Upper Darby Twp. v. WCAB (Dockery) ( 2018 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Upper Darby Township, :
Petitioner :
:
v. : No. 647 C.D. 2018
: Submitted: August 31, 2018
Workers' Compensation Appeal :
Board (Dockery), :
Respondent :
BEFORE: HONORABLE ROBERT SIMPSON, Judge
HONORABLE ELLEN CEISLER, Judge
HONORABLE DAN PELLEGRINI, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE SIMPSON FILED: October 11, 2018
Upper Darby Township (Employer) petitions for review from an order
of the Workers’ Compensation Appeal Board (Board) that reversed a Workers’
Compensation Judge’s (WCJ) decision granting Employer’s modification petition
and directing Michael Dockery (Claimant) to pay $16,106.26 from his third-party
recovery in order to satisfy Employer’s subrogation lien. Employer argues the Board
erred in reversing the WCJ’s decision and in determining Employer was not entitled
to subrogation. Upon review, we affirm.
I. Background
A. WCJ Proceedings
Before the WCJ, the parties stipulated to the following facts. Claimant
worked for Employer as a police officer for 11 years. In December 2015, Claimant
was injured in the performance of his duties. Specifically, Claimant suffered an
injury when, during the course of a traffic stop, the driver of a motor vehicle drove
away running over Claimant’s foot. Employer issued a notice of temporary
compensation payable (NTCP), which identified the injury as a right foot contusion.
The NTCP converted into a notice of compensation payable (NCP) by operation of
law.
Claimant was totally disabled as a result of his work injury during four
periods between December 2015 and December 2016. He returned to his full-duty
position on December 14, 2016, with no loss in earnings.
Employer paid Claimant benefits pursuant to the statute commonly
known as the Heart and Lung Act1 (HLA) for his periods of disability. These
benefits totaled $50,443.52. Pursuant to the NCP, Employer’s claims administrator
issued payments covering indemnity benefits for Claimant’s periods of disability,
which totaled $27,443.14. Additionally, as a result of his injury, Claimant incurred
medical expenses of $27,904.71, which Employer’s claims administrator paid
pursuant to the NCP. Employer asserted a total workers’ compensation lien in the
amount of $55,347.85.2
In connection with his work injury, Claimant made a claim against a
third-party tortfeasor. Claimant recovered $25,000 from the third party. In order to
1
Act of June 28, 1935, P.L. 477, as amended, 53 P.S. §§637-638.
2
Recently, in Whitmoyer v. Workers’ Compensation Appeal Board (Mountain Country
Meats), 186 A.3d 947, 949 (Pa. 2018), our Supreme Court held that “when [a claimant] recovers
proceeds from a third-party settlement … the employer … is limited to drawing down against that
recovery only to the extent that future disability benefits [(and not medical expenses)] are payable
to the claimant.” (Emphasis added.)
2
obtain this recovery, Claimant paid $8,750 in attorney fees as well as $143.74 in
costs. As such, Claimant’s net third-party recovery was $16,106.26.
In December 2016, Employer filed a modification petition, seeking
subrogation reimbursement for Claimant’s third-party recovery.3 Claimant filed an
answer. Hearings ensued before a WCJ.
Before the WCJ, in addition to the joint stipulation of facts, Employer
presented the deposition testimony of Amy Favretto, its Assistant Director of Human
Resources (Employer’s Representative). Employer’s Representative explained the
manner in which she processes workers’ compensation claims. She testified
Employer is self-insured for purposes of workers’ compensation. Employer’s
Representative receives the injury report, which she forwards to Employer’s third-
party administrator for workers’ compensation, A.J. Gallagher. She also retains
doctors’ notes and forwards copies to the third-party administrator as well. If an
injured employee misses work for an extended period, she receives the payment
check in the office and contacts the employee regarding the check.
Employer’s Representative explained that Claimant received his full
salary under the HLA. She testified that A.J. Gallagher sends a separate workers’
compensation check. Employer’s Representative explained that the workers’
compensation check is sent to Employer’s Representative’s office and the injured
employee is contacted to sign the check over to Employer. Employer’s
Representative testified Employer contacted Claimant when Employer received the
3
Employer also filed a termination petition, which, by agreement of the parties, the WCJ
dismissed as moot. Employer’s termination petition is not at issue in this appeal.
