Big Changes To Workers’ Compensation Subrogation

On June 19, 2018, the Pennsylvania Supreme Court issued a decision which significantly changed the landscape of the interaction between personal injury and workers’ compensation claims.  Personal injury attorneys and injured workers should know about the decision and its implications.

The case, Whitmoyer v. W.C.A.B. (Mountain Country Meats), 52 MAP 2017, 2018 WL 3031903 (Pa. June 19, 2018), now stands for the proposition that workers’ compensation insurance carriers may not seek reimbursement for future medical expenses from the claimant’s balance of a personal injury recovery.  Some background discussion is appropriate for context.

Most people know that injured workers are barred from suing their employers in the event of a workplace injury, even if the injury is caused by the employer’s negligence.  Workers’ compensation law is a shield to most such claims.  However, work injuries are frequently caused by entities other than the injured worker’s employer.  These so-called “third party claims” are essentially personal injury lawsuits brought by the injured worker (the first party) against a wrongdoer (the third party) who is not the injured worker’s employer (the second party).  The injured worker must, in this type of case, prove that the third party was negligent.  But since the worker also suffered a work injury, workers’ compensation benefits are payable.  The Whitmoyer case speaks to how the workers’ compensation carrier must be paid back out of a plaintiff’s recovery from a negligent third party.

Workers’ compensation, in general, only pays wage loss benefits and medical benefits to or on behalf of injured workers.  Damages are limited; this is part of the essential “grand bargain” of workers’ compensation law.  Injured workers do not have to prove negligence to receive payment for wage loss and medical treatment, and in return they give up their rights to sue their employers for negligence.  In contrast, plaintiffs suing negligent third parties are entitled not only to claim wage loss and medical expenses as damages, but also pain and suffering.  Thus, personal injury recoveries can be significantly higher than what a workers’ compensation carrier might pay for an injured worker’s claim.  However, the injured worker does not get to keep the whole recovery – the Workers’ Compensation Act provides for the absolute right of subrogation.  Basically this means that the workers’ compensation carrier which has paid out money for the work injury is entitled to be repaid out of any money recovered by the injured worker from the negligent third party.  We say that the workers’ compensation carrier’s right to be reimbursed is subrogated to the injured worker’s right to recover damaged from the negligent third party.

When a personal injury recovery comes into the hands of the plaintiff, by verdict or settlement, and the workers’ compensation carrier has paid wage loss and medical benefits for the same injury, the plaintiff must pay back workers’ compensation to take care of this subrogation interest.  If the personal injury recovery is larger than the amount of money paid by the workers’ compensation carrier for wage loss and medical benefits up to the date on which the personal injury recovery is received, we say that the plaintiff has a “balance of recovery.”  In the past, the law was unclear on whether the balance of recovery would have to be used to continue to repay workers’ compensation as long as workers’ compensation was continuing to pay the injured worker for ongoing wage loss and medical treatment. 

Most workers’ compensation insurance carriers took the position that if there was a balance of recovery in excess of the subrogation lien to the date of the recovery, the excess would still have to be used to pay back the workers’ compensation carrier for the ongoing payments of wage loss and medical expenses received by the injured worker.  The mechanics of that repayment are too complicated to get into in this article, but over the years a Third Party Settlement Agreement form became the accepted method for figuring out this repayment schedule.  The Pennsylvania Supreme Court in theWhitmoyer case interpreted the Workers’ Compensation Act to mean that only future installments of wage loss benefits, not medical treatment, could be reimbursable to the workers’ compensation carrier if there was an excess balance of recovery.

Prior to Whitmoyer, it was accepted practice that a claimant receiving ongoing workers’ compensation benefits after a personal injury recovery would have to pay a portion of his or her own wage loss and medical treatment going forward into the future to account for the future subrogation rights of the workers’ compensation carrier.  Now, Whitmoyer has made it clear that the workers’ compensation carrier must pay for one hundred percent of the claimant’s future medical expenses even if there is a balance of recovery.

Given that it takes paragraphs and paragraphs of explanation to even lay out the most basic concepts of subrogation, diving deeper into these issues in this article would require several more pages.  Moreover, each claimant’s situation is fact-specific, and should be evaluated by a certified specialist workers’ compensation lawyer to give the best opportunity for an optimal outcome.  The Supreme Court did not give any guidance on how existing cases should be handled where a claimant has been paying a percentage of her own ongoing medical expenses after an excess personal injury recovery.  Is workers’ compensation liable only to pay the full cost of medical expenses going forward?  Is the claimant entitled to reimbursement of past medical expenses which she wrongly paid?  Is the claimant somehow locked into continuing to pay a percentage of the ongoing medical expenses despite the holding of Whitmoyer?  These questions and more will have to be answered in the coming months and years as the implications of this decision play out in the courts.

Levi S. Wolf, Esquire is the managing attorney in the Pottstown law firm of Wolf, Baldwin & Associates, P.C., practicing mainly in Montgomery, Berks, and Chester Counties.  He was a member of the inaugural class of attorneys who were certified as specialists in the practice of workers’ compensation law by the Pennsylvania Bar Association’s Section on Workers’ Compensation Law as authorized by the Pennsylvania Supreme Court.  He can be reached at 610.323.7436, or by e-mail to LWolf@wolfbaldwin.com.

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