              IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Pennsylvania State Police,             :
                         Petitioner    :
                                       :
                     v.                :
                                       :
Workers’ Compensation Appeal           :
Board (Bushta),                        :   No. 2426 C.D. 2015
                      Respondent       :   Submitted: July 29, 2016


BEFORE:     HONORABLE RENÉE COHN JUBELIRER, Judge
            HONORABLE ANNE E. COVEY, Judge
            HONORABLE JOSEPH M. COSGROVE, Judge


OPINION BY
JUDGE COVEY                                FILED: October 26, 2016

            Pennsylvania State Police (Employer) petitions this Court for review of
the Workers’ Compensation (WC) Appeal Board’s (Board) November 3, 2015 order
reversing the Workers’ Compensation Judge’s (WCJ) decision approving the
Stipulation of the Parties entered into between Joseph Bushta (Claimant) and
Employer (Stipulation). Employer presents two issues for this Court’s review: (1)
whether the Board erred by finding that the parties were not bound by their
Stipulation because Claimant was not aware of case law which existed before the
Stipulation’s execution; and (2) whether the Board erred by reversing the WCJ’s
decision because it was contrary to the holding in Stermel v. Workers’ Compensation
Appeal Board (City of Philadelphia), 103 A.3d 876 (Pa. Cmwlth. 2014). After
review, we affirm.
            On February 25, 2011, Claimant suffered a work-related injury in the
course of his employment when his state vehicle was hit by a tractor-trailer. On
March 18, 2011, Employer issued a Notice of Compensation Payable (NCP)
accepting compensable injuries described as cervical, thoracic and lumbar strains.
The NCP provided for $858.08 weekly indemnity benefits, but indicated that
Claimant was receiving salary continuation under what is commonly referred to as
the Heart and Lung Act.1
               On January 21, 2014, Claimant entered into a Settlement and Indemnity
Agreement and Release of All Claims (Settlement Agreement), wherein, Claimant
and his spouse acknowledged receipt of $1,070,000.00 as a full compromise
settlement of any and all claims they may have against Winston J. Whitney, U.S.
Trailer Relocators, LLC, USTR Freight, LLC, Rental Trailers of Laredo, Property &
Casualty Ins. Co. of Hartford, James C. Hilton, Greatwide Dedicated Transport, III,
LLC, GE Business Financial Services, Inc., as well as any other person, corporation,
insurer, association or partnership responsible for Claimant’s February 25, 2011
injuries. Pursuant to the Settlement Agreement, $200,000.00 of the $1,070,000.00
third-party recovery was apportioned for Claimant’s spouse’s loss of consortium
claim. The total amount attributed solely to Claimant was $870,000.00.
               The Settlement Agreement reflected that Claimant “will reimburse any
lien holder, known or unknown, for any liens as a result of the above incident.”
Reproduced Record (R.R.) at 43a. In signing the Settlement Agreement, Claimant
acknowledged his understanding that he was “solely responsible for the payment of
any . . . workers’ compensation liens . . . incurred as a result of the accident.” Id.
Before executing the Settlement Agreement, Claimant had entered into a Contingent
Fee Agreement with Powell Law in which it was agreed that Claimant’s attorneys


       1
         Act of June 28, 1935, P.L. 477, as amended, 53 P.S. §§ 637-638. Section 1 of the Heart
and Lung Act provides that a police officer, corrections officer, firefighter, or member of other
enumerated professions, injured in the performance of his duties and temporarily incapacitated from
performing his duties by that injury, shall be paid his full rate of salary until the incapacity has
ceased, as well as “[a]ll medical and hospital bills, incurred in connection with any such injury.” 53
P.S. § 637. Further, “any [WC benefits], received or collected by any such employe for such
period, shall be turned over to the Commonwealth of Pennsylvania. . . .” Id.


                                                  2
would receive 33 1/3% of the recovery as their fee. The attorney’s fee attributable
solely to Claimant’s recovery totaled $290,000.00. Further, Claimant and his spouse
incurred $18,723.68 in litigation costs. On February 4, 2014, Employer filed a
Petition for Review with the WC Office of Adjudication asserting a right of
subrogation against the proceeds of Claimant’s third-party recovery.
                On November 19, 2014, Claimant and his counsel signed the Stipulation
and Employer’s counsel signed it on November 20, 2014.                       According to the
Stipulation, Employer “[paid] Heart and Lung Act wage loss benefits beginning with
a pay dated [sic] occurring on [March 3, 2011].” R.R. at 110a. It further provided
that Claimant initially accepted his full salary in the amount of $1,417.20 per week
(or $2,834.40 bi-weekly) as Heart and Lung Act benefits. However, these payments
increased as Claimant obtained raises, until he started collecting his normal pay as of
June 22, 2012. In total, Claimant was paid $94,166.64 in Heart and Lung Act wage
loss benefits.     The Stipulation also reflected that $56,873.13 in WC indemnity
benefits were remitted to Claimant under the Workers’ Compensation Act (WC Act)2
from February 26, 2011 until June 3, 2012.
               Further, the Stipulation provided that “a medical payment history
revealed treatment billed as of [February 25, 2011] through and including payment
remitted for dates of service occurring on [February 18, 2013].                  The aggregate
amount of medical benefits paid by Employer totaled $110,869.53.” R.R. at 111a.
Employer and Claimant also executed a Third Party Settlement Agreement
calculation sheet which reflected that Employer was entitled to reimbursement of a
net lien, calculated based upon the indemnity and medical benefits payable under the
WC Act in the amount of $56,873.13 and $110,869.53, respectively. The accrued
lien expense reimbursement rate was 19.2801%. The parties stipulated that the


