Whitmoyer, C, Aplt v. WCAB(Mountain Country Meats) ( 2018 )

[J-24-2018]
IN THE SUPREME COURT OF PENNSYLVANIA
MIDDLE DISTRICT
SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.
CRAIG M. WHITMOYER, : No. 52 MAP 2017
:
Appellant : Appeal from the Order of the
: Commonwealth Court at No. 614 CD
: 2015 dated December 1, 2016
v. : Affirming the Order of the Workers'
: Compensation Appeal Board at No.
: A13-1373 dated March 20, 2015
WORKERS' COMPENSATION APPEAL :
BOARD (MOUNTAIN COUNTRY : ARGUED: April 11, 2018
MEATS), :
:
Appellees :
OPINION
JUSTICE DONOHUE DECIDED: June 19, 2018
The Pennsylvania Workers’ Compensation Act (“WCA”)1 makes an employer liable
for paying the disability benefits and medical expenses of an employee who sustains an
injury in the course of his or her employment. See 77 P.S. §§ 431 (disability), 531
(medical). This liability attaches without regard to the employer’s negligence. See id; see
also Heckendorn v. Consolidated Rail Corp., 465 A.2d 609, 613 (Pa. 1983). Under
section 319 of the WCA, however, employers (or their insurance carriers) are “subrogated
to the right of the employe” and therefore entitled to reimbursement for certain expenses
1 Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1-1041.1, 2501-2708
where a third party caused the employee’s injury. 77 P.S. § 671. The instant matter
addresses a specific question about the scope of this reimbursement.
Section 319 of the WCA provides, in pertinent 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, his personal
representative, his estate or his dependents, against such
third party to the extent of the compensation payable under
this article by the employer; reasonable attorney's fees and
other proper disbursements incurred in obtaining a recovery
or in effecting a compromise settlement shall be prorated
between the employer and employe, his personal
representative, his estate or his dependents. The employer
shall pay that proportion of the attorney's fees and other
proper disbursements that the amount of compensation paid
or payable at the time of recovery or settlement bears to the
total recovery or settlement. Any recovery against such third
person in excess of the compensation theretofore paid by the
employer shall be paid forthwith to the employe, his personal
representative, his estate or his dependents, and shall be
treated as an advance payment by the employer on account
of any future instalments of compensation.
77 P.S. § 671 (internal footnote omitted) (emphasis added). We granted allowance of
appeal to determine whether the Commonwealth Court erred in concluding that the term
“instalments of compensation” in section 319 encompasses both disability benefits and
payment of medical expenses.2
We recognize that the word “compensation,” as used elsewhere in the WCA
(including elsewhere in section 319), refers variously to one or both of these types of
benefits. See Giant Eagle, Inc. v. W.C.A.B. (Givner), 39 A.3d 287, 294 (Pa. 2012)
2 We also granted review to consider whether the Commonwealth Court erred in finding
that Mountain Country Meats did not waive its rights under section 319 by waiting thirteen
years to assert a purported right to reimbursement of medical expenses. Because our
resolution of the first issue disposes of this appeal, we do not reach the question of waiver.
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(plurality). “Instalments of compensation,” however, is a more specific term. As
discussed herein, we find that it means what it says: compensation that is paid in
installments. Under the WCA, disability benefits are required to be paid in this manner,
namely, "in periodical installments, as the wages of the employe were payable before the
injury.” See 77 P.S. § 601. Medical expenses are not. See 77 P.S. § 531. Accordingly,
when a workers’ compensation claimant recovers proceeds from a third-party settlement
(following repayment of compensation paid to date) as prescribed by section 319, the
employer (or insurance carrier) is limited to drawing down against that recovery only to
the extent that future disability benefits are payable to the claimant. Accordingly, and as
explained herein, we reverse the decision of the Commonwealth Court.
