Hannigan v. WCAB (O'BRIEN ULTRA SERVICE)

• Decision Date: 01 November 2004
• Citation: 860 A.2d 632
• Parties: Garrett HANNIGAN, Petitioner v. WORKERS' COMPENSATION APPEAL BOARD (O'BRIEN ULTRA SERVICE STATION), Respondent.
• Court: Pennsylvania Commonwealth Court

860 A.2d 632

Garrett HANNIGAN, Petitioner v. WORKERS' COMPENSATION APPEAL BOARD (O'BRIEN ULTRA SERVICE STATION), Respondent.

Commonwealth Court of Pennsylvania.

Argued September 8, 2004.

Decided November 1, 2004.

Richard T. Kupersmith, Philadelphia, for petitioner.

Deborah Beck, Philadelphia, for respondent.

BEFORE: COLINS, President Judge, McGINLEY, Judge, PELLEGRINI, Judge, FRIEDMAN, Judge, LEADBETTER, Judge, COHN JUBELIRER, Judge, LEAVITT, Judge.

OPINION BY Judge LEADBETTER.

The issue presented for review is whether an employer is entitled to subrogate against uninsured motorist benefits that the claimant receives under a policy of motor vehicle insurance purchased by someone other than the claimant, the employer or the tortfeasor who caused the motor vehicle accident. The Workers' Compensation Appeal Board (Board) concluded that employer was entitled to subrogate against the funds and reversed the order of the Workers' Compensation Judge (WCJ). The Board's order is consistent with both the analysis set forth in recent appellate case law, particularly City of Meadville v. Workers' Compensation Appeal Board (Kightlinger), 810 A.2d 703 (Pa.Cmwlth.2002), alloc. denied, 578 Pa. 702, 852 A.2d 313 (2004), and Poole v. Workers' Compensation Appeal Board (Warehouse Club, Inc.), 570 Pa. 495, 810 A.2d 1182 (2002), and the statutory scheme for coordination of benefits evident in the Workers' Compensation Act (Act)¹ and Motor Vehicle Financial Responsibility Law (MVFRL).² Accordingly, we affirm the order of the Board.

Factually, the matter is not in dispute. Claimant worked as a mechanic for employer O'Brien Ultra Service Station. On November 9, 1995, claimant sustained work-related injuries when he was involved in a car accident while driving a customer's car. The other motorist was not insured. Thereafter, claimant received total disability benefits pursuant to a notice of compensation payable. Claimant subsequently made a claim under the customer's motor vehicle insurance policy and received $275,000 in uninsured motorist benefits. In November of 1999, employer filed a petition for modification, seeking to subrogate against claimant's third-party recovery. Because both parties agreed to the above-referenced facts, no testimony was taken on the petition.

The WCJ concluded that since employer had not paid for the motor vehicle insurance and the insurance was intended to protect the owner of the car rather than employer, employer was not entitled to subrogate against the recovery. Accordingly, the WCJ denied employer's modification petition. On appeal, the Board reversed. In doing so, the Board considered, among other things, the purposes served by subrogation, the 1993 amendments to the MVFRL,³ and this court's decision in City of Meadville. The instant appeal followed. Claimant argues on appeal that employer is not entitled to subrogate against the uninsured motorist benefits that he received under the customer's motor vehicle insurance policy because employer did not pay for or procure the insurance policy under which the recovery was made and that insurance policy was not intended to benefit the third-party tortfeasor but its insured, the owner of the car claimant was driving at the time of the accident. We disagree with claimant's characterization of uninsured motorist coverage and with his assertion that the fact that someone other than employer paid for the coverage is determinative of employer's right of subrogation.

Section 319 of the Act, 77 P.S. § 671, provides in relevant 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 [Act] by the employer....

In City of Meadville, this court reiterated the purposes served by the employer's statutory right of subrogation:

[T]he rationale for the right of subrogation is threefold: to prevent double recovery for the same injury by the claimant, to insure that the employer is not compelled to make compensation payments made necessary by the negligence of a third party, and to prevent a third party from escaping liability for his negligence.... "[S]ubrogation is just, because the party who caused the injury bears the full burden; the employee is made `whole,' but does not recover more than what he requires to be made whole; and the employer, innocent of negligence, in the end pays nothing." Thus where a third-party's negligent conduct causes injury to an employee actually engaged in the business of his employer, there is a clear, justifiable right to subrogation under Section 319 of the Act.

