Thompson v. WCAB (USF&G CO.)

• Citation: 566 Pa. 420,781 A.2d 1146
• Parties: John L. THOMPSON v. WORKERS' COMPENSATION APPEAL BOARD (USF&G COMPANY and Craig Welding Equipment Rental). Appeal of USF&G Company and Craig Welding & Equipment Rental.
• Decision Date: 17 October 2001
• Court: United States State Supreme Court of Pennsylvania

781 A.2d 1146

566 Pa. 420

John L. THOMPSON v. WORKERS' COMPENSATION APPEAL BOARD (USF&G COMPANY and Craig Welding Equipment Rental).

Appeal of USF&G Company and Craig Welding & Equipment Rental.

Supreme Court of Pennsylvania.

Argued September 11, 2000.

Decided October 17, 2001.

Judith Olmstead, Pittsburgh, for USF&G Co. and Craig Welding and Equipment Rental.

Amber Marie Kenger, James A. Holzman, for WCAB.

James J. Gillespie, for John L. Thompson.

Annabelle R. Cedar, George Martin, for amicus-John L. Thompson.

Before FLAHERTY, C.J., ZAPPALA, CAPPY, CASTILLE, NIGRO and SAYLOR, JJ.

OPINION OF THE COURT

CASTILLE, Justice:

Appellee John L. Thompson, who suffered work-related injuries while in the employ of appellant Craig Welding and Equipment Rental ("Craig"), received workers' compensation and medical benefits through Craig and its workers' compensation carrier, appellant USF & G Company ("USF & G"). Thompson also filed and settled mid-trial a product liability action against the entities who manufactured, distributed and/or owned the equipment on which he was injured. Following the settlement, appellants filed a Petition to Suspend Compensation and Enforce Subrogation Lien pursuant to § 319 of the Worker's Compensation Act, 77 P.S. § 671. A workers' compensation judge granted the petition and the Workers' Compensation Appeal Board affirmed, both adjudicative bodies finding that the statutory right of subrogation was absolute. A divided Commonwealth Court panel reversed in a published opinion, finding that the "equities" it perceived defeated the employer's statutorily mandated right of subrogation. This Court granted review to consider the proper scope of the right of subrogation provided by § 319. For the reasons that follow, we vacate the order of the Commonwealth Court and remand for proceedings consistent with this Opinion.

On August 5, 1988, appellee was testing an Omni 60 aerial platform that Craig intended to purchase when the tip boom, i.e., the top-most boom, suddenly collapsed causing appellee to suffer injuries to his skull, jaw, ribs and teeth. Eleven days after the collapse, Craig conducted an inspection and tear-down of the Omni 60 to determine the cause of the accident. USF & G retained an expert who was present during the inspection and tear-down. William Craig, owner of appellant Craig, a Craig employee, the owner of the crane, a representative of the manufacturer and appellee's father were also present at the inspection. According to a report submitted by USF & G's expert, the design specifications of the aerial platform required that the tip boom's chain anchor plate be secured by five bolts to the lower end of the scaffold boom. Three of the bolts with lock washers still attached had backed out of the plate and were found in the bottom of the housing. A fourth bolt was severed in two, and the fifth bole was never found. The expert opined that the collapse resulted from four of the bolts working loose and the remaining bolt failing due to overload and fatigue cracking. When the inspection was concluded, William Craig took possession of the three undamaged bolts and the two damaged pieces and certified in a memorandum that he had possession of the bolts from the damaged Omni 60.

Appellee filed a product liability action against Pettibone Corporation, Doering Equipment, Inc., and Marlift, Inc., i.e., the manufacturers, suppliers and/or owners of the platform. Pettibone Texas Corporation subsequently was added as an additional defendant. The matter went to trial in November of 1993 at which time appellee called as a witness the USF & G expert who attended the inspection and tear-down of the Omni 60. The expert testified that the tip boom collapsed because its chain anchor plate was attached to the crane by only one bolt which broke as a result of overload. He further testified that the three intact bolts found in the crane housing had backed out of the chain anchor plate either because they were not properly torqued during maintenance or because the manufacturer failed to anticipate that the Omni 60 would be subject to vibrations during normal use causing the bolts to back out on their own. The expert also stated that, if he had the bolts, he could compare them to the bolts required by the design specifications and ascertain whether they were the correct grade of bolts, determine if they were the original bolts installed at the time of manufacture or replacement bolts installed by the owner, and could measure for any elongation in the bolts. By the time of trial some five years since the inspection of the platform, however, William Craig had inadvertently lost the bolts. No party had requested to inspect the bolts between the August 1988 inspection and the spring of 1993.

