Pennsylvania Appeals Court Holds Workers’ Compensation Insurer Cannot Bring Claim Against Tortfeasor
In a recent case before the Pennsylvania Superior Court, the court addressed whether a workers’ compensation insurer can bring a cause of action against a tortfeasor when the insured/employee has not brought an action, nor been named in the complaint.
Liberty Mutual Insurance (Liberty) appealed from an order granting SAC, Inc.’s Renewed Motion for Reconsideration of Motion for Summary Judgment, dismissing Liberty’s complaint with prejudice.
In this case, Nathan Mihalcik was injured during the course of his employment for Shneider National. While inside a convenience store owned by SAC, Inc., Mr. Mihalcik fell and was injured. Liberty Mutual paid approximately $60,000 in worker’s compensation benefits to Mr. Mihalcik. Neither Mr. Mihalcik nor Shneider National filed a cause of action against SAC.
Liberty asserted its capacity as a subrogee on behalf of Mr. Mihalcik and filed a Complaint against SAC. Liberty asserted that SAC negligently permitted a dangerous condition to exist on its property, thereby causing Mr. Mihalcik’s injuries. Liberty did not name Mr. Mihalcik as a party to the lawsuit. Mr. Mihalcik did not join the action.
SAC filed preliminary objections, including objections to Liberty’s standing to bring the lawsuit against them, and a Motion for Summary Judgment based on Liberty’s lack of standing. The trial court denied both. The trial court granted a Renewed Motion for Reconsideration, dismissing Liberty’s complaint with prejudice, on the grounds that Liberty lacked standing to bring an action against SAC.
On appeal, Liberty raised the issue of whether section 319 of the Pennsylvania Workers’ Compensation Act allows the employer/insurer to subrogate against the tortfeasor. Liberty contended that the section discusses an employer’s rights against a third party. They further alleged that the trial court erred in holding that the word “subrogated,” as set forth in section 319, means that the workers’ compensation insurer can only be reimbursed if the injured employee sues the third-party tortfeasor.
Liberty argued that by permitting SAC to escape liability for its negligence, the trial court forced Liberty to pay Mr. Mihalcik’s hospital bills and other workers’ compensation benefits. The purpose of subrogration had therefore been frustrated. Liberty contended that even if the injured employee chooses not to pursue legal action against the third-party tortfeasor, the insurer should be able to recover against the tortfeasor the amount the insurer has to pay the injured employee.
Liberty also argued policy reasons supported their position that workers’ compensation insurers should be entitled to recover against the tortfeasor. First, they contended that the legislative intent regarding workers’ compensation subrogation is set forth in section 319. The trial court’s order, according to Liberty, created a significant negative impact on the state economy by increasing workers’ compensation premiums. Finally, workers’ compensation insurers were prejudiced because other insurers, including home and auto insurers, are entitled to subrogate their business.
The appellate court reviewed the trial court’s order, which held that Liberty could not assert a cause of action against the tortfeasor when the insured had not brought an action against the tortfeasor, nor been named in the complaint. The appellate court rejected the claims set forth by Liberty and affirmed the trial court’s order dismissing Liberty’s complaint with prejudice.