           IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Karen Davis,                             :
                                         : No. 216 C.D. 2015
                         Petitioner      : Argued: November 16, 2015
                                         :
                   v.                    :
                                         :
Workers’ Compensation Appeal             :
Board (PA Social Services Union          :
and Netherlands Insurance Company),      :
                                         :
                         Respondents     :


BEFORE:     HONORABLE BERNARD L. McGINLEY, Judge
            HONORABLE RENÉE COHN JUBELIRER, Judge
            HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge


OPINION
BY SENIOR JUDGE FRIEDMAN                            FILED: December 30, 2015


            Karen Davis (Claimant) petitions for review of the January 28, 2015,
order of the Workers’ Compensation Appeal Board (WCAB) affirming the decision
of a workers’ compensation judge (WCJ) to grant the petition to review compensation
benefits offset (offset petition) filed by PA Social Services Union (Employer) and its
insurance carrier, Netherlands Insurance Company (Netherlands). We affirm.


            Before the WCJ, the parties stipulated to the following facts.        On
November 9, 2010, Claimant was involved in a motor vehicle accident while in the
course of her employment with Employer. Claimant was a passenger in a vehicle
owned and operated by a co-employee, Vandallia E. Jarvie. The operator of the
vehicle that hit Jarvie’s vehicle is unknown. Claimant sustained injuries to her
cervical and lumbar spine. Pursuant to the Workers’ Compensation Act (Act), 1
Netherlands paid Claimant $56,213.00 in wage-loss benefits and $33,572.22 in
medical benefits.


                Subsequently, Claimant filed an uninsured motorist claim with Allstate
Insurance Company (Allstate), Jarvie’s motor vehicle insurance carrier. In the third-
party uninsured motorist claim, Employer and Netherlands asserted a lien in the
amount of $89,785.22, the total amount paid to Claimant for medical and wage-loss
benefits. Claimant settled her uninsured motorist claim with Allstate for $25,000.00.
Claimant incurred $8,333.33 in attorney’s fees and $196.59 in costs.


                On April 22, 2013, Employer and Netherlands filed the offset petition
alleging that they were entitled to assert a subrogation lien on the settlement proceeds
from Claimant’s uninsured motorist settlement. Based on the stipulated facts, the
WCJ concluded that Netherlands was entitled to subrogate against Claimant’s
settlement proceeds from Allstate. The WCJ noted that Jarvie purchased the motor
vehicle insurance that provided the uninsured motorist benefits in dispute. Because
the insurance had been purchased by someone other than Claimant, Netherlands was
entitled to subrogation in accordance with section 319 of the Act, 77 P.S. §671. On
appeal, the WCAB affirmed. Claimant filed a petition for review with this court.2


       1
           Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§1-1041.4, 2501-2708.

       2
         This court’s review 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. Section 704 of the Administrative Law, 2 Pa. C.S. §704.


                                                  2
            In her petition for review, Claimant states that the sole issue is whether
Netherlands is entitled to subrogation against Claimant’s recovery of uninsured
motorist benefits from a non-negligent co-employee’s personal automobile policy for
which Employer did not pay.


            Claimant correctly states that the right of subrogation derives from
statutory law. Section 319 of the Act provides:

            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 article by the employer . . . .

77 P.S. §671 (emphases added).

            Claimant notes that the courts have addressed uninsured motorist
benefits and subrogation in numerous cases, beginning with Gardner v. Erie
Insurance Company, 691 A.2d 459 (Pa. Super. 1997), aff’d, 722 A.2d 1041 (Pa.
1999). In Gardner, the Superior Court held that an injured employee, who received
workers’ compensation benefits for an injury incurred while operating a co-
employee’s vehicle during the course of employment, could seek uninsured benefits
from the co-employee’s personal automobile policy. Id. at 466. The court, however,
did not address the employer’s right to subrogation of those funds.


            In Standish v. American Manufacturers Mutual Insurance Company, 698
A.2d 599, 601-02 (Pa. Super. 1997), the Superior Court held that an employer’s
workers’ compensation insurance carrier could not subrogate against the uninsured


                                          3
motorist benefits received by the claimant from the claimant’s personal automobile
policy. The court noted that its decision did not “violate the legislature’s prohibition
against double recovery of both workers’ compensation benefits and damages in tort”
because the claimant “did not receive damages in tort. Rather, he received an award
of benefits which were in the nature of an accident policy for the benefit of the
insured.” Id. at 602.


             In American Red Cross v. Workers’ Compensation Appeal Board
(Romano), 745 A.2d 78, 81 (Pa. Cmwlth. 2000), aff’d, 766 A.2d 328 (Pa. 2001), this
court, following Standish, concluded that the employer could not subrogate against
proceeds received by the claimant from an uninsured/underinsured motor vehicle
policy paid for by the claimant. We stated that section 319 of the Act “limit[s]
subrogation rights, i.e., only against sums received from suits against third party
tortfeasors.” Id.


             Thereafter, in City of Meadville v. Workers’ Compensation Appeal
Board (Kightlinger), 810 A.2d 703, 704 (Pa. Cmwlth. 2002), a police officer
sustained   a   work-related   injury   in       a   motor   vehicle   accident   with   an
uninsured/underinsured motorist. The employer paid heart and lung benefits and
PMA, the employer’s workers’ compensation carrier, paid workers’ compensation
benefits. Id. The employer maintained a motor vehicle insurance policy with Penn
National, which paid the police officer a $100,000 settlement. Id.


