Wickert: Court Confirms Compensation Carrier Can Initiate Filing of Third-Party Action

Friday, March 31, 2017 | 0

A long-standing controversy has been resolved and a major anti-subrogation obstacle in Pennsylvania has been overcome.

Gary Wickert

On Feb. 10, 2017, in The Hartford Insurance Group on Behalf of Chen v. Kamara, 2017 WL 542020 (Pa. 2017), a Superior Appellate Court finally confirmed that a subrogated workers’ compensation carrier is authorized to initiate the filing of a third-party action on its own initiative, provided it does so correctly.

In the Kamara case, Chunli Chen was standing in the parking lot of Thrifty Car Rental, waiting to rent a car, when she was struck by a rental car operated by defendant, Kafumba Kamara, and owned by defendant, Thrifty Car Rental, and/or defendant, Rental Car Finance Group.

Chen was in the employ of Reliance Sourcing Inc., and Hartford Insurance Group (“Hartford”) paid $59,424.71 in workers’ compensation benefits to or on behalf of Chen. Hartford thereafter filed suit against Kamara and styled the complaint with “The Hartford Insurance Group on behalf of Chunli Chen” as the plaintiff.

While Pennsylvania law has long allowed for a workers’ compensation carrier to be subrogated to the rights of an injured employee, the Pennsylvania Supreme Court had previously held, based on long-standing precedent, that “the right of action against a third-party tortfeasor under Section 319 of the [Workers’ Compensation Act] remains in the injured employee, and 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.” (Liberty Mutual Ins. Co. v. Domtar Paper Co., 113 A.3d 1230 (Pa. 2015).

Precisely what that meant was, until now, unclear.

Kamara asked the trial court to dismiss Hartford’s suit, claiming that, since Chen was the injured employee and neither assigned her cause of action to Hartford nor was a party to the lawsuit, the entire complaint was improper. Hartford responded that the suit was proper because “[i]n the Domtar [Paper] case, Liberty Mutual filed suit ‘as subrogee of’ [the injured employee, while, in the case at bar,] Hartford captioned the suit ‘on behalf of Chunli Chen’ to show [that Hartford is] appropriately pursuing this action in the name of the injured employee.”

On Feb. 25, 2016, the trial court entered an order that sustained both of Kamara’s preliminary objections and dismissed Hartford’s complaint with prejudice. The trial court held that in accordance with Domtar Paper, dismissal was proper because Hartford was attempting to bring an independent cause of action against the third-party tortfeasors. As the trial court explained, “under Pennsylvania law, actions against a third-party tortfeasor must be brought by the injured employee; the workers’ compensation insurance carrier has no independent cause of action against the tortfeasor under Section 319 of the Workers’ Compensation Act.”

Hartford appealed to the Superior Court (one of two intermediate appellate courts in Pennsylvania), and the issue was whether the trial court erred in dismissing Hartford’s claim when, pursuant to Domtar Paper, Hartford captioned the suit “The Hartford Insurance Group on behalf of Chunli Chen” to show that the action was appropriately brought in the name of the injured employee.

The court noted that, in Domtar, Liberty Mutual filed suit “as subrogee of” the injured employee, while, in this case, Hartford styled the suit “on behalf of Chunli Chen” to show that Hartford was appropriately pursuing this action as a “use plaintiff” in the name of the injured employee.

Hartford was not pursuing a subrogation claim directly against the third-party tortfeasors, as was the case in Domtar Paper. Instead, Hartford filed suit “on behalf of Chen” and was attempting to establish the liability of the third-party tortfeasors to Chen. Therefore, the Superior Court felt that Hartford’s lawsuit was proper under both the Workers’ Compensation Act and case law construing the act.

Section 319 of the Workers’ Compensation Act (“WCA”), codified at 77 P.S. § 671, furnishes the statutory basis for subrogation by a workers’ compensation carrier. Section 319 states, in relevant part:

"Where 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 employe … against such third party to the extent of the compensation payable under [the WCA] by the employer …"

The right to pursue the third-party action remains in the injured employee, and the employer/insurer’s right of subrogation under %u05BB§ 319 must be achieved through a single action brought in the name of the injured employee or joined by the injured employee. The carrier 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. The carrier’s right of subrogation must be worked out through an action brought in the name of the injured employee, either by joining the employer as a party plaintiff or as a use plaintiff.

