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PA Supreme Court Confirms No Right of Direct Action Against Third-Party Tortfeasor by a Workers’ Compensation Insurance Carrier Pursuing a Subrogation Claim

On Behalf of | Dec 27, 2018 | Firm News, Subrogation, Workers’ Compensation

On November 21, 2018, the PA Supreme Court decided the case of The Hartford Insurance Group, on behalf of Chunli Chen vs. Kafumba Kamara, Thrifty Car Rental, and Rental Car Finance Group, (24 EAP 2017; Pa. Supreme Court), involving the question of whether a workers’ compensation insurance carrier can directly sue the third-party tortfeasor where the injured worker is not pursuing the claim.

The Court’s conclusion was to affirm its prior case decisions that no direct action is available to the insurer against the tortfeasor. An employer’s right to subrogation under Section 319 of the Pennsylvania Workers’ Compensation Act must be pursued through a single action brought by the injured employee as a party plaintiff or by assignment of the claim.

Chunli Chen was injured while in the course of her employment and elected to not pursue a third-party claim against the tortfeasors. Hartford attempted to bring the action “on behalf of” the injured employee with verification of the complaint by the insurance adjuster/subrogation specialist for The Hartford.

The Court undertook its analysis by noting the only right of recovery rests in the injured worker and any action against the tortfeasor must be brought by that same injured worker or with his/her cooperation and participation. Historically speaking, there was no common law right of action for indemnity or contribution against the tortfeasor by the insurance carrier; and the Workers’ Compensation Act did not extend a right of direct action for subrogation.

In an Opinion by Justice Baer, the Court gave two bases for the result. The first was to prevent multiple lawsuits against the tortfeasors by splitting the cause of action; and the second was to preserve the rights of the injured worker to fully pursue the cause of action against the tortfeasor.

The Court reasoned that allowing a direct action would result in the carrier necessarily limiting its claim to the amount of its subrogation lien, rather than pursuing the full amount of any potential settlement (such as to include pain and suffering) which might be available to the injured worker. It was also suggested that a carrier could pursue its subrogation claim quickly and thereby preclude the injured worker from filing his or her own claim at a later date.

Although there may appear to be some theoretical appeal to this argument, it does not seem likely in practical application. There would be little to no incentive for a workers’ compensation carrier to immediately pursue a subrogation claim early in the life of the claim when its lien is still increasing.

Additionally, it would make little sense for a carrier to pursue subrogation without cooperation of the injured worker where it would otherwise be able to simply sit back and wait for the claim to be filed and collect at a later date without expending effort or expense. The carrier’s right of subrogation under Section 319 of the Workers’ Compensation Act has been recognized as absolute and therefore stands to receive its share of reimbursement once an award or settlement has been achieved.

Finally, it is the precise situation where the claimant is not pursuing any remedy where the carrier is involved in the first place. It does not logically follow that an injured worker would be deprived of his or her full recovery where no claim whatsoever has been initiated. It is only because of the carrier’s interest in obtaining subrogation that the action would have been filed at all.

The Supreme Court determination was a 5-2 split, with two dissenting opinions by Chief Justice Saylor and Justice Todd. Unless there is a substantial change in the makeup of the Court, it would appear that the holding of The Hartford Insurance Group case will remain the law for the foreseeable future.