             PMA sought to subrogate against the motor vehicle insurance benefits.
Id. This court noted that the motor vehicle insurance was paid for by the employer


                                             4
and the employer was paying damages resulting from the fault of a third party. Id. at
707. If the third party had been insured, and claimant had reached a settlement with
the third party, there is no question that PMA could assert its subrogation lien against
those funds. Id. This court observed that the employer’s motor vehicle insurer was
essentially paying damages resulting from the fault of a third party.         Id.   We
concluded that it would be illogical to allow a claimant who is injured by an
uninsured third party and recovers uninsured benefits under the employer’s motor
vehicle policy to be in a better position than the claimant who recovers directly from
the third-party tortfeasor. Id. The court distinguished American Red Cross, because
proceeds obtained by a claimant through his own insurance policy, paid for by him,
are not subject to subrogation. City of Meadville, 810 A.2d at 707.


             In Hannigan v. Workers’ Compensation Appeal Board (O’Brien Ultra
Service Station), 860 A.2d 632, 633 (Pa. Cmwlth. 2004) (en banc), the claimant was
injured in a car accident with an uninsured motorist while driving a customer’s car.
The claimant received workers’ compensation benefits, and also received a settlement
from the customer’s motor vehicle insurance policy. Id. The employer sought
subrogation against the claimant’s third-party recovery of uninsured motorist
benefits. Id. Following City of Meadville, this court concluded that the employer
was entitled to subrogate against the uninsured motorist benefits the claimant
received under the customer’s motor vehicle insurance policy. Hannigan, 860 A.2d
at 640.


             The Hannigan court distinguished American Red Cross, stating that the
claimant in American Red Cross received benefits through his own policy, the


                                           5
premiums for which were exclusively paid by the claimant. Hannigan, 860 A.2d at
640 n.11.

             In other words, where a claimant has purchased his own
             insurance which pays for his injuries because of the
             premiums he has paid, he is entitled to the double recovery
             ordinarily barred by [s]ection 319 [of the Act]. The same
             cannot be said, however, of a claimant who recovers under
             a policy of insurance purchased by some third-party, such
             as a co-worker or, as here, a customer.

Id. (emphasis added).

             Arguing that subrogation is improper in this case, Claimant relies on the
dissenting opinions by Judge McGinley and this author in Hannigan.              In his
dissenting opinion, Judge McGinley noted that the claimant received uninsured
motorist benefits by virtue of his status as a third-party beneficiary under the
customer’s motor vehicle policy. Id. at 641 (McGinley, J., dissenting). “Uninsured
motorist benefits are intended to benefit not only the insured, but also his resident
relatives, passengers, lawful occupants and authorized drivers who are injured during
the operation of the policy owner’s vehicle.” Id. Thus, “there is no difference
between a policy holder and his beneficiaries.” Id.


             Furthermore, this author noted that section 319 of the Act “clearly limits
an employer’s right of subrogation to those instances where the claimant recovers
from a third-party tortfeasor.”    Id. at 642-43 (Friedman, J., dissenting).     Thus,
“[b]ecause [the] [c]laimant received uninsured benefits pursuant to an accident
insurance policy held by an insured who was not responsible for [the] [c]laimant’s
injuries, [the] [e]mployer simply is not entitled to subrogation under section 319 [of
the Act].” Id. at 643.

                                          6
               Here, Claimant observes that workers’ compensation pays an insured
employee medical and wage benefits. In a personal injury case, the injured party
must also prove negligence, and, the injured party may receive payment for pain and
suffering in addition to medical expenses.3 Claimant maintains that the employer
should have the right to subrogation only where it has paid for the
uninsured/underinsured motorist coverage.


               However, this court has already concluded that an employer has the right
to subrogation not only where the employer paid for the policy, but also where a third
party, such as a customer or a co-worker, paid for the policy. Hannigan, 860 A.2d at
640 n.11. Because Claimant’s co-employee paid for the uninsured motorist insurance
policy, Employer was entitled to subrogate against Claimant’s settlement proceeds.


               Accordingly, we affirm.




                                             ___________________________________
                                             ROCHELLE S. FRIEDMAN, Senior Judge




       3
        The facts in this case do not indicate that any portion of the insurance proceeds received by
Claimant were designated for pain and suffering. Therefore, we do not answer the question of
whether an employer has the right of subrogation to insurance proceeds that are designated as
compensation for pain and suffering.


                                                 7
          IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Karen Davis,                          :
                                      : No. 216 C.D. 2015
                        Petitioner    :
                                      :
                  v.                  :
                                      :
Workers’ Compensation Appeal          :
Board (PA Social Services Union       :
and Netherlands Insurance Company),   :
                                      :
                        Respondents   :




                                     ORDER


            AND NOW, this 30th day of December, 2015, we hereby affirm the
January 28, 2015, order of the Workers’ Compensation Appeal Board.



                                      ___________________________________
                                      ROCHELLE S. FRIEDMAN, Senior Judge