3
workers’ compensation check payable to Claimant, and Claimant endorsed the check
to Employer. She explained that the workers’ compensation checks are paid out of
Employer’s funds, but the checks are actually written by A.J. Gallagher. Employer’s
Representative also testified HLA benefits are paid from a different account than
workers’ compensation benefits. She explained that HLA checks are paid through
the payroll department and workers’ compensation checks are paid using the
workers’ compensation account through Employer’s Human Resources Office.
Employer’s Representative also confirmed that an injured employee’s medical bills
are processed for payment by A.J. Gallagher. Additionally, Employer’s
Representative identified an exhibit, which was the compensation report from
Employer’s payroll department identifying payments Claimant received for the
periods he was out of work. The line for disability payments identified the HLA
benefits paid directly to Claimant. Employer’s Representative testified that no taxes
are deducted from HLA benefits.
On cross-examination, Employer’s Representative admitted that under
the HLA, Employer is required to pay full medical benefits for a claimant’s injury
and his full salary. Employer’s Representative identified a letter from A.J. Gallagher
to Claimant’s third-party attorney indicating that as of December 15, 2016,
$28,899.71 was paid on Claimant’s behalf in workers’ compensation indemnity
benefits and $26,153.66 was paid in workers’ compensation medical benefits for
Claimant’s injury. Employer’s Representative was unsure as to why an injured
worker’s medical benefits were paid out of the workers’ compensation account and
not paid out of the account from which HLA benefits were paid. She also explained
that, after an injured worker comes in to Employer’s office to endorse a workers’
4
compensation check, it is deposited into the workers’ compensation account, which
is the same account on which the checks were drawn. The WCJ accepted
Employer’s Representative’s credible, unrebutted testimony as fact.
B. WCJ’s Decision
The WCJ found that Employer paid Claimant indemnity benefits under
the HLA for his work injury as required by the HLA. Further, Employer issued an
NCP and checks were issued for workers’ compensation indemnity benefits payable
to Claimant, but sent to Employer’s Representative. As required by Section 1(a) of
the HLA, 53 P.S. §637(a), Claimant endorsed those checks to Employer.
The WCJ further stated that, because Claimant’s injury was caused by
the actions of a third-party and involved a motor vehicle, his injury fell under the
Motor Vehicle Financial Responsibility Law (MVFRL).4 The WCJ determined the
benefits Employer paid to Claimant under the HLA, his full salary, were not subject
to subrogation under the MVFRL. However, the WCJ stated, Employer sought
subrogation for the amount of compensation paid to Claimant under the Workers’
Compensation Act.5
The WCJ explained that the HLA provides police officers and other
public safety employees, who are temporarily unable to perform their duties because
of a work injury, their full salary. The WCJ further stated an injured officer cannot
simultaneously receive and retain HLA benefits and workers’ compensation
4
75 Pa. C.S. §§1701-1799.7.
5
Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1-1041.4, 2501-2708.
5
benefits. Specifically, under the HLA, any workers’ compensation indemnity
benefits received by a police officer collecting HLA benefits must be turned over to
the public employer. 53 P.S. §637(a). The WCJ explained that where the injury to
the police officer is caused by the actions of a third party arising from a motor vehicle
accident, the public employer has a right of subrogation against the third-party
recovery for the amount of workers’ compensation benefits paid to the officer.
However, the public employer has no right to subrogation against the third-party
recovery for any amount of HLA benefits paid to the officer. Oliver v. City of
Pittsburgh, 11 A.3d 960 (Pa. 2011).
According to the WCJ, Claimant argued that because he received his
full wages under the HLA, there was no wage loss. Thus, no workers’ compensation
indemnity check should have been issued. However, the WCJ explained, an
employer is statutorily obligated to pay workers’ compensation benefits. The WCJ
stated that Employer issued an NCP, and Claimant lost time from work. The WCJ
stated that payment of HLA benefits does not relieve an employer from its
obligations under the Workers’ Compensation Act. Here, the WCJ stated, Claimant
suffered a work injury and was legally entitled to benefits under the Workers’
Compensation Act. The WCJ explained Employer was required to pay workers’
compensation benefits, and it issued checks. Additionally, the HLA contemplates
payment of both HLA and workers’ compensation benefits, and it directs the manner
in which workers’ compensation benefits are returned to an employer. Thus, the
WCJ rejected Claimant’s argument.
