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Case Bulletin – Pennsylvania Supreme Court Rules on Worker’s Compensation Insurer’s Direct Suit to Recover Lien Amounts

On December 13, 2009, George Lawrence suffered a work related injury when he slipped and fell on a property leased by Domtar Paper Co. and owned by Commercial Net Realty Services, Inc.  As a result of this injury, Mr. Lawrence collected nearly $34,000 in worker’s compensation benefits from his employer’s worker’s compensation carrier, Liberty Mutual.

 

Subsequently, Liberty Mutual filed suit against Domtar and Commercial Net alleging that Mr. Lawrence’s injuries were a result of the negligent ownership and maintenance of the parking lot.  Liberty styled itself in its suit as the subrogee of George Lawrence and it argued that it was entitled to recover from Domtar and Commercial Net by virtue of Section 319 of the Worker’s Compensation Act, 77 P.S. §671.

 

Domtar and Commercial Net responded to this suit by filing Preliminary Objections, arguing that only the injured party has a cause of action against a third party tortfeasor, not that individual’s employer or worker’s compensation carrier.  The trial court sustained the Objections, holding that the employer or carrier’s right of subrogation under Section 319 must be achieved through an action brought in the name of the injured employee or joined by that employee.  The court noted that Lawrence has made no claim against the third parties and that he did not assign his claim to Liberty Mutual, nor was he joined in Liberty Mutual’ s suit.

 

Liberty Mutual appealed, arguing that Section 319 provided it an absolute right of subrogation for the benefits it paid to Lawrence and that it should not be denied this right because Lawrence declined to bring suit against the third party tortfeasors.  In support of its appeal, Liberty Mutual relied on the Supreme Court’s decision in Scalise v. FM Venzie & Co., wherein it was stated that an employer “is not to be denied his right of suit because the employee does not sue, but may institute the action in the latter’s name.” 152 A. 90, 92 (Pa. 1930).  However, the Superior Court deemed Liberty Mutual’s use of Scalise to be incorrect, finding that the central holding of that case was that an injured employee had a right to bring suit against a third party not withstanding subrogation rights conferred on the employer.  Essentially, the Superior Court held that an employer or insurance carrier does not gain the right to directly sue a third party based on Section 319; rather such an action must be brought by the injured individual.  Thus, the Superior Court affirmed Domtar and Commercial Net’s Preliminary Objections.

 

The Supreme Court granted Liberty Mutual’s appeal to address this issue.  The Court held that Pennsylvania law does not provide an employer or insurance carrier the right to bring suit directly against a third part tortfeasor to recover for worker’s compensation benefits which were paid.  Additionally, the Court noted that the language relied upon by Liberty Mutual from Scalise was dicta and that the premise of this case allowed an employer or carrier to enforce its subrogation rights by filing an action against the third party in the name of the injured claimant.  

 

 

Ultimately, the Court affirmed the lower courts’ decisions and held that the right of action against a third party tortfeasor under Section 319 of the Worker’s Compensation Act remained with the injured employee and that the employer’s or carrier’s right of subrogation under the Act must be “achieved through a single action brought in the name of the injured employee or joined by the injured employee”.  Thus, the Court found against Liberty Mutual as it brought this suit on its own accord did not name or joined Mr. Lawrence to it as required by Section 319.