Arlet, R., Aplt. v. WCAB (L&I)

[J-68-2021]
IN THE SUPREME COURT OF PENNSYLVANIA
WESTERN DISTRICT
BAER, C.J., SAYLOR, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.
ROBERT ARLET, : No. 12 WAP 2021
:
Appellant : Appeal from the Order of the
: Commonwealth Court entered July
: 29, 2020 at No. 1722 CD 2018,
v. : affirming the Order of the Workers'
: Compensation Appeal Board
: entered December 4, 2018 at No.
WORKERS' COMPENSATION APPEAL : A17-0526.
BOARD (COMMONWEALTH OF :
PENNSYLVANIA, DEPARTMENT OF : ARGUED: October 26, 2021
LABOR AND INDUSTRY, BUREAU OF :
WORKERS' COMPENSATION), :
:
Appellees :
OPINION
JUSTICE MUNDY DECIDED: FEBRUARY 23, 2022
In this appeal by permission, we consider the right of an insurer to subrogation
under the Workers’ Compensation Act (WCA).1 More specifically, we consider, as a
matter of first impression for this Court, the limitations of the general equitable prohibition
of an insurer seeking subrogation from its insured.
FACTUAL AND PROCEDURAL BACKGROUND
On March 9, 2011, during the course and scope of his employment as a shipwright,
Robert Arlet (Claimant) slipped and fell on an icy sidewalk on the premises of his
1 Act of June 2, 1915, P.L. 736, No. 338, as amended, 77 P.S. § 1, et seq.
employer, Flagship Niagara League (Employer), sustaining injuries.2 Employer had
obtained a Commercial Hull Policy from Acadia Insurance Company (Insurer).3 Through
the policy, Insurer provided coverage for damages caused by the Brig Niagara and for
Jones Act4 protection and indemnity coverage for the “seventeen (17) crewmembers” of
the Brig Niagara. Cover Letter for Commercial Hull Policy: CHA028883411; Reproduced
Record at 45a.5 Employer had also at some point obtained workers’ compensation
insurance from the State Workers’ Insurance Fund (SWIF).6
2 Employer is a non-profit associate organization of the Pennsylvania Historical and
Museum Corporation. It is responsible for maintaining and operating the U.S. Brig
Niagara and its homeport, the Erie Maritime Museum.
3 Claimant, as Appellant, acts on behalf of Insurer pursuant to a power of attorney and
fee agreement of record, which granted “unto my said attorneys complete power and
authority” over the conduct of his case. Notes of Testimony, 11-16-2016, Claimant Exhibit
C-03; see Arlet v. Workers’ Compensation Appeal Board, 237 A.3d 615, 617 n.1 (Pa.
Cmwlth. 2020). Herein, we refer to Appellant’s arguments as Insurer’s and refer to Mr.
Arlet as Claimant.
4 The Jones Act refers to Section 33 of the Merchant Marine Act of 1920, 46 U.S.C.A.
§ 30104 (formerly cited as App. U.S.C.A. § 688), which provides enhanced protection to
workers exposed to the perils of the sea. Chandris, Inc. v. Latsis, 515 U.S. 347, 354
(1995). It provides a “seaman” the ability to sue his employer for negligence and to
recover for injuries sustained in the course of his employment. Id. at 355-56. Once an
individual is found to be covered by federal maritime law, the state workers’ compensation
law is preempted. Hill v. Workmen’s Comp. Appeal Bd. (Spirit of Phila.), 703 A.2d 74, 78-
80 (Pa. Cmwlth. 1997).
5 The policy language refers to “members of the crew” and the parties use the terms
“crewmember” and “members of the crew” synonymously.
6 Certain funds paid by employers pursuant to the WCA, are directed to SWIF, which
“provide[s] insurance coverage to subscribing employers as an alternative to contracts of
insurance with private commercial carriers.” Key Handling Sys., Inc. v. Workers’ Comp.