810 A.2d at 704-05 [quoting Brubacher Excavating, Inc. v. Workers' Compensation Appeal Board (Bridges), 774 A.2d 1274, 1277 (Pa.Cmwlth.2001), aff'd, 575 Pa. 168, 835 A.2d 1273 (2003)]. Accord Poole. In order to assert its right of subrogation, the employer must demonstrate that it was compelled to make payments under the Act due to the negligence of a third party and that the fund from which it seeks subrogation was for the same compensable injury for which the employer was liable under the Act. Poole, 570 Pa. at 499, 810 A.2d at 1184.

Initially, it is important to note that Section 1731(b) of the MVFRL, 75 Pa.C.S. § 1731(b), defines "uninsured motorist coverage" as "protection for persons who suffer injury arising out of the maintenance or use of a motor vehicle and are legally entitled to recover damages therefor from owners or operators of uninsured motor vehicles. ..." (Emphasis added). Thus, by definition, the recovery of uninsured motorist benefits is premised on the liability or negligence of another driver; otherwise, there would be no legal entitlement to the recovery of damages. As our Supreme Court noted in Gardner v. Erie Insurance Co., 555 Pa. 59, 70, 722 A.2d 1041, 1046 (1999), "recovery [of uninsured motorist benefits] derives from the contractual commitment of the insurer to provide coverage for injury resulting from the fault of the uninsured motorist, and benefits may be payable to the injured occupant by virtue of his status as a third-party beneficiary." With respect to uninsured motorist coverage, the American Jurisprudence encyclopedia states that it "is not intended to serve as a substitute for comprehensive personal liability insurance, but rather to provide protection for the innocent party by making the insurance carrier stand as the insurer of the uninsured motorist...." 7 Am Jur 2d Automobile Insurance § 36 (footnotes omitted and emphasis supplied). Accord Boris v. Liberty Mut. Ins. Co., 356 Pa.Super. 532, 515 A.2d 21 (1986)

.⁴

In City of Meadville, this court addressed the issue of whether the employer's workers' compensation carrier was entitled to subrogate against the uninsured/underinsured motor vehicle benefits recovered by the injured employee under the employer's motor vehicle insurance policy. The employee received the funds because the third-party tortfeasor was either uninsured or underinsured at the time of the accident. In concluding that the employer was entitled to subrogate against the funds, this court relied in part on Warner v. Continental/CNA Insurance Cos., 455 Pa.Super. 295, 688 A.2d 177 (1996) and Gardner. Although we discussed these two cases in City of Meadville, it is appropriate to review them again here because they demonstrate that the coordination of benefits scheme currently set forth in the MVFRL supports our conclusion today that subrogation is proper.

In Warner, the Superior Court addressed the issue of whether the exclusivity provision of the Act⁵ precluded an employee injured in a work-related automobile accident from recovering underinsured benefits⁶ from the employer's motor vehicle insurance policy. In resolving this issue, the Superior Court examined the 1993 amendments to the MVFRL (hereafter referred to as Act 44). Prior to Act 44, the statutory scheme set forth in the MVFRL precluded a claimant from recovering in a third-party tort action amounts that he had received under the Workers' Compensation Act, and the employer had no right of subrogation against the claimant's tort recovery. See City of Meadville; former Sections 1720 and 1722 of the MVFRL, 75 Pa.C.S. §§ 1720 and 1722. Specifically, former Section 1720 of the MVFRL provided: "In actions arising out of the maintenance or use of a motor vehicle, there shall be no right of subrogation or reimbursement from a claimant's tort recovery with respect to workers' compensation benefits...." In tandem with former Section 1720, former Section 1722 provided:

In any action for damages against a tortfeasor, or any uninsured or underinsured motorist proceeding, arising out of the maintenance or use of a motor vehicle, a person who is eligible to receive benefits under the coverages set forth in this subchapter, or workers' compensation, or any program, group contract or other arrangement for payment of benefits as defined in section 1719 (relating to coordination of benefits) shall be precluded from recovering the amount of benefits paid or payable under this subchapter, or workers' compensation....

Thus, as we noted in City of Meadville, under the former statutory scheme, a claimant could not recover in a tort action against a third party amounts paid under workers' compensation and the employer had no right of subrogation against a claimant's subsequent tort recovery. 810 A.2d at 705 n. 6. We further noted that, "`The effect, and obvious legislative intent, was to mandate that the ultimate burden for payment of compensation benefits remain with Workers' Compensation insurance and not be passed on to the automobile insurance [carrier] (and the premiums by which auto insurance is funded) [footnote omitted].'" Id. [quoting Updike v. Workers' Compensation Appeal Board (Yeager Supply Inc.), 740 A.2d...