In Domtar Paper, the Supreme Court held that a workers’ compensation carrier may not “pursue a subrogation claim directly against a third-party tortfeasor when the compensated employee who was injured has taken no action against the tortfeasor.” Since Liberty Mutual was suing the third-party tortfeasors “as subrogee of” the injured employee, and since Liberty Mutual was simply attempting to pursue its own subrogation claim directly against the third-party tortfeasors, Liberty Mutual’s complaint was properly dismissed. It was pursuing its own claim, not the employee’s claim. The third-party right of action against the tortfeasor is indivisible and remains in the employee.

Pennsylvania courts disfavor splitting causes of action and have frequently remained true to this maxim in the context of workers’ compensation subrogation. Preventing the employer/insurer from asserting an independent cause of action against the tortfeasor eliminates the possibility that the third-party tortfeasor could be exposed to multiple suits filed by both the employer and injured employee, and will preserve the preferred rights of the injured employee, who retains a beneficial interest in the cause of action against the tortfeasor.

While Domtar clearly held that a carrier’s third-party subrogation rights must be protected through a single action brought in the name of the injured employee or joined by the injured employee, nobody was quite sure what this meant. In The Hartford Insurance Group on Behalf of Chen v. Kamara, Hartford followed the above precedent and carefully filed suit with the plaintiff listed as “The Hartford Insurance Group on behalf of” the injured employee.

Therefore, Hartford was not itself attempting to “pursue a subrogation claim directly against a third-party tortfeasor,” was not seeking to recover only the amount that it paid to Chen in workers’ compensation benefits, and was not “splitting” the employee’s cause of action. Instead, Hartford brought a single action against the third-party tortfeasors in the name of the injured employee and attempted to recover the entire amount to which Chen is entitled, and to which Hartford was subrogated. They got it right.

Kamara also claimed that the complaint was verified by Jaime Young, a representative of Hartford with knowledge of the claim. The appellant claims that the verification was proper or, in the alternative, the appellant claims that the trial court “should have allowed [Appellant 20] days to attach a verification signed by Chunli Chen, rather than dismissing the suit.” 

The trial court held that the verification was improper because Jaime Young “was not present at the scene of the accident and did not have firsthand knowledge of the incident,” and because the verification “did not state the source of Young’s information or the reason why the verification was not made by a party.”

However, as Hartford is a party to this action because the injured employee, Chunli Chen, did not bring suit against the third-party tortfeasors, and Hartford thus brought suit “on behalf of” Chen, Hartford is the entity that is controlling this litigation, and its verification was appropriate.

On appeal, the Superior Court concluded that the trial court erred when it dismissed Hartford’s third-party complaint. A dissent in Domtar Paper noted that where the workers’ compensation carrier brings suit in the name of the injured employee in the capacity of a use plaintiff, it is critical that the actual injured employee be served with a copy of the subrogee’s complaint so that the employee may, if he or she desires, retain counsel and actively participate in the action. Although there was some discussion about whether Hartford complied with this requirement, no issue was preserved on this point in the Kamara appeal.

Although § 671 does not confer on a workers’ compensation carrier/employer the statutory right to bring suit directly against a third-party tortfeasor in its own name, the same result can be achieved “through an action brought in the name of the injured employee, either by joining the employer as a party plaintiff …, or as a use plaintiff.” 

Filing as “subrogee of” the employee is not authorized under the statute. Filing suit with the plaintiff as “The Hartford Insurance Group on behalf of Chunli Chen” is authorized.

The confusion and anti-subrogation obfuscation in Pennsylvania regarding third-party actions appears to have been cleared up once and for all. The Kamara decision shows subrogated carriers precisely how file a third-party action if they need to.

Gary Wickert is a partner with the Matthiesen, Wickert & Lehrer law firm in Hartford, Wisconsin. This blog post is reprinted with permission.