In January 1993, Craig Whitmoyer (“Whitmoyer”) suffered a work-related injury that
resulted in the amputation of part of his arm. Starting at that time, his employer, Mountain
Country Meats (“MCM”), or MCM’s insurance carrier, Selective Insurance (“Selective”),
paid all of Whitmoyer’s medical expenses related to this injury. A few months later, the
parties reached an agreement related to Whitmoyer’s disability benefits – he was entitled
“to a 20 week healing period and 370 weeks of specific loss benefits [at $237.50 per week
after May 22, 1993].” Judge’s Exhibit 3 (Supplemental Agreement for Compensation for
Disability or Permanent Injury, 4/29/1993) (providing that “weekly wages must be
computed in accordance with Section 309 of the [WCA]”).3 Whitmoyer subsequently
petitioned for a commutation of these weekly payments. In December 1994, the Workers’
3 This supplemental agreement provided that “compensation was paid from 1/2/93 thru
[sic] 5/21/93 for 20 weeks at a rate of $158.33 per week for a total of $3,166.60, which
includes both the waiting period and the healing period.” Judge’s Exhibit 3. Section 309
of the WCA sets forth the method of computing a claimant’s wages at the time of his or
her injury for the purpose of determining compensation. See 77 P.S. § 582.
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Compensation Judge (“WCJ”) granted his petition and directed MCM or Selective to pay
Whitmoyer a lump sum payment of $69,994.64. While this commutation resolved his
entitlement to disability benefits entirely, MCM remained responsible for Whitmoyer’s
ongoing medical bills. Judge’s Exhibit 4 (Commutation Decision and Stipulation of Facts,
12/27/1994).
Several years later, Whitmoyer obtained a $300,000 settlement from third parties
related to his injury and, in April 1999, he entered a third-party settlement agreement (the
“TPSA”) with Selective providing that as to past-paid compensation, Selective was
entitled to a net subrogation lien of $81,627.87. See Selective’s Exhibit 7 (TPSA).4 The
net subrogation lien represents the difference between Selective’s total accrued
subrogation lien ($110,583.73) and Selective’s pro rata share of the third-party litigation
expenses ($28,955.86). Id. Thus, under the terms of the TPSA, Whitmoyer’s “balance
of recovery” was $189,416.27. Id. This term is defined on the form as a “fund for credit
against future workers’ compensation payable, subject to reimbursement to claimant of
expenses of recovery at the rate of 37% on credit used.” Id.
In communicating with Selective about the TPSA, Whitmoyer’s counsel sent two
letters to Jodi Bell (“Bell”), Selective’s claims adjuster. In the first letter, dated March 8,
1999, counsel forwarded the TPSA, noted that “the lien of [Selective] can be satisfied in
full with payment of $81,627.87” pursuant to section 319, and asked “that [Selective]
4 The third-party settlement agreement between Selective and Whitmoyer is
memorialized on a boilerplate form supplied by the Bureau of Workers’ Compensation
(the “Bureau”) for such agreements. The form provides, “In accordance with Section 319
of the Pennsylvania [WCA], parties herein have agreed to the following distribution of
proceeds received from Hollymatic Corporation & Dantro Associates, Inc, third party.”
Selective’s Exhibit 7 (TPSA).
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remain responsible for payment of future medical expenses incurred by Mr. Whitmoyer.”
Selective’s Exhibit 6 (March Letter from Donald F. Smith, Jr.). In the second letter, dated
May 26, 1999, counsel enclosed a check for $81,627.13 and advised Selective of
Whitmoyer’s position that “no credit can be applied to future medical bills” because “under
Section 319 such credit only applies to ‘future installments of compensation’,” which does
not encompass “future medical expenses.” Selective’s Exhibit 8 (May Letter from Donald
Smith, Jr.). Selective cashed the check but did not respond to the letter. The TPSA,
dated April 8, 1999, bears Bell’s name and signature but was never signed by
Whitmoyer’s counsel.
Selective continued to pay Whitmoyer’s work-related medical expenses in full
(without taking credit under the TPSA) for approximately thirteen years, until September
2012. At that time, Selective filed a modification petition requesting an adjustment to the
TPSA to reflect the medical expenses incurred since the parties entered the agreement.
Crediting the testimony of Bell that she did not have authority to agree to counsel’s
interpretation of “future installments of compensation” as set forth in his May 1999 letter,
the WCJ granted Selective’s petition. In addition, the WCJ found as a matter of fact that
the TPSA made Selective liable to Whitmoyer “for 37% of future medical expenses, up to
the balance of recovery.” See Decision and Order of the WCJ, 10/17/2013, at 2. The
WCJ also found, per the parties’ stipulation, that Selective had paid $206,670.88 for
Whitmoyer’s work injury as of February 2013. Id. The WCJ ordered that Selective’s
percentage credit be reduced to 26.09% of future medical expenses, up to Whitmoyer’s
balance of recovery amount of $189,416.27. Id. at 4.
