Holloran v. Larrieu

• Decision Date: 15 February 1994
• Citation: 637 A.2d 317,431 Pa.Super. 558
• Parties: , 18 Employee Benefits Cas. 1554 Thomas H. HOLLORAN and Edith Holloran, H/W v. Alberto J. LARRIEU, M.D., David M. Masiak, D.O., Metropolitan Hospital, Parkview Division and Carl G. DiJoseph, D.O., and Bruce S. Margolis, D.O., and Crown Cork and Seal Company, Inc. Appeal of CROWN CORK AND SEAL COMPANY, INC.
• Court: Pennsylvania Superior Court

Page 317

637 A.2d 317

431 Pa.Super. 558, 18 Employee Benefits Cas. 1554

Thomas H. HOLLORAN and Edith Holloran, H/W v. Alberto J. LARRIEU, M.D., David M. Masiak, D.O Metropolitan Hospital, Parkview Division and Carl G. DiJoseph, D.O., and Bruce S Margolis, D.O., and Crown Cork and Seal Company, Inc Appeal of CROWN CORK AND SEAL COMPANY, INC.

Superior Court of Pennsylvania.

Submitted Dec. 15, 1993.

Filed Feb. 15, 1994.

Joseph R. Glancey, Philadelphia, for appellant.

Shanin Specter, Philadelphia, for Holloran, appellees.

Frederick J. DeRosa, Jr., Philadelphia, for Larrieu, appellee.

John F. O'Brien, III, Plymouth Meeting, for Masiak, appellee.

James L. Griffith, Philadelphia, for Metro. Hosp., appellee.

Adrian R. King, Philadelphia, for DiJoseph & Margolis, appellees.

Before McEWEN, OLSZEWSKI and HOFFMAN, JJ.

OLSZEWSKI, Judge:

Thomas Holloran, a long-time employee of appellant Crown Cork and Seal Co., Inc. (Crown), suffered brain damage from allegedly negligent medical treatment he received at appellee Metropolitan Hospital, Parkview Division. Pursuant to his union contract, Crown paid Holloran's medical expenses resulting from the incident, which now total over $200,000. About four years ago, Holloran began a malpractice action against Metropolitan Hospital and the allegedly negligent doctors. In addition to pain and suffering, loss of life's pleasures, loss of consortium, and other compensable damages, Holloran's complaint sought to recover medical expenses from the hospital and doctors.

The case before us stems from Crown's petition to intervene, pursuant to Pa.R.C.P. 2327. Crown argues that since it has paid Holloran's medical expenses, it is equitably subrogated to Holloran's right to recover these medical expenses from the malpractice defendants.

This issue was briefed and then argued before the Honorable Gene D. Cohen on July 7, 1993. The trial court ruled from the bench that Crown had no right of equitable subrogation, and denied Crown's petition to intervene. The trial court has designated the transcript of this oral argument and bench ruling as its opinion in this case.

Crown argues that Pennsylvania law recognizes a right of equitable subrogation in situations such as Holloran's, based upon the doctrine of unjust enrichment. While no case is precisely on point, the nearest cases have involved situations where cities or counties have paid medical expenses of injured police officers or fire fighters, and then sought reimbursement when the injured employees filed suit against the third-party tortfeasors, for damages, including medical expenses.

In Philadelphia v. Philadelphia Rapid Transit Co., 337 Pa. 1, 4, 10 A.2d 434, 435 (1940), our Supreme Court held that "[w]hatever right the city has to recover the payments made by it must of necessity be based upon the equitable doctrine of subrogation." Our high court did not squarely address the issue of whether equitable subrogation did in fact apply, being diverted by procedural matters.

The Superior Court picked up where Philadelphia Rapid Transit, supra, left off in Potoczny v. Vallejo, 170 Pa.Super. 377, 85 A.2d 675 (1952), holding that a city was indeed entitled to equitable subrogation. The Potoczny court offered a particularly lucid and relevant discussion of the doctrine of equitable subrogation:

"The doctrine of subrogation is based "on considerations of equity and good conscience * * * to promote justice * * * [and] is granted as a means of placing the ultimate burden of the debt on the person who should bear it." It is not a matter of contract or privity. It "may be invoked in favor of persons who are legally obligated to make good a loss caused by the negligent or tortious acts of another." It is a device adopted by equity to compel the ultimate discharge of an obligation by him who in good conscience ought to pay it." ... "Where the property of one person is used in discharging an obligation owed by another * * *, under such circumstances that the other would be unjustly enriched by the retention of the benefit thus conferred, the former is entitled to be subrogated to the position of the obligee."

Potoczny, supra at 380-81, 85 A.2d at 677 (citations omitted).