      2
          Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1-1041.4, 2501-2708.
                                                 3
accrued lien was $167,742.66, and did not include $37,293.51 which Employer
characterized as Heart and Lung Act wage loss benefits.
              On December 4, 2014, the WCJ issued his decision approving the
Stipulation. On December 22, 2014, Claimant appealed to the Board, arguing that
since all Employer provided benefits were paid pursuant to the Heart and Lung Act,
Employer is not entitled to subrogation and, therefore, the Stipulation was contrary to
Stermel. On November 3, 2015, the Board agreed, and reversed the WCJ’s decision.
Employer appealed to this Court.3
              Employer first argues that the Board erred by finding that the parties
were not bound by their Stipulation because notwithstanding Claimant’s lack of
knowledge, Stermel was decided before the Stipulation’s execution.                      Although
Claimant’s execution of the Stipulation on November 19, 2014 occurred after Stermel
was decided (on November 13, 2014), Stermel was decided before the WCJ issued
his decision approving the Stipulation, and before the matter was appealed to the
Board.
              In Cipcic v. Workers’ Compensation Appeal Board (Consolidation Coal
Co.), 693 A.2d 1009 (Pa. Cmwlth. 1997), this Court was presented with the issue of
whether the Board erred by retroactively applying Republic Steel v. Workmen’s
Compensation Appeal Board (Petrisek), 640 A.2d 1266 (Pa. 1994) (decided on April
22, 1994 which was after the WCJ’s decision but before the Board’s decision) to the
claimant’s case. The Cipcic Court held:

              ‘It is well-settled that changes in decisional law which
              occur during litigation will be applied to cases pending
              on appeal.’ M & D Auto Body v. Workmen’s [Comp.]
              Appeal [Bd.] (John Pallott), . . . 599 A.2d 1016, 1020 ([Pa.

       3
        “On review[,] this Court must determine whether constitutional rights were violated, errors
of law were committed, or necessary findings of fact were supported by substantial competent
evidence.” Stepp v. Workers’ Comp. Appeal Bd. (FairPoint Commc’ns, Inc.), 99 A.3d 598, 601 n.6
(Pa. Cmwlth. 2014).
                                                4
            Cmwlth.] 1991). . . . Further, where ‘decisional law relies
            on a statutory interpretation which was not wholly without
            precedent, such decisions are treated as relating back to the
            original statute because they are nothing more than
            interpretations of existing legislation.’ Id., n.5. Republic
            Steel addressed the issue of whether benefits are available
            to a claimant under the provisions of the [WC] Act where a
            work-related disability has no effect upon earning power.
            This issue bore directly upon [the c]laimant’s burden of
            proving his eligibility for benefits. Therefore, the Board did
            not err by applying the Supreme Court’s interpretation of
            the [WC] Act in Republic Steel to the facts of this case,
            notwithstanding that Republic Steel was decided after the
            close of the record before the WCJ. . . . As noted by this
            Court, Republic Steel modified case law previously decided
            by this Court.
Cipcic, 693 A.2d at 1011 (emphasis added).
                Stermel addressed the issue of whether Heart and Lung Act benefits are
subject to subrogation, which bears directly upon the basis for the Stipulation before
this Court. Notwithstanding that the Stipulation was executed after Stermel was
decided, Stermel was decided before the WCJ’s decision and the appeal to the Board.
Accordingly, the Board did not err by applying Stermel to the case sub judice.
                Employer next contends that the Board erred by reversing the WCJ’s
decision because it was not contrary to Stermel’s holding. We disagree. The Stermel
Court held that a city employer was not entitled to recover a portion of the Heart and
Lung Act benefits it paid a police officer from the officer’s third-party tort claim
settlement. This holding was resultant of the Court’s interpretation of the interplay
between the Motor Vehicle Financial Responsibility Law (MVFRL)4 and Act 44.5
                The Court explained:

                [T]he [MVFRL], . . . prohibits a plaintiff from including as
                an element of damages payments received in the form of

      4
          75 Pa.C.S. §§ 1701-1799.7.
      5
          Act of July 2, 1993, P.L. 190, No. 44.