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Whitmoyer appealed to the Workers’ Compensation Appeal Board (the “Board”),
arguing that the TPSA was unenforceable because neither he nor his counsel had signed
it. Board Op. at 2. He also argued that the WCA only allows credit on account of future
installments of compensation, namely, “indemnity benefits,” none of which, in his case,
remained to be paid. Id. Finally, citing his attorney’s March and May 1999 letters and
Selective’s course of conduct since that time, he urged that the parties had agreed that
no credit would be applied toward future medical bills, and that Selective had waived its
subrogation rights and should be equitably estopped from now raising this claim. Id.
The Board affirmed, finding no merit to Whitmoyer’s claim that the TPSA was
unenforceable or that the March and May 1999 letters created a binding agreement
barring Selective from taking a credit on future medical expenses. Id. at 6-7. As to
Whitmoyer’s argument that section 319 does not permit credit to be taken on future
medical expenses because they are not “instalments of compensation,” the Board held
that “it is well settled that medical expenses are compensation payments subject to
subrogation rights against a claimant’s recovery from a third party and subject to credit
toward future compensation where the recovery exceeds compensation paid at the time
of recovery.” Id. at 7 (citing Deak v. W.C.A.B. (USX Corp.), 653 A.2d 52 (Pa. Commw.
1994)) (emphasis added). Moreover, the Board explained that Bell’s credible testimony
belied the assertion that Selective chose to waive its subrogation right, which is generally
“absolute and can be abrogated only by choice.” Id. at 9 (noting that Bell did not have
the authority to agree to, nor did she respond to, any of the assertions in counsel’s letters).
Finally, the Board concluded that equitable estoppel was inappropriate under the
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circumstances because Selective never agreed to forgo its right to subrogation for future
medical expenses, and the WCA contains no equitable exceptions. Id. at 9-10.
In a divided en banc opinion, the Commonwealth Court affirmed. The intermediate
appellate court first outlined the three objectives underlying section 319, as identified by
this Court in Dale Mfg. Co. v. W.C.A.B. (Bressi), 421 A.2d 653, 654 (Pa. 1980): (1) to
prevent double recovery by a claimant, (2) to ensure that a non-negligent employer avoids
responsibility for compensation payments necessitated by a negligent third party, and (3)
to prevent a negligent third party from escaping liability. 5 Whitmoyer v. W.C.A.B.
(Mountain Country Meats), 150 A.3d 1003, 1014 (Pa. Commw. 2016) (en banc). It then
reasoned that Pennsylvania appellate courts have concluded on multiple occasions that
medical expenses constitute “compensation” under section 319. Id. at 1012-13
(discussing Deak, 653 A.2d at 54, Dasconio v. W.C.A.B. (Aeronca, Inc.), 559 A.2d 92,
103 (Pa. Commw. 1989), and Haley to Use of Martin v. Matthews, 158 A. 645, 646-47
(Pa. Super. 1932)). Even while recognizing that no court, least of all this one, has
addressed whether the General Assembly’s use of the distinct term “instalments of
compensation” in the last sentence of section 319 limits subrogation to credit for disability
benefits only, the Commonwealth Court nonetheless concluded that employers are
entitled to seek reimbursement for medical expenses from the employee’s balance of
recovery under section 319. Id. at 1013-15.
The Commonwealth Court then discussed Giant Eagle. Id. at 1014. In that case,
a plurality of this Court indicated that a case-by-case analysis of the meaning of
5 It is worth noting that we discussed the rationale behind subrogation in section 319 after
citing the beginning of that provision, only, and without any reference to “instalments of
compensation.” See Dale Mfg. Co., 421 A.2d at 654.
