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The Pennsylvania Supreme Court has ruled in a workers’ compensation subrogation case that an employer has no right to a portion of a settlement between a former worker and a third party because the third party didn’t cause the employee’s compensable injury. In Brubacher Excavating Inc. v. Workers’ Compensation Appeal Board, the court found that even though a third party’s discriminatory termination of an employee caused his loss in earning power and forced his former employer, Brubacher, to pay him higher workers’ compensation benefits, Brubacher could recover from the third party under the state Workers’ Compensation Act only if the third party had caused the employee’s injury. It did not, the court explained. The majority opinion, written by Chief Justice Ralph J. Cappy, affirmed the Commonwealth Court’s similar ruling en banc, which concluded that the third party’s wrongful termination of the employee, James Bridges, was “totally unrelated” to Bridges’ back injury that he suffered while working for Brubacher. Thus, Brubacher had no right to subrogation over money Bridges recovered in a settlement for his wrongful discharge lawsuit. Justice Russell M. Nigro wrote separately in a dissenting opinion, joined by Justice Sandra Schultz Newman. Nigro argued that allowing subrogation in Brubacher would be appropriate because, otherwise, the purpose of the subrogation mechanism — to ensure an employer isn’t paying compensation as a result of a third party’s wrongful act — would be undermined. Bridges, a mechanic, hurt his back in 1992 while working for Brubacher Excavating Inc., according to the opinion. He began receiving total disability benefits, about $455 a week, until July 1993, when his doctor said he could return to work — but only to less physically demanding responsibilities. Brubacher referred him to Diesel Services Inc., which hired him as a service adviser. His disability benefits from Brubacher were reduced to partial benefits of $245 a week, while he was making about $400 from Diesel, according to the opinion. Less than a month later, Diesel fired Bridges because its workers’ compensation insurer declined to cover him, according to the opinion. Brubacher had to resume paying total disability benefits to Bridges. In 1995, Bridges filed a wrongful termination suit against Diesel in federal court, claiming the company had violated the Americans with Disabilities Act when it fired him. Brubacher sought subrogation against Bridges’ settlement with Diesel in 1996 — the amount of the settlement was confidential, according to the opinion. The workers’ compensation judge and appeals board both said Brubacher was not entitled to subrogation because the two injuries were different in type and causation, according to the opinion. The Commonwealth Court agreed. Section 319 of the state Workers’ Compensation Act states that subrogation is permitted only when a third party causes “the compensable injury,” which the Supreme Court defined as a work-related physical or mental injury suffered by a claimant, as well as some disability — a loss of earning power, for example. “The third party employer Diesel Services did not ’cause’ claimant Bridges’ compensable injury, i.e., cause both his physical injury and the resulting loss of earning power,” Cappy wrote for the court. “While Diesel Services’ actions may have resulted in a loss of earning power, it is not disputed that Diesel Services did not in whole or in part cause Bridges’ physical injury. Thus, one of the necessary elements is missing, and subrogation is not available in this case.” Cappy noted that three purposes for the subrogation provision in workers’ compensation law include preventing an employee from receiving “double recovery” for the same injury, ensuring the employer is not compelled to compensate an employee for the wrongful actions of a third party, and preventing a third party from avoiding liability for its wrongful conduct. Andrew E. Greenberg of Chartwell Law Offices in Valley Forge represented Brubacher at the request of its then-insurer, Aetna. Greenberg had argued that when Brubacher had to go back to paying Bridges full workers’ benefits after he was fired from Diesel, Brubacher was compensating Bridges merely because of Diesel Services’ actions. These actions, Greenberg said, resulted from the original workplace injury. Additionally, the settlement enabled Bridges to recover damages for the same wage loss twice, Greenberg said. When the Supreme Court ruled in 2002 that subrogation was appropriate in the context of a legal malpractice action, Greenberg contended that the decision, Poole v. Workers’ Compensation Appeal Board, rendered Brubacher dispositive, he said. The employee in Poole had argued that subrogation was inappropriate because his lawyer’s legal malpractice was neither a compensable injury nor related to the cause of his work injury, according to the opinion. “ Poole didn’t involve a compensatory injury — attorney malpractice is not a compensatory injury under the (Workers’ Compensation) Act,” Greenberg said. But in a footnote, Cappy dismissed this argument, saying that in Poole, “the malpractice claim was deemed to be, in essence, a conduit for the underlying tort claim, which necessarily encompassed proof of the underlying physical injury and its cause,” he wrote. “Thus, subrogation in the context of a legal malpractice action satisfied the statutory requirement of establishing that the third party caused the compensable injury.” In his dissenting opinion, Nigro argued that as part of the court’s reasoning in Poole, it concluded that a compensable injury caused by a third party is not strictly limited to a claimant’s work-related injury, but includes any wage loss that flows from the physical injury and for which the employer is required to provide compensation under the Workers’ Compensation Act. “Here, as in Poole, … I believe that subrogation is appropriate in spite of the fact that the third party’s act did not itself cause the claimant’s physical injury,” Nigro wrote. “To conclude otherwise, as the majority does, is not only inconsistent with Poole, but also leads to the unjust result that Bridges will realize a ‘double recovery’ of both workers’ compensation benefits and a civil recovery that allegedly includes payment for lost wages.” Nigro explained that under Section 319, Brubacher should be able to recover from the proceeds of Bridges’ settlement with Diesel, but only to the extent that Bridges recovered wage losses from Diesel and in the amount that his benefits increased as a result of Diesel firing him. Greenberg predicted that the court’s decision in Brubacher wouldn’t significantly limit employers’ ability to seek and secure subrogation in workers’ compensation cases because the facts in Brubacher were unique and the court’s interpretation so narrow that few cases would fall into a similar category. Counsel for the Workers’ Compensation Appeal Board was not available for comment last week.

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