Worth Noting: Recent Developments in Workers' Compensation Subrogation
Subrogation is the substation of one party for another with reference to a claim, so that the substituted party succeeds to the rights of the original party in relation to the claim. In workers' compensation, the employer or insurer that has paid benefits to an injured worker has subrogation rights with regard to a workers' claim against a third party responsible for the injury.
The Pennsylvania Workers' Compensation Act provides that where an injury is caused by the act or omission of a third party, the employer shall be subrogated to the right of the employee against such third party to the extent of the benefits paid by the employer or the insurer. Any recovery against a third party in excess of the workers' compensation benefits paid by the employer are paid to the employee.
The purpose underlying the employer's right of subrogation is threefold: 1) to prevent the employee from receiving a double recovery for the same injury; 2) to ensure that the employer is not compelled to pay benefits due to the wrongful act of a third party; and, 3) to prevent a third party from escaping responsibility for wrongful acts.
After a work injury, it is not uncommon for employers to be contacted by their insurer or the injured employee's representative for the purpose of examining the accident scene to determine whether a third party is responsible for the employee's injury. It is often in the employer's best interests to cooperate with such investigations.
Recently, the Pennsylvania Supreme Court considered whether a workers' compensation employer/insurer could pursue its right of subrogation directly against a third party without participation from the injured employee.
In Liberty Mutual v. Domtar, an employee suffered a work-related injury when he slipped and fell in a parking lot owned and maintained by third parties. Liberty Mutual paid the injured employee workers' compensation benefits and then filed an action directly against the parties responsible for the parking lot.
The defendants argued that Liberty Mutual had no independent right to bring a subrogation claim directly against a third-party tortfeasor and that the injured employee must also be a party to the claim. The trial court agreed, and the Superior Court affirmed the trial court.
On April 27, 2015, the Pennsylvania Supreme Court issued an Opinion declaring that the right of action against a third party remains with the injured employee, and that the employer/insurer's right of subrogation must be achieved through a single action brought in the name of the employee. The Supreme Court's decision provides incentive for employers to cooperate with the injured employee in thoroughly investigating whether a third party is responsible for the employee's injuries.
In Bowman v. Sunoco, Inc., the Pennsylvania Supreme Court affirmed a company's practice of requiring independent contractors and vendors to have their employees sign a waiver of subrogation in favor of the company. Sunoco hired Allied Security to provide security at a refinery. Allied hired Bowman, who was subsequently injured while working at the refinery. Bowman sued Sunoco. Sunoco responded by claiming Bowman signed a waiver when she was hired wherein she waived any rights she had to assert a claim against any customer of Allied.
The Supreme Court affirmed the dismissal of Bowman's claim, noting the purpose of the release was to protect Allied's customers from liability in the event an Allied employee was injured on the job after the employee signed the waiver. The waiver was a condition of employment, and both Allied and Bowman contemplated it would encompass future injuries. The waiver was a guarantee to Allied's customers that they would not be responsible for injuries sustained by Allied's employees. It served as a benefit to Allied's customers and in no way affected the employee's right to recover workers' comp from allied.
In light of the Pennsylvania Supreme Court's decision in Bowman, businesses might consider requiring their vendors or contractors to obtain prospective waivers of future subrogation claims. To discuss this matter with one of our attorneys, please call our office at 814-870-7600 or complete this form on our website.