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“compensation,” as used in article III of the WCA, is required whenever that word is
capable of at least two valid interpretations. Giant Eagle, 39 A.3d at 298 (conducting an
ambiguity analysis as to the meaning of “compensation” in section 314(a) and concluding
that it “need not always include medical benefits”). Finding that there are at least two
interpretations of “compensation” as used in section 319, the Commonwealth Court
indicated it would resolve the ambiguity by reference to the purpose of the statutory
provision. Whitmoyer, 150 A.3d at 1014-15 (citing 1 Pa.C.S. § 1921(c)). One objective
of subrogation, as noted supra, is to protect the “presumably [] innocent” employer from
ultimate liability. Because this rationale applies with equal force to medical expenses and
disability benefits, the Commonwealth Court reasoned that “compensation” (and even
“instalments of compensation”) as used in section 319 must be construed to encompass
both types of payments. Id.
The Commonwealth Court added that the General Assembly’s use of the word
“instalments” could be explained by the fact that medical expenses are not typically paid
in a lump sum but instead must be paid “periodically overtime” or in “discrete payments.”
Id. at 1015. Finally, the Commonwealth Court found no merit to Whitmoyer’s position that
allowing an employer to seek reimbursement for medical expenses violates section
306(f.1) by shifting liability for the cost of medical care from the employer to the claimant.
Instead, allowing an employer to seek reimbursement for these expenses from
Whitmoyer’s balance of recovery was simply “a right expressly agreed upon in the
[TPSA].” Id.
In dissent, President Judge Leavitt (joined by Judges Cosgrove and McCullough)
argued that the majority’s interpretation of section 319 gives no effect to the General
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Assembly’s inclusion of the word “instalment” in the final sentence. She reasoned that
section 306(f.1)(7) makes the employer responsible for all medical expenses and posited
that allowing an employer to seek reimbursement from the employee’s third party
recovery, after the accrued subrogation lien is resolved, improperly “turns the statutory
scheme on its head.” Id. at 1022 (Leavitt, P.J., dissenting). In addition, she noted that
the word “installment” is defined in the dictionary as “one of the parts into which a debt is
divided when payment is made at intervals” and that only disability benefits are “made at
intervals.” Id. at 1022-23 (citing Merriam-Webster’s Collegiate Dictionary 605 (10th ed.
2001). Furthermore, whereas section 319 refers to “compensation paid or payable at
the time of recovery or settlement,” the General Assembly did not use the symmetrical
word “payment” when delineating the type of benefits for which an employer could claim
credit after settlement. Id. at 1023. Instead, the General Assembly chose “future
instalments of compensation,” thus deliberately limiting future charges against the
employee’s recovery to disability benefits. Id.
Judge Cosgrove also separately dissented (joined by the President Judge and
Judge McCullough) to emphasize, as relevant here, that there is clearly “a certain
regularity … attached to the concept of ‘interval’” in the definition of “installment.” Id. at
1023 (Cosgrove, J., dissenting). He concluded that disability benefits are distributed with
regularity whereas medical expenses are typically incurred on a random and uncertain
basis. Id.
On appeal, Whitmoyer argues that the Commonwealth Court’s decision improperly
reads the word “instalments” out of section 319. He also notes that the cases cited by
the Commonwealth Court are concerned with what the term “compensation” means,
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generally, and not with the meaning of “instalments of compensation.” Whitmoyer’s Brief
at 16-19. He insists that section 308 of the WCA supports his position that “instalments
of compensation” refers to disability benefits, but not medical expenses, because that
section states, “except as hereinafter provided, all compensation payable under this
article shall be payable in periodical installments, as the wages of the employe were
payable before the injury.” Id. at 19 (quoting 77 P.S. § 601). Whitmoyer juxtaposes the
disability payments made in “periodical installments,” with section 306(f.1)(1)(i), which
requires the employer to make medical payments “as and when needed.” Id. at 19-20
(quoting 77 P.S. § 531(1)(i)). Finally, he argues, in the alternative, that the
Commonwealth Court erred in not finding that Selective waived its right to seek any
reimbursement for medical expenses from Whitmoyer’s balance of recovery. Id. at 23-
26.
MCM takes the position that courts have consistently interpreted the word
“compensation” in section 319 to encompass both disability wages and medical
expenses. MCM’s Brief at 5-17. Like the Commonwealth Court below, MCM urges that
prohibiting an employer from recouping the cost of medical expenses after its initial lien
has been satisfied undermines the purpose of section 319 by facilitating a double
recovery for the employee and by forcing the non-negligent employer to bear the costs of
a third party’s negligence. Id. at 12-13, 20 (citing Dale Mfg. Co., 421 A.2d 653).
