Workers’ Compensation Subrogation: Moving Forward in Pennsylvania after The Hartford Insurance Group on Behalf of Chunli Chen v. Kafumba Kamara, Thrifty Car Rental, and Rental Car Finance Group
In The Hartford Ins. Grp. on Behalf of Chen v. Kamara, 155 A.3d 1108 (Pa. Super. Ct. 2017) (“Hartford”),the Pennsylvania Superior Court issued a ruling that caused a monumental shift in workers’ compensation subrogation litigation. The court ruled that a subrogated workers’ compensation insurance carrier is entitled to bring suit against a third-party tortfeasor on its own initiative when the carrier conforms to the guidelines set out by the court in Liberty Mut. Ins. Co. v. Domtar Paper Co., 113 A.3d 1230 (2015). Although the Hartford ruling is very beneficial for subrogees, it created a variety of new issues for these carriers that have yet to be addressed by either the courts or legislature in Pennsylvania.
Shift in Position on Employer/Carrier Initiated Actions Against Third-Party Tortfeasors
Section 319 of the Workers’ Compensation Act (77 P.S. § 671) provides the statutory basis for a workers’ compensation carrier to bring suit. Section 319 states in relevant part,
“[w]here the compensable injury is caused in whole or in part 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 compensation payable under [the WCA] by the employer…”
In the line of cases preceding Hartford, the court continuously held that the subrogation rights afforded in Section 319 are the exclusive remedy against third-party tortfeasors and that the injured employee must sue the tortfeasor before the employer or carrier could be subrogated to the employee’s claim. The court insisted that the right of action against a tortfeasor is indivisible and remains with the injured employee who suffered the loss, thus preventing employers/carriers from asserting an independent cause of action. The court ruled in this way to avoid splitting causes of action between employers, carriers, and the injured employee. The court disfavors exposing third-party tortfeasors to multiple suits. In 2015, the court took its first step away from this long-held position on Section 319 in Liberty Mutual. Insurance. Company. v. Domtar Paper Company.
In Domtar, after denying a carrier’s suit, the court left the door open as to employer/carrier initiated actions against third-party tortfeasors, when it opined that “the employer/insurer’s right of subrogation under Section 319 must be achieved through a single action brought in the name of the injured employee or joined by the injured employee.” Recognizing the opportunity presented by the ruling in Domtar, the carrier in Hartford sought to take advantage of the court’s guidance.
Hartford Ruling Regarding Employer/Carrier Actions Against Third Parties
In Hartford, Chunli Chen (“Chen”) was standing in the parking lot of Thrifty Car Rental when she was struck by a rental car operated by defendant, Kafumba Kamara, and owned by Thrifty Car Rental. At the time Chen was struck by the car she was in the employ of Reliance Sourcing, Inc. Chen suffered extensive injuries and received thousands of dollars in medical and wage benefits from Reliance’s worker’s compensation insurance carrier, Hartford Insurance Group. Hartford filed suit against third-party tortfeasors Kamara and Thrifty Car rental alleging two counts of negligence and claiming that the tortfeasors were liable to Hartford and Chen for the injuries caused to her.
The trial court dismissed the case on two grounds. First, it ruled that Hartford’s action was barred by the court’s ruling in Domtar. The court explained that Hartford’s independent cause of action was improper under Section 319 and noted that actions against a third-party tortfeasor must be brought by the injured employee. Second, the trial court held that Hartford did not properly verify the complaint, as the complaint was not verified by Chen; rather, the complaint was verified by an agent at Hartford. The trial court held that verification was improper because the Hartford agent was not present at the scene of the accident and therefore did not have first-hand knowledge of it.
