In workers’ compensation cases an injured employee will frequently have a cause of action not only against his employer but also against the third party tortfeasor who contributed to his work injury. If an employee receives a settlement from the third party tortfeasor the employer is entitled to pursue it’s subrogation rights against the employee’s third party recovery. “As provided in Section §319 [of the Pennsylvania Workers’ Compensation Act], an employer who pays workers’ compensation is subrogated to the right of the employee against a third party tortfeasor.” P&R Welding and Fabricating and The Donegal Mutual Insurance Co. v. WCAB (Pergolia), 664 A.2d 657, 661 (Pa. Cmwlth. 1995).
The case Fortwangler v. WCAB (Quest Diagnostics), 113 A.3d 28, 33 (Pa. Cmwlth. 2015) is especially helpful in explaining both the concept of subrogation and an employer’s subrogation rights under Section §319 of the Act. The purpose “. . . behind the right to subrogation is threefold ‘to prevent double recovery for the same injury by the Claimant, to ensure that the employer is not compelled to make compensation payments made necessary by the negligence of the third party and to prevent a third party from escaping liability for his negligence.”Fortwangler, 113 A.3d at 33 (Pa. Cmwlth. 2015). Fortwangler emphasizes that “there are two aspects to an employer’s subrogation rights: the compensation previously paid to a claimant by an employer is the accrued lien or ‘past’ aspect and the credit towards the compensation payable is the “future” aspect to be paid subsequently upon settlement of the accrued lien.” 113 A.3d at 33. “Calculation of an employer’s future subrogation rights is dependent upon the amount of the Claimant’s recovery from the third-party settlement and the amount of compensation previously paid to a Claimant by the employer.” Id.
Of significance is that under Section §319 of the Pennsylvania Worker’s Compensation Act (hereinafter “Act”) “an employer’s right to subrogation is automatic and absolute.” Id. Therefore, “Section §319 does not contain a time limitation for filing a subrogation claim.” DeVore v. WCAB (Sun Oil Co.), 645 A.2d 917, 920 (Pa. Cmwlth. 1994). See also Superior Lawn Care and State Workers’ Insurance Fund v. WCAB (Hoffer), 878 A.2d 936 (Pa. Cmwlth. 2005). It is also important to remember that even if an employee’s third party recovery is less than the employer’s lien that does not prohibit the employer from pursuing its subrogation rights. P&R Welding and Fabricating and The Donegal Mutual Insurance Co. v. WCAB (Pergolia), 664 A.2d 657, 661 (Pa. Cmwlth. 1995).
Nevertheless, an employer’s right to subrogation is subject to exceptions which can ultimately prevent it from realizing it’s subrogation rights. First, “an employer can agree to waive its past and future subrogation rights.”Fortwangler, 113 A.3d at 34. See also Gorman v. WCAB (Kirkwood Construction), 952 A.2d 748, 752 (Pa. Cmwlth. 2008). The language of “full satisfaction” can be reasonably interpreted to constitute the waiver of future subrogation rights. Fortwangler, 113 A.3d at 34. The principles of accord and satisfaction or estoppel can also result in the employer forfeiting his future subrogation rights. See Goodway Marketing Inc. v. Faulkner Advertising Associates,(1982 U.S. Dist. LEXIS 14084) and Bayush v. WCAB (Conemaugh Township), 534 A.2d 853 (Pa. Cmwlth. 1987) respectively. Finally, “subrogation may be considered inappropriate in the face of deliberate bad faith conduct by the employer.” Stout v. WCAB (Pennsbury Excavating, Inc.), 948 A.2d 926, 929 (Pa. Cmwlth. 2008). See also Superior Lawn Care and State Workers’ Insurance Fund v. WCAB (Hoffer), 878 A.2d 936 (Pa. Cmwlth. 2005).
As stated , an employer’s subrogation rights are subject to negotiation. In other words, the third party plaintiff’s attorney oftentimes deals with a subrogation adjuster for the workers’ compensation carrier. How the third party attorney deals with the subrogation adjuster will have a significant impact on both the amount of money the Plaintiff receives in the third party recovery and his future workers’ compensation benefits.
Ultimately, in the interest of protecting an injured employee’s future compensation rights, it is highly advisable to either engage the services of an attorney who handles both third party and workers’ compensation cases or have the third party attorney and the workers’compensation attorney consult extensively with one another.