In addition, MCM posits that the TPSA must be read to evidence the Bureau’s
understanding of section 319, namely that “where the balance of recovery exceeds the
accrued lien, the balance of recovery is a fund to be depleted by payment of credits to
the injured worker as a percentage of future compensation which becomes payable.”
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MCM’s Brief at 22 (noting that there is nothing on the form to denote that credit applies
only to future disability benefits). Moreover, MCM contends that the TPSA has no
meaning if the “37%” figure therein only relates to disability benefits, because Whitmoyer
is not owed any future disability benefits. Thus, according to MCM, in drafting the TPSA,
Whitmoyer’s counsel acknowledged that Whitmoyer’s balance of recovery was subject to
a 37% credit toward future medical expenses. Id. at 22-23 (arguing that Whitmoyer’s
counsel should have inserted “zero” or “disputed” instead of “37%” if he believed no credit
could be taken for future medical expenses). Finally, MCM argues that it has not waived
any rights. Id. at 28-34.
In an amicus brief in support of Whitmoyer, the Pennsylvania Association for
Justice (“PAJ”) focuses on the structure of section 319, characterizing the provision as
presenting two distinct scenarios. PAJ’s Brief at 7. The first two sentences of section
319 set forth the employer’s entitlement to subrogation at the time of a third-party
recovery. This encompasses “compensation” already paid and therefore contemplates a
reimbursement for both disability benefits and medical expenses paid out to date. By
contrast, the final sentence refers to “future instalments of compensation,” which refers
only to disability benefits still outstanding at the time of settlement. Id.
We are called upon to interpret the term “instalments of compensation” in section
319 of the WCA. The proper interpretation of a statute is a question of law as to which
our standard of review is de novo, and our scope of review is plenary. Borough of
Heidelberg v. W.C.A.B. (Selva), 928 A.2d 1006, 1009 (Pa. 2007). As with all questions
of statutory interpretation, we are guided by the rules of construction, 1 Pa.C.S. §§ 1901-
1991. First and foremost, these rules provide that the object of interpretation is to
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“ascertain and effectuate the intention of the General Assembly.” 1 Pa.C.S. § 1921(a). In
pursuing this goal, we must take care to give meaning to every word and provision of the
statute. Id.
Moreover, the statute’s plain language generally offers the best indication of
legislative intent, and we are instructed to give the statute its obvious meaning whenever
the language is clear and unambiguous. 1 Pa.C.S. § 1921(b). To that end, we will
construe words and phrases according to their common and approved usage. 1 Pa.C.S.
§ 1903(a). In addition, in determining whether language is clear and unambiguous, we
must assess it in the context of the overall statutory scheme, construing all sections with
reference to each other, not simply examining language in isolation. See Housing
Authority of County of Chester v. Pennsylvania State Civil Service Com'n, 730 A.2d 935,
945-46 (Pa. 1999); see also Commonwealth v. Office of Open Records, 103 A.3d 1276,
1285 (Pa. 2014) (concluding that the statutory term at issue was unambiguous by
reference to surrounding statutory provisions). Only if we determine that the statutory
text is ambiguous may we look to considerations beyond the text such as the mischief to
be remedied by the statute or what gave rise to its enactment. 1 Pa.C.S. § 1921(c).
Initially, we observe that section 319 addresses two distinct scenarios. See Rollins
Outdoor Advertising v. W.C.A.B., 487 A.2d 794, 796 (Pa. 1985). First, “the compensation
paid by the employer to the date of the third-party recovery constitutes a claim against
the recovery, payable immediately upon recovery to the employer.” Id. As to this scenario,
the General Assembly chose to use the word “compensation” without modification by the
term “instalments of.” That is, an employer’s subrogation right “at the time of recovery or
settlement” encompasses all “compensation” “theretofore paid” or “payable” to date. 77
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P.S. § 671. This amount is understood to be the employer’s accrued subrogation lien or
“total lien.”6 See Selective’s Exhibit 7 (TPSA).
The second scenario relates to the distribution of net settlement proceeds, namely
what is left of the recovery after the employer has been reimbursed for “compensation
theretofore paid.” See id.; see also Rollins Outdoor Advertising, 487 A.2d at 796.
