Section 319 of the Workers’ Compensation Act; Entitlement to Subrogation Where Self-Insured Police Employer Has Concurrent Obligations Under Workers’ Compensation Act and Heart and Lung Act
The Supreme Court granted allocatur to decide these issues as phrased by the State Police:
(1) Is compensation payable pursuant to Article III of the Pennsylvania Workers’ Compensation Act, when the Claimant suffers a work related injury and is concurrently entitled to benefits under the Pennsylvania Workers’ Compensation Act and the Heart and Lung Act? and
(2) Did the Commonwealth Court err in its determination that a self-insured municipality [sic] is not entitled to subrogation, to the extent of the compensation payable pursuant to Article III of the Pennsylvania Workers’ Compensation [Act], when it has concurrent obligations to an injured State Trooper under the Pennsylvania Workers’ Compensation Act and the Heart and Lung Act?
A Pennsylvania state trooper was injured when a tractor trailer struck his vehicle. As is customary, the State Police as employer paid trooper Heart and Lung benefits in lieu of Workers Compensation Act benefits while convalescing. The trooper entered into a settlement with a third-party tortfeasor arising out of accident. The State Police then sought subrogation against the proceeds of the trooper’s third-party tort recovery to recover the benefits it paid, and eventually entered into a stipulation with the trooper that acknowledged that the State Police had a net lien against the third-party tort recovery for Workers Comp benefits paid. Although the Workers’ Compensation Judge approved the settlement, the Board reversed, because the settlement was executed after the Commonwealth Court had ruled in Stermel v. Workers’ Compensation Appeal Board (City of Philadelphia), 103 A.3d 876 (Pa. Cmwlth. 2014), that a city employer of policemen was not entitled to recover a portion of the Heart and Lung Act benefits it paid a police officer from the officer’s third-party tort claim settlement.
The Commonwealth Court’s holding in Stermel was based on its interpretation of four statutes affecting a police employer’s right to subrogate against an injured employee’s third-party tort recovery for benefits paid as a result of the work related injury involving a motor vehicle – the Workers’ Compensation Act, the Heart and Lung Act, the Motor Vehicle Financial Responsibility Law (MVFRL), and Act 44, a 1994 statute that amended both the Workers’ Compensation Act and the MVFRL. As quoted by the court in this case, the Stermel court explained why no subrogation is permitted in these circumstances:
[T]he [MVFRL], … prohibits a plaintiff from including as an element of damages payments received in the form of [WC] or other ‘benefits paid or payable by a program … or other arrangement.’ [Section 1720 of the MVFRL,] 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 [Act] benefits are paid. Fulmer [v. Pa. State Police], 167 Pa.Cmwlth. 60, 647 A.2d [616,] 618–19 [ (1994) ]. Section 25(b) of Act 44 changed the Section 1720 [of the MVFRL] paradigm [ ] for [WC] benefits, [but] not Heart and Lung [Act] benefits. This means [a c]laimant continue[s] to be ‘precluded’ from recovering the amount of benefits paid under the Heart and Lung Act from the responsible tortfeasors. [Section 1722 of the MVFRL,] 75 Pa.C.S. § 1722. There can be no subrogation out of an award that does not include these benefits. Likewise, because the tort recovery cannot, as a matter of law, include a loss of wages covered by Heart and Lung [Act] benefits, [a c]laimant d[oes] not receive a double recovery of lost wages or medical bills.
149 A.3d 121-122, quoting Stermel, 103 A.3d at 885