Appeal Bd. (Jenkins), 729 A.2d 109, 112-13 (Pa. Cmwlth. 1999); see also Section 1504
of the WCA, 77 P.S. § 2604.
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Insurer paid benefits to Claimant under its Commercial Hull Policy’s “maintenance
and cure” provision, which “concerns the vessel owner’s obligation to provide food,
lodging, and medical services to a seaman injured while serving the ship.” Lewis v. Lewis
& Clark Maritime, Inc., 531 U.S. 438, 441 (2001). Specifically, Insurer paid Claimant
maintenance of $50.00 per day for 92 days plus $42,133.36 in medical expenses. On
February 8, 2013, Claimant filed a claim for workers’ compensation benefits effective
March 9, 2011. Employer filed an answer asserting Claimant’s remedy was exclusively
governed by the Jones Act, and furthermore that Claimant had fully recovered from his
injury by May 12, 2011. Employer also filed to join SWIF as an additional insurer in the
event the WCA was deemed to supply the applicable exclusive remedy, and Employer
was found to be liable thereunder. SWIF filed an answer denying coverage, alleging
Employer’s policy was lapsed at the time of Claimant’s injury. Thereafter, Claimant filed
an Uninsured Employers Guaranty Fund (UEGF) claim petition, asserting the fund’s
liability in the event he prevailed, and Employer was deemed uncovered by SWIF and
failed to pay.7 UEGF filed an answer, denying the principal allegations in the petition.
The Workers’ Compensation Judge (WCJ) bifurcated the proceedings to first
address whether Claimant was a “seaman” for the purposes of the Jones Act. If so,
recovery through the WCA would be pre-empted, but Claimant could, pursuant to the
Jones Act, sue Employer for negligence, which recovery had already been effected
7 The Legislature created the UEGF, via legislation amending the WCA, “for the exclusive
purpose of paying to any claimant or his dependents workers’ compensation benefits due
and payable ... and any costs specifically associated therewith where the employer liable
for the payments failed to insure or self-insure its workers’ compensation liability ... at the
time the injuries took place.” 77 P.S. § 2702(c). The enactment, which created the fund,
also provides that if an injured worker’s claim “is not voluntarily accepted as compensable,
the employee may file a claim petition naming both the employer and the fund as
defendants.” 77 P.S. § 2704.
[J-68-2021] - 3
through the above noted payments by insurer. Following testimony and argument, the
WCJ ruled that Claimant was a “seaman” covered exclusively under the Jones Act and
therefore ineligible for workers’ compensation benefits. The WCJ reasoned that the term
“member of the crew” as used in the Commercial Hull Policy, and the term “seaman” as
used in the Jones Act, were synonymous. Claimant appealed, and the Workers’
Compensation Appeals Board (WCAB) reversed that determination. It reasoned that, as
a land-based employee, Claimant did not meet the definition of seaman under the Jones
Act and was, therefore, entitled to pursue his workers’ compensation claim.8
On remand, the WCJ awarded Claimant total disability benefits at a weekly rate of
$411.75 from March 8, 2011 to August 19, 2011. The WCJ determined that, because
Employer had not maintained a state workers’ compensation insurance policy at the time
of Claimant’s injury, it would be responsible for payment of the amount of the award that
exceeded the benefits paid under the Commercial Hull Policy, being net uncompensated
wage loss of $5,046.71. Additionally, the WCJ held that Insurer was not entitled to
subrogation because it had correctly paid Claimant under its Commercial Hull Policy, and
that, if Employer failed to pay, UEGF must pay the benefits, with leave to pursue
8 Somewhat prescient of the instant issue the WCAB noted the following respecting
Insurer’s payments under the Commercial Hull Policy:
Rather, it is our understanding that when a party’s entitlement
to certain benefits is ultimately established by litigation, any
benefits which were previously received by the party absent
any litigation, the receipt of which is legally inconsistent with
the ultimate award of benefits, are subject to being
reimbursed to the original payor. See, e.g, Lucev v. WCAB
(VY-CAL Plastics), 732 A.2d 1201 (Pa. 1999) (holding that a
person who has paid another an excessive amount of money
because of an erroneous belief induced by a mistake of fact
that the sum paid was necessary for the discharge of a duty
is entitled to restitution of the excess).