On November 18, 1993, the third day of trial, the product liability defendants filed a motion in limine requesting that appellee be precluded from presenting any evidence of medical or indemnity benefits paid by USF & G as workers' compensation carrier for Craig as a sanction for appellee's inability to produce the bolts at trial.¹ The trial court ruled that the loss of the bolts substantially deprived defendants of the ability to prepare a defense and granted the motion in limine. At the request of the trial court, counsel for USF & G and Craig, who were not parties to the product liability action, were present at the time the motion in limine was argued and granted. The same day, appellee settled his product liability action for $300,000. The settlement was structured in a way that was obviously intended to defeat the employer's subrogation right: specifically, $200,000 was apportioned to appellee John Thompson and designated as compensation for pain and suffering, while $100,000 was apportioned to his wife for loss of consortium. On February 2, 1994, the trial court entered an order approving the terms of the settlement, including the parties' designation and allocation of the settlement funds. The court stated that the settlement was exclusive of all medical bills and lost wage payments because those claims were precluded by the court's in limine ruling. The court also opined, gratuitously in light of the fact that the issue was not before it, that USF & G's "subrogation claim has been completely compromised by its insured's destruction of vital evidence in the case."

On April 14, 1994, appellants filed their petition to suspend compensation to appellee and enforce their subrogation lien.² On January 23, 1995, the workers' compensation judge ("WCJ") granted the petition finding that: (1) appellants' subrogation right was absolute; (2) the allegations of wrongdoing against Craig were insufficient to deprive appellants of their subrogation right; (3) appellee and the defendants in the third party action could not unilaterally allocate the settlement proceeds in such a way as to deprive appellants of their full subrogation right; and (4) the amount of the settlement allocated to loss of consortium was subject to subrogation because there was no agreement between Craig and appellee regarding the amount of loss of consortium or an adjudication determining the actual amount of loss of consortium damages.³ The Workers' Compensation Appeal Board ("WCAB") affirmed the WCJ's decision on December 20, 1996, holding that the WCJ had not committed an error of law and that the findings of fact were supported by substantial, competent evidence. See Bethenergy Mines, Inc. v. Workmen's Compensation Appeal Board (Skirpan), 531 Pa. 287, 612 A.2d 434 (1992)

.

On direct appeal, a divided Commonwealth Court panel reversed the WCAB in a published opinion. The panel majority concluded that appellants were barred on "equitable grounds" from enforcing their statutory subrogation right. The majority analogized the situation to a personal injury claimant who inadvertently destroys or loses a defective product, noting that such a plaintiff "may be barred from recovering any damages from the alleged tortfeasor."⁴ The majority saw no reason why an employer and its compensation carrier who lose the defective product, as William Craig did here, should be entitled to what it viewed as "disparate treatment." The majority also found that appellants' failure to intervene in the product liability action to protect their subrogation interest, particularly after the trial court in that matter precluded evidence of lost wages and medical expenses in response to Craig having lost the bolts, was another factor weighing in favor of denying subrogation on "equitable" grounds. In reaching its decision, the majority distinguished Winfree v. Philadelphia Electric Company, 520 Pa. 392, 554 A.2d 485 (1989), a case that appellants cite for the proposition that the statutory right of subrogation is absolute. The majority concluded that this Court merely held that an "insufficient equitable basis" existed to deny subrogation in Winfree.

Judge Leadbetter dissented. In her view, this Court in Winfree "stated unequivocally" that the employer's right to subrogation under § 319 is absolute. In addition, the Commonwealth Court itself had held in Kelly v. Workmen's Compensation Appeal Board (A-P-A Transport Corp.), 107 Pa.Cmwlth.223, 527 A.2d 1121 (1987) that equitable considerations do not outweigh the mandatory language of § 319. In the alternative, Judge Leadbetter would have found insufficient equitable reasons to defeat the statutory right in this case.

This Court's scope of review in workers' compensation matters is limited to determining whether constitutional rights were violated, whether an error of law was committed, or whether the findings of fact are supported by substantial evidence. 2 Pa.C.S. § 704; Udvari v. Workmen's Compensation Appeal Board (USAir, Inc.), 550 Pa. 319, 322, 705 A.2d 1290, 1291 (1997). Although the WCJ's decision must be based on substantial evidence, the WCJ is the ultimate finder of fact and the exclusive arbiter of...