6
The WCJ also noted Claimant’s argument that payment of workers’
compensation benefits by Employer in addition to benefits under the HLA was made
so that Employer could claim subrogation against the third party under the MVFRL.
Acknowledging there can be no subrogation under the MVFRL for HLA benefits,
the third-party administrator wrote Claimant a check from Employer’s workers’
compensation account, sent it to Employer’s Representative, Claimant endorsed the
check to Employer, and Employer redeposited it into its workers’ compensation
account. Essentially, Claimant argued, this was a ruse to obtain subrogation.
However, the WCJ stated, the stipulated facts revealed that Claimant received both
indemnity benefits under the HLA and the Workers’ Compensation Act. As such,
the WCJ explained, Employer was entitled to subrogation in the amount of benefits
paid under the Workers’ Compensation Act. The WCJ distinguished this case from
Oliver and Stermel v. Workers’ Compensation Appeal Board (City of Philadelphia),
103 A.3d 876 (Pa. Cmwlth. 2014), on the ground that, in those cases, the employers
made no actual workers’ compensation payments to the claimants.
In addition, the WCJ rejected Claimant’s argument that Employer was
not entitled to subrogation for the medical benefits paid on Claimant’s behalf under
the Workers’ Compensation Act on the ground that those benefits were required to
be paid and should have been paid under the HLA. To that end, the WCJ determined
that benefits paid under the Workers’ Compensation Act could not be reclassified as
HLA benefits to deny subrogation. Rather, the WCJ stated, payment of medical
benefits under the Workers’ Compensation Act subjected those benefits to
subrogation under the MVFRL.
7
For these reasons, the WCJ determined Employer was entitled to
subrogation in the amount of $16,106.26 against Claimant’s third-party recovery.
Thus, the WCJ granted Employer’s modification petition, and the WCJ ordered
Claimant to pay Employer $16,106.26 from his third-party recovery. Claimant
appealed.
C. Board’s Decision
On appeal, the Board reversed. In so doing, the Board agreed with
Claimant that the WCJ erred in failing to apply controlling precedent. It stated:
In [Oliver], our Supreme Court concluded that
benefits paid under the [HLA] to a claimant injured in a
work-related automobile accident were not made subject
to subrogation by Act 44.3 The Commonwealth Court in
[Stermel], explained that self-insured public employers
who [sic] pay [HLA] benefits issue an NCP to
acknowledge the injury but do not make workers’
compensation payments, as the workers’ compensation
payments would simply be returned as required by the
[HLA]. [HLA] benefits are still treated differently than
workers’ compensation benefits with respect to
subrogation from a third-party recovery arising from a
motor vehicle accident, notwithstanding the adverse effect
on self-insured public employers. [Stermel, 103 A.3d] at
884.
The interplay between the MVFRL and Act 44 was
further discussed in Pennsylvania State Police v.
[Workers’ Compensation Appeal Board (Bushta), 149
A.3d 118 (Pa. Cmwlth. 2016), aff’d, 184 A.3d 958 (Pa.
2018)]. The court there explained that the Stermel court
rejected the employer’s contention that a portion of the
claimant’s [HLA] benefits were subject to subrogation
because the MVFRL does not allow a plaintiff to include,
as an element of damages, either lost wages or medical
benefits paid under the [HLA]. Because the third-party
8
recovery cannot include those damages, there can be no
subrogation.4
The Bushta court was very clear in including
medical benefits with salary continuation benefits as
[HLA] benefits, not subject to subrogation. …
Recently, in DeHoratius v. [Workers’
Compensation Appeal Board (Upper Darby Township),
187 A.3d 273 (Pa. Cmwlth. 2017), appeal denied, 187
A.3d 911 (Pa. 2018)], the Court reviewed the Board’s
order in a matter factually indistinguishable from the
present matter. There, as here, [Employer] argued that
because the NCP did not specify that [HLA] payments
were being made in lieu of workers’ compensation
payments, and the workers’ compensation payments were
made from a separate account, it was entitled to subrogate
against a third-party recovery. The WCJ granted
[Employer’s] petition and the Board affirmed.