Decision of the Workers’ Compensation Appeal Board, 2/23/16, at 11.
[J-68-2021] - 4
reimbursement from Employer. See Olin Corp. (Plastics Div.) v. WCAB, 324 A.2d 813(Pa. Cmwlth. 1974) (recognizing subrogation is the right of a party who has made
payment toward an obligation, which should have been paid by another, to be indemnified
by the other.) Claimant and UEGF each appealed to the WCAB.
UEGF argued that Claimant was a “seaman” with his sole remedy available under
the Jones Act. Having previously ruled on the question, the WCAB declined to revisit the
issue. For his part, Claimant argued that the WCJ erred in ruling that Insurer correctly
paid benefits under the Commercial Hull Policy and was ineligible for subrogation. The
WCAB disagreed. It reviewed the terms of the Commercial Hull Policy and noted that the
policy did not employ the same terminology present in the Jones Act. Specifically, by
using the term “member of the crew” rather than “seaman” the policy at best created an
ambiguity as to whether the terms were synonymous or not, and that any ambiguities
must be resolved in favor of the insured. Thus, the WCAB held that, although Claimant
was not a “seaman” under the Jones Act, he was a “member of the crew” under the
Commercial Hull Policy, meaning that Insurer had correctly paid proceeds to Claimant
under the policy. Therefore, the WCAB concluded Section 319 of the WCA, see infra
note 10, precluded Insurer from seeking subrogation, and it affirmed the WCJ. Claimant
sought review in the Commonwealth Court and Employer intervened.
Claimant argued that “the law of the case” doctrine should apply to preclude the
WCAB’s order from deviating from its previous determination that Claimant was not a
“seaman.” Because the terms “seaman” and “crewmember” are interchangeable,
Claimant contended, the WCAB’s decision is at odds with its earlier ruling. Employer
responded that the WCAB did not reverse its earlier ruling, which had not specifically
construed the “member of the crew” language of the Commercial Hull Policy. Accordingly,
“the law of the case” doctrine would not apply. The court declined to invoke the law of
[J-68-2021] - 5
the case doctrine absent any authority indicating the doctrine is applicable to proceedings
completely within the workers’ compensation system.
Claimant next argued the WCAB’s decision was not supported by substantial
evidence because, inasmuch as his employment duties did not qualify him as a “seaman”
under the Jones Act, he could not then be deemed a “crewmember.” Employer countered
that the terms are not the same, and the use of the term “crewmember” in the Commercial
Hull Policy and not “seaman” must be deemed purposeful.
The Commonwealth Court reviewed pertinent case law construing the term
“seaman” in the Jones Act as a mixed question of law and fact and concluded the terms
“seaman” and “crewmember”- or “member of the crew” - are interchangeable. Arlet v.
Workers’ Compensation Appeal Board, 237 A.3d 615, 622-623 (Pa. Cmwlth. 2020) (citing
Chandris, Inc. v. Latsis, 515 U.S. 347 (1995); Foulk v. Donjon Marine Co., Inc., 144 F.3d
252 (3rd Cir. 1998); and Hill v. Workmen’s Compensation Appeal Bd. (Spirit of Phila.), 703
A.2d 74 (Pa. Cmwlth. 1997). Thus, the court held that because “the remedies under [the
WCA and the Jones Act] are exclusive, the WCAB erred in concluding that Claimant was
entitled to Jones Act maintenance and cure benefits and workers’ compensation benefits
for the same injury.” Id. at 623. The court did not disturb the WCAB’s underlying
determination that Claimant was not a seaman for the purposes of the Jones Act.