Regarding this “excess” amount, section 319 provides that it shall be “paid forthwith” to
the employee to be treated as an “advance payment by the employer” — not as to
“compensation” but rather “on account of future instalments of compensation.” 77 P.S.
§ 671.
There is no dispute that the term “compensation” – as it appears three times
unmodified by “instalments of” – encompasses both medical expenses and disability
benefits. See MCM’s Brief at 4-10; Whitmoyer’s Brief at 18. Indeed, Whitmoyer concedes
that a non-negligent employer has a right to be reimbursed for any disability benefits and
medical expenses accrued “up to the date of settlement.” See Whitmoyer’s Brief at 18;
77 P.S. § 671. But the terms “compensation” and “instalments of compensation” are
distinct and we are tasked here with interpreting the latter, more specific, term. To
conclude that “instalments of compensation” carries the same meaning as
“compensation” would render the words “instalments of” meaningless. Our rules of
statutory construction do not permit such a result. See 1 Pa.C.S. 1921(a); see also
Commonwealth v. Lobiondo, 462 A.2d 662, 664 (Pa. 1983).
6 As noted, this amount is reflected in Part II of the TPSA (relating to the distribution of
proceeds) as the employer’s “total lien.” See supra p. 4; see also infra p. 18 (explaining
that the TPSA reflects MCM’s total lien amount at the time of settlement as $110,583.33,
before pro rata expenses).
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As set forth in President Judge Leavitt’s dissenting opinion, Merriam-Webster’s
dictionary provides that an “installment” is “one of the parts into which a debt is divided
when payment is made at intervals.” See Whitmoyer, 150 A.3d at 1022-23 (Leavitt, P.J.,
dissenting). While a dictionary definition is not dispositive as to the plain meaning of a
statutory term, an examination of the overall statutory scheme confirms that the
legislature intended “instalments of compensation” to be limited to compensation that is
paid at “periodical” intervals (e.g. weekly or bi-weekly) in the same way that an employee’s
wages were paid. See 77 P.S. §§ 601, 603. Disability benefits, but not medical expenses,
are payable in this manner. See id.
This result necessarily obtains because section 308 of the WCA states, “Except as
hereinafter provided, all compensation payable under this article shall be payable in
periodical installments, as the wages of the employe were payable before the injury.” 77
P.S. § 601. The reference to wages, and to the manner in which wages are paid, makes
plain that this provision, relating to “compensation payable in periodical installments,”
addresses the subset of workers’ compensation aimed at replacing lost wages. See id.
Cases interpreting section 308 bear out this conclusion. For example, in Staller v. Staller,
21 A.2d 16 (Pa. 1941), after discussing section 308 of the WCA, this Court noted that
section 316 of the same article authorizes the commutation of compensation and
explained that “[c]ommutation of periodical payments is not applicable to medical and
hospital expenses.” Id. at 17; see also Essroc Materials v. W.C.A.B.(Braho), 741 A.2d
820, 824 (Pa. Commw. 1999) (providing that section 308, “in furtherance of the inherent
humanitarian purposes of the [WCA], requires that compensation be paid in the same
periodic installment as a claimant's wages were paid before the injury, thus alleviat[ing]
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the economic burdens caused by a claimant's loss of earning power”); Bates v. W.C.A.B.
(Titan Const. Staffing, LLC), 878 A.2d 160, 163 (Pa. Commw. 2005) (confirming that
employer was required to pay benefits on a weekly basis so as “to mirror claimant’s pay
schedule prior to his injury”).
Section 317, which addresses the payment of a lump sum in trust, also
demonstrates that the term “future instalments of compensation” refers exclusively to
disability benefits. See 77 P.S. § 603. That section provides that “a sum equal to all
future instalments of compensation may (where death or the nature of the injury renders
the amount of future payments certain) … be paid by the employer” to a bank, insurance
company or trust company. 77 P.S. § 603. Because death would defeat the need for
future medical expenses and because medical expenses are not capable of
predetermination in a way that renders their future amount “certain,” the General
Assembly’s inclusion of this parenthetical phrase indicates that “future instalments of
compensation” refers only to disability benefits.7 See id. That section 317 further
provides that the trustee must make payments from said fund “in the same amounts and
at the same periods as are herein required of the employer,” is additional evidence that
“instalments of compensation” encompasses payments made at set intervals under the
WCA. Id. Again, only disability benefits are paid in this way. 77 P.S. § 601.