Hartford appealed the trial court decision arguing that its case was distinguishable from Domtar, and the Superior Court agreed. The court found that Hartford was not pursuing a subrogation claim directly against a third-party tortfeasor, as was the case in Domtar, rather it was trying to establish the third-party tortfeasor’s liability to Chen. To support this point, the court noted that Hartford captioned its complaint “Hartford Insurance. Group. on Behalf of Chunli Chen” (emphasis added), whereas the carrier in Domtarcaptioned “as subrogee of.” The court further distinguished Domtar by noting that Hartford brought “a single action [against the third-party tortfeasors] in the name of the injured employee.” The court called attention to the fact that Hartford sought to collect the full amount owed to Chen as a result of Thrifty’s negligence, rather than seeking recovery solely as to the amount it paid to Chen in workers’ compensation benefits. Thus, Hartford’s action was proper as it was a single action on behalf of the injured employee, complying with Section 319 and the guidelines set forth in Domtar.
In addition to finding that Hartford properly initiated the action on behalf of Chen, the court found that verification was proper under Pennsylvania Rule of Civil Procedure 1024. Under Rule 1024, a pleading must be verified by one or more of the parties filing. Here, the court found that it was proper for Hartford to verify the complaint as the court had already determined that Hartford properly brought suit “on behalf of Chen.” Additionally, Rule 1024 also requires that the party verifying the complaint have “personal knowledge or information and belief” that the averments contained in the complaint are true. Here, the court found that although the Hartford’s agent did not have personal knowledge of Chen’s injuries, the agent verified the complaint “to the best of [her] best information and belief,” thereby satisfying Rule 1024. As a result, the court ruled that verification was also proper.
The court’s ruling in Hartford changed the way Section 319 has been applied. Moving forward, employers/carriers with subrogation rights are permitted to initiate a suit against third-party tortfeasors, so long as they abide by the guidelines set forth in both Domtar and Hartford. To start, employers/carriers must bring a single action in the name of the injured employee or be joined by the injured employee. The caption of such an action should reflect that the suit is being brought on behalf of the injured employee. Additionally, the language of the complaint must make it clear that the employer/carrier is not attempting to pursue a subrogation claim directly against a third-party tortfeasor for benefits it paid to the injured employee; rather, the language must demonstrate that the employer/carrier is seeking to recover the entire amount to which the injured employee is entitled as a result of the third-party tortfeasor’s conduct. If properly plead, verification of the complaint by an employer/carrier’s agent familiar with the case will be appropriate to satisfy Rule 1024. Following these guidelines makes it more likely that an employer/carrier’s subrogation claim will proceed.
Issues after Hartford
Confusion surrounding employer/carrier actions against third-parties seems to have been clarified by the court in Hartford. The ruling, however, creates a variety of new issues that insurance carriers will have to deal with moving forward, including:
In Hartford, Chen worked together with the carrier to file the action, not wanting to file on her own. This raises the question regarding how an employer/carrier might proceed when an injured employee is uncooperative, non-responsive, or wants to file their own action. Does the filing by an employee preclude the filing by an employer/carrier? Does the employer/carrier still have a right to file and consolidate with the suit filed by the employee?
Many states that allow an employer/carrier to file suit require that the employer/carrier, initiating an action on behalf of an injured employee, must provide that employee notice of their intent to file. Will Pennsylvania institute a notice requirement? What is the length of time for that notice requirement? Will the state require notice to be sent via certified mail, return receipt requested?
c. Attorney’s Fees
When one party files an action to recover from a third-party tortfeasor for the entire amount to which the injured employee is entitled, who is responsible for attorneys’ fees? In many jurisdictions, reasonable attorney’s fees are to be deducted from the award received by the party who brought the action, whether that be the injured employee, employer, or carrier. However, there is a requirement under the Pennsylvania Rules of Professional Responsibility that a fee agreement be in place before an attorney can be paid. While liens held by the employer/carrier are paid less the employer/carrier’s pro rata share of reasonable attorney’s fees and court costs, how should the court address the issue when two suits are consolidated? Is a hearing on fee apportionment required to determine appropriate fee arrangements?
The Pennsylvania Superior Court has provided guidance on how to move forward in the filing of a Workers’ Compensation action, but there are still many questions that should be addressed by counsel and the client before rushing to the courthouse steps.