Notwithstanding its determination that Claimant’s exclusive remedy lay with the WCA, the
court affirmed the WCAB on the alternative grounds that “it is well settled that an insurer
cannot subrogate against its own insured.” Id. (citing Keystone Paper Converters, Inc. v.
Neemar, Inc., 562 F. Supp. 1046, 1048 (E.D. Pa. 1983); Employers of Wausau v. Purex
Corp., 476 F. Supp. 140, 142 (E.D. Pa. 1979); and Remy v. Michael D’s Carpet Outlets,
571 A.2d 446, 447 (Pa. Super. 1990)).
ISSUE ON APPEAL
[J-68-2021] - 6
Claimant sought allowance of appeal, and we granted allocator to consider the
following question.
Did the Commonwealth Court of Pennsylvania err as a matter
of law in its July 29, 2020 Opinion and Order when it affirmed
the Workers’ Compensation Appeal Board’s finding that
Acadia [Insurance Company] did not have a right to
subrogation for benefits paid to [Claimant] under a Jones Act
policy of insurance, despite the Commonwealth Court’s initial
holding in this case that [Claimant] was not a seaman and/or
crewmember entitled to the benefits which [Insurer] should not
have paid him?
Arlet v. Workers’ Compensation Appeal Board, 255 A.3d 190, (Table) (Pa. 2021) (order
granting allowance of appeal).
It is as well to note at the outset those issues that are not encompassed within the
question accepted for review. As related in the factual and procedural history of this case,
several determinations were made by the lower tribunals regarding whether Claimant’s
employment qualified him as a seaman under the Jones Act, and whether the Commercial
Hull Policy was exclusively a Jones Act policy or provided additional coverage. Portions
of the parties’ briefs are devoted to defending or disputing the correctness of those
holdings, but we note procedurally those issues are not before us and merely establish
the law of the case, culminating in the critical determinations that a crewmember and
seaman are synonymous for the purpose of the Jones Act and that both the Jones Act
and workers’ compensation law provide exclusive remedies. For our review of the
narrower issue of the right of Insurer to seek subrogation against Employer, we accept
that state of the case without revisiting the merits of those foundational determinations.9
9 For example, in Section III-A of its brief, Flagship Niagara League argues the ambiguity
of the policy language and questions the interchangeability of the terms “seaman” and
“crewmember” to urge the position that the Commercial Hull Policy was not exclusively a
Jones Act Policy. Additionally, in section C of its brief, the Bureau of Workers’
Compensation argues Insurer is estopped from seeking subrogation based on its
voluntary payment under the policy. These issues are not presently before us.
[J-68-2021] - 7
PARTIES’ ARGUMENTS
Insurer submits that the authority relied upon by the Commonwealth Court in
applying the general equitable prohibition against an insurer seeking subrogation against
its insured involves factual circumstances that are materially distinct from the instant case,
namely that the subrogation sought in this case is for payments made on a risk against
which Insurer did not insure. The Commonwealth Court cited two United States District
Court cases and a Pennsylvania Superior Court Case to support its general proposition
that an insurer cannot subrogate against its insured, to wit, Keystone Paper Converters,
Inc., supra; Employers of Wausau, supra; and Remy v. Michael D's Carpet Outlets, supra.
However, Insurer points out the insurers in those cases sought subrogation for sums paid
on risks for which they provided coverage. In Keystone, the insurer sought recovery from
its own insured for payment it made on a covered risk. The Keystone court specifically
held; “To permit the insurer to sue its own insured for liability covered by the insurance
policy would violate ... sound public policy. Such action, if permitted would (1) allow the
insurer to expend premiums collected from its insured to secure a judgment against the
same insured on a risk insured against.” Keystone, 562 F. Supp at 1050-1051 (internal
citations omitted) (emphasis supplied). Similarly, in Employers of Wausau, the insurer
sought subrogation from its insured for payment it made on a covered risk in an
automobile policy.