                                                   5
              [WC] or other ‘benefits paid or payable by a program . . .
              or other arrangement.’ [Section 1720 of the MVFRL,] 75
              Pa.C.S. § 1720. This language ‘benefits paid or payable by
              a program’ has been construed to include the program by
              which Heart and Lung [Act] benefits are paid. Fulmer [v.
              Pa. State Police], 647 A.2d [616,] 618-19 [(Pa. Cmwlth.
              1994)]. Section 25(b) of Act 44 changed the Section 1720
              [of the MVFRL] paradigm [] for [WC] benefits, [but] not
              Heart and Lung [Act] benefits. This means [a c]laimant
              continue[s] to be ‘precluded’ from recovering the amount of
              benefits paid under the Heart and Lung Act from the
              responsible tortfeasors. [Section 1722 of the MVFRL,] 75
              Pa.C.S. § 1722. There can be no subrogation out of an
              award that does not include these benefits. Likewise,
              because the tort recovery cannot, as a matter of law,
              include a loss of wages covered by Heart and Lung [Act]
              benefits, [a c]laimant d[oes] not receive a double recovery
              of lost wages or medical bills.

Stermel, 103 A.3d at 885 (emphasis added). Further, Employer’s argument that a
portion of Claimant’s Heart and Lung Act benefits were subject to subrogation
because they were in fact WC benefits was expressly rejected by the Stermel Court
in its discussion of the legislature’s intent:

              As our Supreme Court has explained, the legislature’s
              rationale is irrelevant:
                  Significantly, the [MVFRL’s] remedial scheme has
                  become increasingly complicated, in light of the
                  need to address premium costs while maintaining
                  financial viability in the insurance industry. The
                  Legislature has made numerous specific refinements
                  impacting the competing, and legitimate, rights and
                  interests of insurers, employers, and injured persons.
                  In this landscape, where there are mixed policy
                  considerations involved, we decline to extend clear
                  and specific refinements beyond their plain terms.
              Oliver [v. City of Pittsburgh], 11 A.3d [960,] 966 [(Pa.
              2011)] (emphasis added). By treating a portion of the
              Heart and Lung benefits as [WC] payments, [Employer]
              extended the legislature’s ‘specific refinements beyond
              their plain terms.’

                                                 6
                Only the legislature may undertake further refinements and
                eliminate the distinction between the self-insured public
                employer and the public employer who purchases an
                employer’s liability policy of insurance. We must,
                therefore, [affirm] the Board.

Stermel, 103 A.3d at 885-86 (bold emphasis added).
                Here, as in Stermel:

                Section 1722 of the [MVFRL] did not allow Claimant to
                recover loss of wages from the tortfeasor defendants
                because they were covered by the Heart and Lung Act. The
                record does not disclose the elements of the $[1,070,000.00]
                Claimant received from the tortfeasor.[6] As a matter of
                law, however, it was net of his Heart and Lung [Act]
                benefits.

Stermel, 103 A.3d at 885. Accordingly, the Board’s reversal of the WCJ’s decision
was not contrary to this Court’s holding in Stermel.
                Importantly, the Stermel Court appears to limit its holding to lost wages
received under the Heart and Lung Act; however, a review of the record in Stermel
reveals that both wage loss and medical benefits were at issue in that action.
Further, the Heart and Lung Act clearly provides for medical expenses as well as
wage loss. See Section 1 of the Heart and Lung Act (emphasis added) (pertaining to
“[a]ll medical and hospital bills, incurred in connection with any such injury); see
also Oliver, 11 A.3d at 966 (emphasis added) (“The design [of the Heart and Lung
Act] is to ensure that, if . . . temporarily disabled in the performance of their duties,
these critical-services personnel do not suffer salary losses or incur the expense of
medical care and treatment.”).
                Although the NCP in the instant case stated that “[p]aid [s]alary
continuation [was under the] Heart and Lung [Act,]” NCP at 2, because the Heart and
Lung Act requires the payment of full salary and all medical expenses, see Section 1


      6
          With the exception of the $200,000.00 attributed to loss of consortium.
                                                  7
of the Heart and Lung Act, self-insured employers paying Heart and Lung Act
benefits issue an NCP only to acknowledge the work injury. See Stermel. Section
25(b) of Act 44 expressly states: “The provisions of [Sections 1720 and 1722 of the
MVFRL,] 75 Pa.C.S. §§ 1720[,] 1722 are repealed insofar as they relate to [WC]
payments or other benefits under the [WC] Act.” Section 25(b) of Act 44 makes no
distinction between wage loss or medical benefits. Here, because Claimant was a
public safety employee, his benefits fall under the Heart and Lung Act.       Thus,
pursuant to Section 1720 of the MVFRL, Employer is not entitled to subrogation
from Claimant’s third-party recovery. Consequently, we are constrained to hold that
Claimant’s recovery under his Settlement Agreement is not subject to subrogation.
            For all of the above reasons, the Board’s order is affirmed.


                                      ___________________________
                                      ANNE E. COVEY, Judge




                                          8
            IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Pennsylvania State Police,              :
                         Petitioner     :
                                        :
                   v.                   :
                                        :
Workers’ Compensation Appeal            :
Board (Bushta),                         :   No. 2426 C.D. 2015
                      Respondent        :



                                      ORDER


            AND NOW, this 26th day of October, 2016, the Workers’ Compensation
Appeal Board’s November 3, 2015 order is affirmed.


                                      ___________________________
                                      ANNE E. COVEY, Judge
