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Pennsylvania State Police V. Workers’ Comp. Appeal Bd. (Bushta)

July 18th, 2018

In Pennsylvania State Police v. Workers’ Comp. Appeal Bd. (Bushta), 14 WAP 2017, 2018 WL 2408166, at *1 (Pa. May 29, 2018), the Supreme Court of Pennsylvania unanimously affirmed the Commonwealth Court’s decision that the Pennsylvania State Police (“PSP”) is not entitled to subrogation of a state trooper’s third-party settlement for benefits paid under the Heart and Lung Act.  In this discretionary appeal, the Supreme Court considered whether a self-insured public employer was entitled to subrogation for benefits payable under the Workers Compensation Act (“WCA”), when there is a concurrent obligation to provide benefits under the WCA and Health and Lung Act (“HLA”).  The Court held that benefits paid to the state trooper were entirely Heart and Lung benefits, not workers’ compensation benefits, and, as such, subrogation is prohibited under the Motor Vehicle Financial Responsibility Law.

The case arose from a 2011 motor vehicle collision in which Pennsylvania State Trooper Joseph Bushta (“Claimant”) sustained neck and back injuries when a tractor-trailer struck his police vehicle.  Claimant missed approximately 16 months of work, during which he received his full salary under the HLA.  A notice of compensation payable was also issued in accordance with the WCA. However, PSP’s third-party administrator sent workers’ compensation checks directly to PSP, rather than Claimant, avoiding the need for Claimant to remit the payments under the HLA.

In 2014, Claimant settled his third party case against the responsible tortfeasors for $1 million. The release Claimant signed assumed responsibility for any liens. PSP filed a petition to review compensation benefits, asserting a right of subrogation against the third-party settlement for benefits payable under the WCA.  On November 19, 2014, Claimant executed a stipulation to reimburse PSP a reduced lien amount as full payment, despite continued denial of the lien’s validity.  The stipulation was then approved by a workers compensation judge and adopted as an order.

However, unbeknownst to Claimant’s counsel, the Commonwealth Court issued its decision in Stermel v. WCAB (City of Philadelphia), 103 A.3d 876 (Pa. Cmwlth. 2014) the week before the stipulation was executed, holding that the anti-subrogation provision in 75 Pa.C.S. § 1720 of the MVFRL includes benefits paid under the HLA.  Upon learning this, Claimant’s counsel filed an appeal with the Workers’ Compensation Appeal Board arguing that benefits paid to Claimant fell solely under the HLA and, under Stermel, were not subrogable.  The WCAB held that because Stermel was decided prior to the parties signing the stipulation, Stermel was controlling – making the stipulation void.  The Commonwealth Court affirmed, also recognizing that, while the court in Stermel appeared to limit its holding to lost wages, because the HLA requires payment of all medical expenses, PSP could not recover any portion of the benefits paid under the HLA from the proceeds of Claimant’s third-party settlement.

The Supreme Court, agreeing with the Commonwealth Court’s reasoning in Stermel, held that Health and Lung benefits subsume WCA benefits for the purposes of the 75 Pa.C.S. § 1720 of the MVFRL, and, thus, subrogation of such benefits is barred.  The court reasoned that Claimant was precluded from recovering lost wages and medical benefits received under the HLA from the responsible tortfeasors. Therefore, PSP had no right of subrogation out of an award that does not include workers’ compensation benefits.  Further, the court was unpersuaded by PSP’s arguments to limit Stermel. The court noted that neither the mere acknowledgement of a work injury in an NCP, nor the specification of the weekly compensation rate Claimant would be entitled under the WCA, transformed Heart and Lung benefits into WCA benefits under the MVFRL.  Similarly, the use of the WCA’s pricing formula was did not change the fact that Claimant’s medical care and treatment were required by the HLA.

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