Purex is the named insured in the policy; Purex paid the
premiums for the coverage; and Purex had contracted with
American Stevedoring to carry such insurance in connection
with the operation of the vehicles. If Employers recovered in
this subrogation action against Purex, it would be
reimbursed for the loss which Purex paid it premiums to
cover. To permit subrogation in this case would be a direct
violation of the well-recognized rule of law that, in the absence
of a clear and unequivocal understanding to the contrary, an
insurer is not entitled to subrogation from its named insured.
[J-68-2021] - 8
Employers of Wausau, 476 F.Supp. at 143 (emphasis supplied). The court in Remy
recited Keystone and Wausau’s general principle that an insurer cannot recover through
subrogation against its own insured in a case where it had been raised as a defense, but
the court determined the party to whom the insurer made payment and from whom it
sought subrogation was not, as had been alleged, an implied co-insured. Accordingly,
the court held the bar against subrogation from an insured for a covered risk did not apply.
By contrast, what this case presents is Insurer seeking subrogation for payment
on a risk it did not insure against. The lower tribunals’ determinations established that
Claimant was not a member of the crew, that the term “crewmember” is interchangeable
with the term “seaman” for Jones Act interpretation and application, and the Jones Act
and WCA remedies are mutually exclusive. Therefore, Claimant is entitled to benefits
under the WCA but not under the Jones Act. Insurer notes that the Commonwealth Court
has recognized a statutory right of subrogation by non-responsible insurance companies
pursuant to Section 319 of the Workers’ Compensation Act.10 See Olin Corp, supra.10 The Act provides as follows.
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
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Employer argues that the Commonwealth Court did not determine that Insurer
should not have paid Claimant and that Insurer is seeking subrogation for payment made
on a risk it covered. However, Employer supports its position by revisiting the use of the
terms “member of the Crew” and “seaman” in the policy and Jones Act. Employer
reasserts the holding of the WCAB, which the Commonwealth Court reversed, that the
Commercial Hull Policy was more than a Jones Act policy based upon its use of the term
“members of the crew.” As noted above, this issue was settled to the contrary and is the
law of the case for the purpose of this appeal. Employer also argues that the right of
subrogation set forth in Section 319 requires reasonable diligence and that Insurer failed
to affirmatively act in a reasonable time. Employers Brief at 24 (citing Independence Blue
Cross v. Workers’ Comp. Appeal Bd. (Frankford Hosp.), 820 A.2d 868 (Pa. Cmwlth.
2003)).11
treated as an advance payment by the employer on account
of any future instalments of compensation.
Where an employe has received payments for the disability or
medical expense resulting from an injury in the course of his
employment paid by the employer or an insurance company
on the basis that the injury and disability were not
compensable under this act in the event of an agreement
or award for that injury the employer or insurance
company who made the payments shall be subrogated
out of the agreement or award to the amount so paid, if
the right to subrogation is agreed to by the parties or is
established at the time of hearing before the referee or
the board.
77 P.S. § 671 (emphasis supplied).
11As noted earlier, the WCAB, argues issues that would come to the fore in the event the
Commonwealth Court’s decision regarding Insurer’s right to seek subrogation is reversed.
These include the distinct status of the UEGF vis-à-vis Employer relative to any
subrogation claim, the role sovereign immunity may have on such a claim, and whether
Insurer’s voluntary actions in this matter should result in it being estopped from asserting
[J-68-2021] - 10
Analysis
Subrogation has its roots in equity and was envisioned as a means to place the
ultimate burden of a debt on the primarily responsible party. Prof’l Flooring Co., Inc. v.
Buhsar Corp., 152 A.3d 292, 301 (Pa. Super. 2016), appeal denied, 170 A.3d 1036 (Pa.
2017). We have described a typical scenario of how subrogation arises in an insurance
context as follows.