The foregoing provisions stand in contrast to section 306(f.1)(1)(i) which provides
that “the employer shall provide payment in accordance with this section for reasonable
surgical and medical services … as and when needed.” 77 P.S. § 531(1)(i) (emphasis
7 Moreover, under the WCA, the nature of an injury may determine with certainty the
amount of disability benefits to which an injured employee is entitled. See 77 P.S. § 513.
[J-24-2018] - 15
added). Notably, this section does not speak in terms of installments or periods, but
instead recognizes that medical expenses arise unpredictably, based upon the
individualized and changing needs of an injured employee.8
Returning to section 319, we observe further that the “excess” recovery from a
third-party settlement is to be “paid forthwith” to the employee as an “advance payment
by the employer on account of any future instalments of compensation.” 77 P.S. § 671.
MCM refers to this “excess” as having strings attached, noting that “the recipient … is on
notice that the funds are being distributed to them only conditionally, and that they are not
free to utilize these funds however they wish.” MCM’s Brief at 11. But the statutory
language does not support MCM’s position. Nothing in section 319 indicates that the
employee is receiving his or her recovery “conditionally.” The plain language provides
that the employee is receiving an “advance payment.” 77 P.S. § 671. The fact that this
advance is “on account of any future instalments of compensation” does not imply that
the employee will later have to relinquish his advance funds, nor is this the common usage
of “advance payment.”
Construing the sentence to encompass only disability benefits is consistent with
the concept of an “advance payment.” As to disability benefits, which are known amounts
8 Taken together, sections 308, 317, and 319 of the WCA render unreasonable the
Commonwealth Court majority’s position, adopted by MCM, that “the Legislature’s use of
the word ‘instalments’ can reasonably be explained and harmonized with the fact that
future medical expenses, which generally may occur periodically over time, are typically
not costs payable in a lump sum. Rather, it is more likely that an employer or insurer will
have to make discrete payments on an ongoing basis.” MCM’s Brief at 18 (quoting
Whitmoyer, 150 A.3d at 1015) (emphasis in original). It is clear that “instalments” are
related to “periodical” payments made in the nature of wages, not payments that occur
“as and when needed,” in the nature of medical expenses. Compare 77 P.S. § 601, with
77 P.S. § 531.
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paid at established intervals, the “excess” recovery is a true “advance payment.” The
employee has simply been paid in advance for outstanding instalments owed to him, and
the money is his to do with as he chooses. The logical corollary is that the employee will
not receive any additional disability compensation from the employer (up to the amount
of the recovery) nor is he obligated to reimburse the employer for any amount. To that
end, this Court has explained that dividing the balance of recovery by the weekly
compensation rate results in what is known as the employer’s “grace period.” See P & R
Welding & Fabricating v. W.C.A.B. (Pergola), 701 A.2d 560, 563-64 (Pa. 1997). The
“grace period” represents the number of weeks an employer may abstain from paying
“future installments” of disability benefits by charging them against the employee’s
recovery balance. Id. (recognizing that an employer would still be obligated under section
319 to reimburse the employee for legal expenses attributable to this period).
Unlike disability benefits, future medical expenses are unknown at the time of
settlement. As MCM concedes, the insurance carrier pays medical bills upfront. MCM’s
Brief at 26. Thus, in order to recoup its costs, the insurance carrier would have to require
the employee to relinquish some of its “advance payment,” in derogation of the plain
meaning of that term. Indeed, finding that “instalments of compensation” encompasses
future medical expenses would undermine the clear language of section 319 by turning
the employee’s “advance payment” into a type of loan.
In sum, after satisfying the employer’s accrued subrogation lien, which
encompasses “compensation” payments made by the employer toward both disability
benefits and medical expenses prior to the third-party settlement, the General Assembly
intended the excess recovery to be paid to the injured employee and to be treated as an
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advance payment only on account of any future disability benefits. See 77 P.S. 671. The
fact that, in this case, Whitmoyer was not owed any outstanding disability benefits is
wholly irrelevant to our analysis.