Our Supreme Court later adopted this rule in Topelski v. Universal South Side Autos, Inc., 407 Pa. 339, 352, 180 A.2d 414, 420 (1962) ("There can be no question of the right of the County to recover by way of subrogation from a third party tortfeasor all the salary, medical and hospital expenses paid to or for Topelski." (emphasis in original)). In a footnote, our Supreme Court quoted an A.L.R. citation noting that Pennsylvania is the only jurisdiction which recognizes a city or county's right to equitable subrogation in this situation, absent an express statute. Id. at n. 3.

Crown acknowledges that the collective bargaining agreement with Holloran's union which obligated it to pay Holloran's medical expenses is silent regarding subrogation rights. But the right of equitable subrogation is an established principle of law in Pennsylvania, Crown argues, and is thus available to Crown since the union contract does not state otherwise. Applying this principle, Crown urges that it would be inequitable to allow Holloran double recovery for his medical expenses.

The Hollorans argue that our courts have never applied the doctrine of equitable subrogation to a situation where a private employer pays for an employee's medical expenses. Contending that this precise issue has never been addressed in Pennsylvania, they cite caselaw from several other jurisdictions which allows such a double recovery for policy reasons. The most thorough and eloquent of these cases is Frost v. Porter Leasing Corp., 386 Mass. 425, 436 N.E.2d 387 (1982), which the Hollorans excerpt at length in their brief.

Frost distinguishes the policies which underlie property indemnification contracts from personal injury insurance. Property insurance coverage usually involves liquidated amounts comparable to the actual damages suffered. Here, the doctrine of equitable subrogation can be applied accurately and efficiently. Personal insurance is thought of less as an indemnity contract than as a form of personal investment. The injured is more likely to have sustained intangible losses, and is less likely to be made truly whole by an award. An insured who pays a premium for coverage is entitled to be completely reimbursed before the insurer's equitable right of subrogation is activated. Also, a subrogee's intervention could conceivably make settling a case more difficult.

In Frost, the insured had already negotiated a lump-sum settlement with the third-party tortfeasor, so the court was loath to expend more resources in determining what part of that recovery could be earmarked as medical expenses. Hence, the Frost court saw fit to withhold the doctrine of equitable subrogation, and allow a personal injury victim possible double recovery. Frost, supra at 427-32, 436 N.E.2d at 389-91.

The trial court heard these arguments, and ruled from the bench in the Hollorans' favor, denying Crown's petition to intervene. While we ordinarily appreciate brevity in briefs and opinions, this "opinion" leaves us with very little to go on. The trial court held:

There are two issues involved here. One, whether Crown Cork had negotiated away its rights to recover [via] subrogation. Because apparently in the briefs it is stated that some other contracts with other locals had left the right of subrogation in the medical plan.

* * * * * *

[Two:] [T]here is no equitable right of subrogation in this type of case. The reasoning behind this reluctance to extend implied rights of subrogation from the limited situation is well explained in many cases. ¹ However, the court will base its decision as follows: Some Pennsylvania common law does not recognize a right of equity subrogation for medical and salary benefits absent a contractual agreement providing for subrogation. In the instant case the contract between Crown and Holloran is silent regarding rights of subrogation.

Furthermore, Crown apparently negotiated that right away in exchange for which it can be safely said that the union gave him other benefits.

For these two reasons the court will not permit intervention.

Trial court opinion (from oral argument transcript) 7/7/93 at 13-14, appellant's brief at 23-24.

As an appellate court, we will not disturb a trial court's ruling on a petition to intervene absent an abuse of discretion or an error of law. Wilson v. State Farm Mutual Auto Ins. Co., 512 Pa. 486, 517 A.2d 944 (1986). Because we find the trial court's decision is neither supported by the facts of record, nor by what little Pennsylvania law there is on this subject, we must reverse.

I.

We would agree with the trial court that if Crown had explicitly discussed and surrendered subrogation rights in its union contract negotiations, then Crown should not be granted an equitable right of subrogation in this case. Unfortunately, there is not one iota of evidence in the record which supports this conclusion. The company handbooks detailing medical coverage make no mention of subrogation rights. See Handbook, "Your Employee Benefit Plan at Crown," R.R. 36-42. If subrogation rights were a point of negotiations, then we would expect to see a statement somewhere in this handbook, the union contract or medical plan stating whether Crown is or is not subrogated to medical expense claims which it has paid on behalf of employees. The parties have not brought any such evidence to our attention.

According to its opinion, the trial court based its conclusion on the arguments in the parties' briefs, which contain correspondence between the Hollorans' attorney and Crown's attorney on this topic. The first letter is from the Hollorans' attorney, confirming a conversation in which Crown's attorney allegedly admitted that Crown had bargained away subrogation rights. Crown's...