Subrogation allows the subrogee [often an insurer] to step into
the shoes of the subrogor [often the insured] to recover from
the party that is primarily liable [often a third party tortfeasor]
any amounts previously paid by the subrogee to the subrogor
[instantly the amounts mistakenly paid under the Commercial
Hull policy]. See e.g. Ario v. Reliance Insur. Co., 602 Pa. 490,
980 A.2d 588, 594–95 (2009). As well-stated by the Superior
Court,
[W]hen an individual who has been indemnified for a
loss subsequently recovers for the same loss from a
third party, equity compels that the indemnifying party
be restored that which he paid the injured party;
thereby placing the cost of the injury upon the party
causing the harm while preventing the injured party
from profiting a “double recovery” at the indemnifying
party’s expense.
Allstate Ins. Co. v. Clarke, 364 Pa.Super. 196, 527 A.2d 1021,
1024 (1987).
Jones v. Nationwide Property and Cas. Ins. Co., 32 A.3d 1261, 1270–71 (Pa. 2011).12
As arising in this case, the subrogee, Insurer (Acadia), steps into the shoes of the
subrogor, Claimant (Arlet), to recover its expenditures mistakenly paid to Arlet under the
Commercial Hull policy issued to Employer (Flagship Niagara). Insurer (Acadia) seeks
it is a non-responsible party. We do not address these arguments, as they exceed the
scope of the issue before us.
12This Court has noted that “[a]lthough originally a common law equitable doctrine,
subrogation today may arise by statute or by virtue of an express agreement between
parties, as well as through operation of common law equitable principles.” Thompson v.
Workers’ Compensation Appeal Board (USF&G Co. and Craig Welding & Equipment
Rental), 781 A.2d 1146, 1151 (Pa. 2001).
[J-68-2021] - 11
through subrogation to receive any payments Employer, as the primarily responsible
party, is due to pay Claimant by virtue of Employer’s workers compensation obligation. It
is this scenario that implicates the general equitable rule recognized by the
Commonwealth Court that “[i]t is well settled that an insurer cannot subrogate against its
own insured.” Arlet, 237 A.3d at 623. The public policy supported by the general rule
speaks of conflict of interest, and of apportionment of risk among those assuming the
burden of such risk.
The courts give various reasons for this rule. Some courts
reason that in subrogation the insurer stands in the shoes of
the insured and is not entitled to subrogation where the
insured has no cause of action against a third party. Stafford
Metal Works, Inc. v. Cook Paint & Varnish Co., 418 F.Supp.
56 (N.D. Tex. 1976); Midwest Lumber Co. v. Dwight E. Nelson
Construction Co., 188 Nev. 308, 196 N.W.2d 377 (1972).
Other courts have pointed out that the insurer accepts the
risks under the policy in exchange for premiums, and it is not
equitable that it be compensated by the insured for a loss paid
out under the policy. First National Bank of Columbus v.
Hansen, 84 Wis.2d 422, 267 N.W.2d 367 (1978); Chenoweth
Motor Co., Inc. v. Cotton, 2 Ohio Misc. 123, 207 N.E.2d 412(1965). Other courts have reasoned that it would be against
public policy for the insurer to prevail in a subrogation action
against its named insured. Stafford Metal Works, Inc. v. Cook
Paint & Varnish Co., 418 F.Supp. 56 (N.D. Tex. 1976); Home
Insurance Co. v. Pinski, 160 Mont. 219, 500 P.2d 945 (1972)
Employers of Wausau, 476 F.Supp. at 143.
This rule serves two purposes: (1) it prevents the insurer from
passing the loss back to its insured, an act that would avoid
the coverage that the insured had purchased; and (2) it guards
against conflicts of interest that might affect the insurer’s
incentive to provide a vigorous defense for its insured.
Continental Divide Ins. Co. v. Western Skies Management, Inc., 107 P.3d 1145, 1148
(Colo. App. 2004). Insurer is correct that the instant case has a critical distinguishing fact
from the cases relied on by the Commonwealth Court in applying that general equitable
rule. Unlike the cases cited by the Commonwealth Court, instantly Insurer’s policy was
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found not to cover Claimant’s injury. Insurer, therefore had not contracted to assume the
risk of Claimant’s injury. This factual distinction highlights the limitation of the conflict of
interest and apportionment of risk rationale expressed to justify the general rule.