Similarly, because we granted allocatur to determine the meaning of a statutory
term, the parties’ arguments that are specific to the TPSA, rather than to the language of
the statute, are unavailing. Nonetheless, we find no merit to MCM’s contention that
Whitmoyer’s counsel knew, by virtue of filling in the “37%” figure on the TPSA, that his
client’s balance of recovery would be susceptible to diminution for future medical
expenses paid by the employer. MCM’s Brief at 22-23. MCM characterizes this figure as
relevant only to future expenses, and therefore only to medical expenses, because
Whitmoyer’s disability benefits had been commuted many years prior. Id. This
characterization is both inaccurate and inconsistent with section 319’s command that “the
employer shall pay that proportion of the attorney’s fees and other proper disbursements
that the amount of compensation paid or payable at the time of recovery or settlement
bears to the total recovery or settlement.” 77 P.S. § 671 (emphasis added).
The Bureau’s instructions for filling in the blanks of the boilerplate third-party
settlement agreement provide, inter alia, that the “rate of reimbursement to the employee
of expenses of recovery is determined by dividing the workers’ compensation lien by the
gross recovery.” Selective’s Exhibit 2 (Instructions). Here, the employer’s total accrued
lien amount was $110,583.33. Dividing that amount by $300,000, the gross recovery
from the third party, yields a rate of reimbursement to the employee of thirty-seven
percent. This rate is then used, as prescribed, to calculate MCM/Selective’s pro rata
share of recovery expenses to date. The total expenses of recovery are listed on the
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TPSA as $78,259.09. Thirty-seven percent of that amount is $28,955.86, which is set
forth as the employer’s pro rata share. This figure is then subtracted from the total lien
amount to arrive at the employer’s “net recovery of Workers’ Compensation Lien,” or
$81,627.87. See Selective’s Exhibit 7 (TPSA) at Part II(A)-(B). Thus, the “37%” figure is
both required by the Bureau and material to calculating the employer’s net entitlement to
subrogation at the time of settlement.
Viewing “instalments of compensation” in context, with reference to surrounding
language and the overall statutory scheme, we conclude that the term is clear and
unambiguous. It does not refer to medical expenses. Therefore, having satisfied its
accrued subrogation lien at the time of settlement, an employer is not permitted to seek
reimbursement for future medical expenses from the employee’s balance of recovery.
Because we find that “instalments of compensation” is unambiguous, we need not
consider other factors to divine legislative intent. See 1 Pa.C.S. § 1921(c). Accordingly,
discussion of the purpose or rationale behind section 319, which animated the
Commonwealth Court majority’s opinion, is unnecessary. Even if we were to engage in
an ambiguity analysis, our conclusion would be unchanged. Contrary to MCM’s
assertions, reading “instalments of compensation” to exclude medical expenses does not
undermine the rationale behind section 319. See Dale Mfg. Co., 421 A.2d at 654.
Regarding the potential ill of an employee making a “double recovery,” we observe that
this would be impossible to know in the context of a settlement, where the amount of
recovery is a lump sum that does not neatly or necessarily breakdown by category of
damages.
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As to the other stated purposes of section 319, we note that the provision’s
protection of “innocent” employers has its limits. The WCA’s default is to hold an
employer liable for an employee’s work-related injury. See 77 P.S. §§ 431 (disability
benefits), 531 (medical expenses). Indeed, in the instant matter, MCM concedes that
even if we found in its favor, its liability would be circumscribed “only to the extent of
[Whitmoyer’s] third party recovery.” MCM’s Brief at 21. Once that amount is exceeded,
MCM (or Selective) would again be required to pay Whitmoyer’s medical expenses in full,
“potentially for the lifetime of the injured worker[].” Id. Finally, it bears emphasizing that
the conclusion we reach today is wholly consistent with the remedial nature of the WCA,
which should be interpreted for the benefit of the worker and liberally construed to
effectuate its humanitarian objectives. Peterson v. W.C.A.B (PRN Nursing Agency), 597
A.2d 1116 (Pa. 1991); 1 Pa.C.S. § 1928.
The decision of the Commonwealth Court is reversed.
Chief Justice Saylor and Justices Baer, Todd, Dougherty, Wecht and Mundy join
the opinion.
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