The Commonwealth Court reversed, citing Stermel
and Bushta, and rejecting [Employer’s] contention that its
internal accounting method preserves its right of
subrogation against a third-party recovery. …
Consequently, the WCJ erred by recognizing
[Employer’s] asserted right of subrogation against
Claimant’s third-party recovery.
3
Act of July 2, 1993, P.L. 190, No. 44.
4
Subrogation is the right of one who has paid an obligation
which should have been paid by another to be indemnified
by the other. Olin Corp. (Plastics Div.) v. [Workmen’s
Comp. Appeal Bd. (Lawrence)], 324 A.3d 813 (Pa. Cmwlth.
1974).
Bd. Op., 4/12/18, at 2-4. Thus, the Board determined the WCJ erred in granting
Employer’s modification petition. As such, it reversed the WCJ’s determination that
9
Employer was entitled to subrogation in the amount of $16,106.26 against
Claimant’s third-party recovery. Employer now petitions for review to this Court.
II. Discussion
A. Contentions
On appeal,6 Employer argues the Board erred in reversing the WCJ’s
decision granting Employer’s modification petition based on its determination that
this case was controlled by Stermel and Bushta. It asserts this case is factually
distinguishable from those cases.
Employer contends it took steps to separate its payment obligations
under the HLA and the Workers’ Compensation Act. Moreover, Employer
maintains, it did not, like the employers in Stermel and Bushta, issue an NCP that
addressed the HLA or indicate that payments under the HLA were in lieu of workers’
compensation payments so as to conflate its two payment obligations. Based on
these distinctions, Employer argues Stermel and Bushta are not controlling. Thus,
it asserts, the Board erred in reversing the WCJ’s decision.
Claimant responds that the Board did not err in reversing the WCJ’s
order granting Employer’s modification petition, which sought subrogation for the
amount of its workers’ compensation payments of indemnity and medical benefits
against Claimant’s third-party recovery. Claimant argues the Board correctly
6
Our review is limited to determining whether constitutional rights were violated, whether
the adjudication was in accordance with the law and whether necessary findings of fact were
supported by substantial evidence. Grimm v. Workers’ Comp. Appeal Bd. (Fed. Express Corp.),
176 A.3d 1045 (Pa. Cmwlth.) (en banc), appeal denied, ___A.3d ___(Pa., No. 52 WAL 2018, filed
July 16, 2018).
10
concluded that the WCJ failed to apply controlling authority as set forth in Bushta,
Stermel, and DeHoratius. Claimant asserts those decisions consistently hold that a
public employer, whether self-insured or insured, is obligated under the HLA to
provide wage continuation and medical benefits to injured police officers.
Further, Claimant contends, although Employer kept its payments of
workers’ compensation indemnity and medical benefits separate from its payments
of HLA wage benefits, those payments are subsumed into his HLA benefits, which
Employer was required to provide. Therefore, Claimant maintains, the self-insured
public employer here did not possess a right of subrogation for workers’
compensation indemnity and medical benefits issued as a result of Claimant’s injury
and resulting disability arising from a work-related motor vehicle accident. Claimant
argues the Act 44 amendments to the MVFRL, while authorizing a public
employer’s right of subrogation for workers’ compensation benefits, did not extend
that authority to required HLA wage and medical benefits.
B. Analysis
Initially, Section 1(a) of the [HLA] provides that a police officer injured
in the performance of his duties and temporarily incapacitated from performing his
duties by that injury, “shall be paid” his full rate of salary until the incapacity has
ceased, as well as “[a]ll medical and hospital bills, incurred in connection with any
such injury[.]’ 53 P.S. § 637(a) (emphasis added). Additionally, “any work[ers’]
compensation benefits received or collected by any such employe for such period,
shall be turned over to the … township ….” Id. (emphasis added).
