X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
An employer does not have a right of subrogation to the proceeds of a settlement its employees obtained in a legal malpractice claim, a split Pennsylvania Commonwealth Court, sitting en banc, has ruled. The court noted that the issue was one of first impression in Pennsylvania and looked to Michigan law for guidance. The court found that the pertinent section of Pennsylvania’s Workers’ Compensation Act parallels the Michigan statute that had been addressed by that court. “Section 319 of the Act and MCL 418.827 clearly require causation between the injury and the act or omission of a third party to facilitate subrogation,” Judge Bernard L. McGinley wrote for the majority in Poole v. WCAB. “Also, both statutes provide that any recovery from a third party shall be used to reimburse the employer for any amount of compensation paid,” the court wrote. “Lastly, Section 319 of the act and MCL 418.827 do not provide the employer or its insurer the right of subrogation to the proceeds of a claimant’s legal malpractice claim.” Judge Bonnie Brigance Leadbetter filed a dissenting opinion, asserting that the majority read the state’s subrogation statute “too narrowly.” Judge Dan Pellegrini joined Leadbetter in her dissent. SLIP AND FALL William Poole worked as a wholesale canvasser for Warehouse Club Inc. when he slipped and fell on ice in his employer’s parking lot. At the time of the accident in March 1989, Poole made an average weekly wage of $155.87. The accident caused an aggravation of Poole’s pre-existing back condition. Poole was awarded workers’ compensation for temporary and total disability in the amount of $140.28 per week. Poole’s disability benefits were commuted by a workers’ compensation judge and as a result, Poole was paid more than $50,000 for partial disability and more than $20,000 for unreimbursed medical expenses. In May 1995, Poole filed a legal malpractice action against his previous counsel alleging that the counsel was negligent by filing suit against the wrong parties in a third-party complaint. The third-party suit was filed against Kossman Development and Paul Kossman because Poole’s counsel believed that they owned the property where Poole fell. A judge dismissed the complaint, finding they were, in fact, not the defendants in the case. Poole, however, could not file the case again because the two-year statute of limitations had expired. Travelers Insurance Co. requested subrogation against any money Poole received as a result of the legal malpractice action. Poole denied the insurance company’s request because no workers’ compensation lien existed in the legal malpractice action. Poole settled the case on July 22, 1998, and his current counsel refused to provide Warehouse and Travelers with any information about the settlement, asserting the confidentiality clause precludes a release of such information. A workers’ compensation judge, however, ruled that both Warehouse and Travelers were entitled to subrogation against the money from the legal malpractice case and ordered disclosure of the settlement amount. Poole appealed, arguing that there were no subrogation rights because the legal malpractice action was based on a claim for breach of contractual duties, not for his physical injury from the fall. The court said that although there were no state cases directly on point, the state supreme court offered some guidance in Dale Manufacturing Co. v. Bressi. In that case, a woman had sustained a work-related injury to her back. She had surgery to correct the problem, suffered complications and subsequently filed a medical malpractice action. The claim settled for $30,000 and the woman’s employer sought subrogation. Although a WCJ allowed subrogation, both the Pennsylvania superior and supreme courts denied that such a right to subrogation existed. MICHIGAN LAW The Poole court then turned to examining a Michigan case — Ramsey v. Kohl. McGinley noted that Michigan and Pennsylvania have very similar workers’ compensation laws. In that case, Charles Ramsey alleged he suffered a disabling medical condition after coming in contact with industrial chemicals on the job. His employer’s insurer settled his claim for $60,000 and he later filed a product liability action against the chemical manufacturers and sellers. Ramsey’s products case was, however, dismissed because of his counsel’s failure to properly serve the complaint. He filed a legal malpractice suit and his employer’s insurer sought subrogation against any recovery Ramsey might make. The legal malpractice action settled for $335,000 and the insurer requested $40,000 of the money be put in escrow until there was a determination on the workers’ compensation lien. But the Michigan Court of Appeals would not allow for the workers’ compensation lien. “In this case, defendants (plaintiff’s lawyers) did not cause the injury that led to compensation payments,” the Ramsey court wrote. “Put differently, the circumstances that allegedly caused plaintiff’s injury did not ‘create’ a legal liability in the defendant lawyers.” “Accordingly, the statute does not provide for the imposition of a worker’s compensation lien on the proceeds of plaintiff’s legal malpractice claim.” The Poole court adopted the reasoning of the Michigan court and agreed with a concurring judge in the case that said although the subrogation lien under the above circumstances may be in the “spirit” of the workers’ compensation laws, the language doesn’t provide for such recovery. The decision reversed the WCJ’s ruling. DISSENT In her dissent, Leadbetter said the majority looked to the wrong state for guidance by turning to Michigan law. She said she would instead look to New Jersey case law. Leadbetter quoted Frazier v. N.J. Mfrs. Ins. Co., in which a New Jersey court interpreted a workers’ compensation statute similar to Pennsylvania’s. The New Jersey court said the statute was “not to be so rigidly confined and was to apply to recoveries that were the functional equivalent of a recovery from the actual third-party tortfeasor.” The New Jersey court also noted that any other reasoning would lead to double recovery. Leadbetter said that the New Jersey court view was better than that of Michigan. “I feel that New Jersey’s is the better view, and that the majority reads our subrogation statute too narrowly,” Leadbetter wrote. “The injury in a legal malpractice case is not new or independent. Rather, in Pennsylvania, a legal malpractice recovery is a derivative recovery, determined by the amount that would have been recovered from the third-party tortfeasor had the claim been brought forward properly[.]“ Leadbetter said she believes that damages stemming from a legal malpractice claim such as Poole’s are the “functional equivalent” to a third-party tort recovery and therefore subject to subrogation liens by workers’ compensation carriers.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.