Based on this distinction, other jurisdictions that apply the bar against an insurer
seeking subrogation against its insured have recognized what has sometimes been
termed a “no-coverage exception” to the rule. In Continental Divide Ins. Co., the Colorado
Court of Appeals, set forth several circumstances where an insurer could recover against
insured for payments made toward injuries not covered by the policy.
An insurer may sue to recover payment made for bodily injury
where a general liability policy excluded bodily injury to
employees.
An insurer may sue to recover payment made for damage
caused by arson where a policy excluded intentional acts.
An insurer may sue to recover payment made for damage
caused by a subcontractor’s negligence where a general
contractor’s policy covered subcontractors for property
damage, but not liability.
Id. at 1148 (citations omitted)
Similarly, a New York appellate court held “[b]ecause the bodily injury to an
employee exclusion in the general liability policy renders that policy inapplicable to the
loss, the antisubrogation rule does not apply.” Zahno v. Urquart, 625 N.Y.S.2d 111, 112–
13 (N.Y. App. Div. 1995). Citing like cases, the California Court of Appeal explained this
exception as follows:
The rule illustrated by these cases prevents an insurer from
equitably subrogating against an insured where the policy
covers the insured for the particular loss or liability that the
insurer seeks to impose on the insured. If the policy does not
cover the insured for a particular loss or liability, however, the
insurer does not assume responsibility to the insured for the
loss or liability, and it would not be inequitable for the insurer
to impose the loss or liability on the insured.
[J-68-2021] - 13
Truck Ins. Exch. v. Cty. of L.A., 115 Cal. Rptr. 2d 179, 186–87 (Cal. Ct. App. 2002).
As a matter of first impression for this Court, we conclude that the “no-coverage
exception” to the general equitable rule precluding an insurer from pursuing subrogation
against its insured comports with the purposes and public policy supporting the rule and
hereby adopt it as the law of this Commonwealth. For example, the conflict of interest
perceived to be present when an insurer seeks subrogation from an insured for a covered
loss is not implicated where the loss is found not to be covered. The concerns expressed,
as justification for precluding subrogation by an insurer against its insured, about
apportionment of risk among those assuming the burden of such risk is similarly inapt
where the insurer had not assumed any burden for the loss at issue.
Applying the exception to the instant case, given the finding below that Insurer’s
Commercial Hull Policy, a Jones Act policy, does not cover Claimant, because Claimant
is not a “seaman” or crew member, and the finding that the WCA’s exclusive remedy
applies, Insurer is seeking subrogation for payment it made on a loss it did not cover. The
fact that Insurer voluntarily made timely payments under its policy pending a
determination of whether Claimant was in fact covered under the policy does not alter the
rationale of either the general rule or the no-coverage exception. Subrogation claims may
well be dependent on particular circumstances in their final analysis, but we conclude any
equitable rule precluding an insurer from seeking subrogation against its insured is best
tempered by the exception adopted herein today. Accordingly, we reverse that portion of
the Commonwealth Court’s decision affirming the WCAB on its stated alternate grounds,
and remand for further proceedings consistent with this decision.13
13 As noted earlier, Appellee Commonwealth of Pennsylvania, Department of Labor and
Industry, Bureau of Workers’ Compensation addressed in its brief more specialized
issues pertaining to whether the UEGF may be subject to subrogation, including
sovereign immunity. As a consequence of the Commonwealth Court’s decision, these
issues had not been reached below. Nothing in this decision should be construed as
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Chief Justice Baer and Justices Todd, Donohue, Dougherty and Wecht join the opinion.
Former Justice Saylor did not participate in the decision of this matter.
opining on the merits of those issues or as precluding them being raised in due course
on remand.
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