11
A little over a year ago, in DeHoratius, which involved the same
employer and virtually identical facts to those presented here, this Court rejected
Employer’s argument that it was entitled to subrogation of the claimant’s third-party
recovery. We stated:
Employer does not dispute that it is not entitled to
subrogation for the lost wages [the] [c]laimant received
under the [HLA]. However, Employer contends that, since
it paid [the] [c]laimant indemnity and medical benefits
from its [workers’ compensation] account, it is entitled to
subrogation from [the] [c]laimant’s third-party recovery
for those benefits. [The] [c]laimant argues that because he
was entitled to [HLA] benefits, it is irrelevant that
Employer chose to pay [the] [c]laimant’s benefits from its
[workers’ compensation] account.
This Court addressed a similar argument in
[Bushta], wherein, the employer maintained that it was
entitled to subrogation because a portion of the claimant’s
benefits were paid out of [workers’ compensation]. The
Bushta Court held:
Although the NCP in the instant case stated
that ‘[p]aid [s]alary continuation [was under the]
[HLA]’ NCP at 2, because the [HLA] requires the
payment of full salary and all medical expenses, see
Section 1 of the [HLA], self-insured employers
paying [HLA] benefits issue an NCP only to
acknowledge the work injury. See [Stermel].
Section 25(b) of Act 444 expressly states: ‘The
provisions of [Sections 1720 and 1722 of the
[MVFRL],5 75 Pa. C.S. §§ 1720[,] 1722 are
repealed insofar as they relate to [workers’
compensation] payments or other benefits under the
[Workers’ Compensation Act.]’6 Section 25(b) of
Act 44 makes no distinction between wage loss or
medical benefits. Here, because [the [c]laimant was
a public safety employee, his benefits fall under the
[HLA]. Thus, pursuant to Section 1720 of the
MVFRL, [the e]mployer is not entitled to
12
subrogation from [the c]laimant’s third-party
recovery. Consequently, we are constrained to hold
that [the c]laimant’s recovery … is not subject to
subrogation.
Bushta, 149 A.3d at 122-23 (emphasis added). Employer
responds that because the NCP issued to [the] [c]laimant
did not reference the [HLA] and because Employer kept
the salary payments (under [HLA] benefits) separate from
medical benefits (under [Workers’ Compensation] Act
benefits), this case is distinguishable from both Stermel
and Bushta. However, the Court in neither decision relied
on the wording of the NCP to make its determination. In
both cases, the employers were self-insured and argued
that because they treated the medical payments as
[workers’ compensation], they were entitled to
subrogation.
The Court in both decisions rejected this argument
on the basis that the employers were going beyond the
MVFRL by treating [HLA] benefits as [workers’
compensation] benefits when the [HLA] specifically
encompasses wages and medical benefits. It appears
Employer is seeking to use its accounting method of
separating the [HLA] benefits from the [workers’
compensation] benefits as the basis to establish
subrogation rights. However, the [HLA] expressly
provides for wages and medical benefits, and, therefore,
both are statutorily ‘require[d;]’ thus, Employer’s separate
[workers’ compensation] account does not entitle it to
subrogation under the [Workers’ Compensation] Act.
Bushta, 149 A.3d at 122; see also 53 P.S. §637(a). This
fact is especially true here, where Employer required [the]
[c]laimant to endorse his [workers’ compensation] checks
to Employer. Contrary to Employer’s argument,
Employer appears to be the party seeking double recovery
by requesting subrogation of these same payments.
Accordingly, we hold that [the] [c]laimant’s third-party
recovery is not subject to subrogation.
4
Act of July 2, 1993, P.L. 190, No. 44.
5
75 Pa. C.S. §§1701-1799.7.
13
6
Section 1720 of the MVFRL prohibited a plaintiff from
including as an element of damages [workers’
compensation] or other benefits paid, which included [HLA]
benefits. Section 1722 of the MVFRL did not allow [the]
[c]laimant to recover loss of wages covered by the [HLA].
DeHoratius, 187 A.3d at 275-76. The same reasoning applies equally here.
