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A unanimous Pennsylvania Supreme Court has ruled in a case of first impression that an employer does have a right to subrogation to the award an employee received in a legal malpractice case. In so holding, the high court distinguished the case of Poole v. Workers’ Compensation Appeal Board from a previous decision when it ruled that the employer had no subrogation rights to an employee’s award in a medical malpractice case. The justices said the rules were a bit different when considering a plaintiff’s burden of proof in a legal malpractice case. According to the six-page opinion authored by Chief Justice Stephen Zappala, 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 the parties were, in fact, not the proper defendants in the case. Poole could not refile the case against the proper defendants 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 Commonwealth Court said that although there were no state cases directly on point, the Pennsylvania Supreme Court offered some guidance in Dale Manufacturing Co. v. Bressi. In Dale Manufacturing, a woman suffered a work-related injury to her back. She had surgery to correct the problem, suffered complications from the surgery 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 Superior and Pennsylvania Supreme Courts denied that such a right to subrogation existed. The Commonwealth Court also looked to Michigan law for guidance, noting that the pertinent section of Pennsylvania’s Workers’ Compensation Act parallels the Michigan statute that had been addressed by the Michigan Court of Appeals. The panel said that � 319 of the Pennsylvania statute and MCL 418.827 both require a causal connection between the injury and the act or omission of a third party in order for subrogation to be proper. On that basis, the Commonwealth Court concluded, �319 provides no right to subrogation when a legal malpractice settlement resulted from former counsel’s failure to pursue a claim against a third party. The Pennsylvania Supreme Court also considered Dale Manufacturing in its analysis, noting that that case held that it is an employer’s burden to show it is compelled to make payments due to the negligence of a third party and the “fund to which he seeks subrogation was for the same compensable injury for which he is liable under the act.” However, Zappala concluded, there is a difference between medical malpractice claims and legal malpractice claims. The burden of proof for a legal malpractice claim in Pennsylvania, which the court reiterated in Kituskie v. Corbman, requires that the plaintiff must first “prove that he had a viable cause of action against the party he wished to sue in the underlying case.” Zappala said it is the burden of “proving the case within the case that makes legal malpractice actions so unique.” “When placed into the framework of Dale Manufacturing Co., we find that this unique element compels a different result, for now the employee must demonstrate not only merely an injury as a result of the malfeasance of his previous counsel, but also the malfeasance of the original tortfeasor which resulted in the underlying injury,” Zappala said. “Thus, an employer may rely upon the employee’s legal malpractice action to demonstrate that ‘the compensable injury is caused … by the third party.’” Zappala also said the high court’s result was in line with the Workers’ Compensation Act’s underlying rationale regarding subrogation. “The employee is made whole for his injury while not receiving a double benefit,” he said. “The employer is not compelled to make compensation payments for the negligence of a third party. Finally, while the underlying tortfeasor may have escaped liability due to the statute of limitations and the actions of employee’s previous counsel, the legal malpractice action places this liability on the proper party.”

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