equitable estoppel forwarded there, however, does not definitively resolve the more fundamental question of whether the statutory subrogation right is subject to avoidance upon ad hoc equitable grounds at all. The holding in Winfree, as well as this court�s plain language interpretation of the statute in the case, affirmed that the statutory right was absolute."

The court also looked at Curtis v. Simpson Chevrolet in stating that there are circumstances where subrogation may not be absolute, such as when an employer deliberately is in bad faith in order to collect from a third-party suit brought by the employee. "No showing of bad faith has been made here, however; thus the employer�s right to subrogation is absolute," said the Supreme Court.

Thompson then argued whether the settlement funds were subject to subrogation at all, since the funds were designated for pain and suffering and loss of consortium only. Craig and USF&G said that the settlement was created in such a way as to defeat the employer�s right to subrogation.

The court remanded to the Commonwealth Court for consideration of these issues, since they failed to address them in the first trial.


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