Therefore, based on DeHoratius, the Board properly determined Employer was not
entitled to subrogation of Claimant’s third-party recovery here.7
This result is supported by our Supreme Court’s affirmance of this
Court’s decision in Bushta, which was rendered after this Court’s decision in
DeHoratius. In our underlying decision in Bushta, we applied our holding in
Stermel. In Bushta, our Supreme Court considered whether the Pennsylvania State
Police, which is self-insured, was entitled to subrogation to the extent of
compensation payable pursuant to the Workers’ Compensation Act where it had
concurrent obligations to the injured employee under both the Workers’
Compensation Act and the HLA. Our Supreme Court acknowledged its prior
holding that a claimant may be entitled to benefits for concurrent employment under
the Workers’ Compensation Act while also receiving HLA benefits. Id. at 966
(discussing City of Erie v. Workers’ Comp. Appeal Bd. (Annunziata), 838 A.2d 598(Pa. 2003), holding a police officer injured on duty could receive HLA benefits and
workers’ compensation benefits for wages he lost as a part-time security guard
7
Nevertheless, Employer asserts “DeHoratius v. [Workers’ Compensation Appeal Board
(Upper Darby Township), 187 A.3d 273 (Pa. Cmwlth. 2017), appeal denied, 187 A.3d 911 (Pa.
2018)] is … not controlling because it is not clear that the argument made by Employer, i.e.
regarding the separate nature of its payment obligations, was fully considered as the basis for the
DeHoratius holding.” Pet’r’s Br. at 20. Contrary to Employer’s present assertions, it raised the
same argument in DeHoratius, and this Court rejected that argument. Thereafter, the Supreme
Court denied Employer’s petition for allowance of appeal. As such, Employer’s argument fails.
14
because of his work injury). However, our Supreme Court cautioned that, while a
claimant who is receiving HLA benefits may seek and receive workers’
compensation benefits for concurrent employment, the HLA requires the claimant
to remit to his employer all workers’ compensation benefits received or collected.
Thus, our Supreme Court held, if the claimant does not actually receive or collect
workers’ compensation benefits, there is no basis for subrogation.8
Here, Employer paid Claimant HLA benefits during the periods in
which Claimant was temporarily disabled by his work injury. See Stipulation of
Fact ¶9; Reproduced Record (R.R.) at 68a. However, Claimant did not actually
receive or collect any workers’ compensation benefits; rather, Employer required
him to endorse all of his workers’ compensation checks to Employer. R.R. at 25a-
27a, 48a-51a. Indeed, Employer concedes this point. Pet’r’s Br. at 18. Therefore,
there is no basis for subrogation.
For all of the foregoing reasons, we affirm the Board.
8
Further, the Court “agreed with the Stermel court that, for purposes of the MVFRL,
[HLA] benefits subsume [Workers’ Compensation Act] benefits, and thus subrogation of such
benefits is barred.” Pa. State Police v. Workers’ Comp. Appeal Bd. (Bushta), 184 A.3d 958, 968
(Pa. 2018). Moreover, the Court found “no basis upon which to conclude that a mere
acknowledgement in an NCP of a work injury, and the specification of the amount of benefits to
which an injured employee would be entitled under the [Workers’ Compensation Act], transforms
an injured employee’s [HLA] benefits into [Workers’ Compensation Act] benefits under the
MVFRL.” Id. at 969.
In addition, our Supreme Court rejected the employer’s argument that, because the
claimant’s medical bills were paid using the “re-pricing” formula contained in the Workers’
Compensation Act, those medical payments constituted compensation payable under the Workers’
Compensation Act. Id. at 969. Because payment of the claimant’s medical care and treatment is
required under the HLA, the Court explained, those payments constituted an HLA benefit,
regardless of the pricing scheme used.
15
ROBERT SIMPSON, Judge
Judge Fizzano Cannon did not participate in the decision in this case.
16
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Upper Darby Township, :
Petitioner :
:
v. : No. 647 C.D. 2018
:
Workers' Compensation Appeal :
Board (Dockery), :
Respondent :
ORDER
AND NOW, this 11th day of October, 2018, the order of the Workers’
Compensation Appeal Board is AFFIRMED.
ROBERT SIMPSON, Judge