J. Todd v. WCAB (Fastrack Construction Inc.)

J
             IN THE COMMONWEALTH COURT OF PENNSYLVANIA

James Todd,                                    :
                        Petitioner             :
                                               :
       v.                                      : No. 505 C.D. 2020
                                               : SUBMITTED: October 23, 2020
Workers’ Compensation Appeal                   :
Board (Fastrack Construction Inc.),            :
                  Respondent                   :

BEFORE:          HONORABLE MARY HANNAH LEAVITT, President Judge1
                 HONORABLE ANNE E. COVEY, Judge
                 HONORABLE ELLEN CEISLER, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE CEISLER                                                      FILED: March 23, 2021

       James Todd (Claimant) petitions this Court for review of the April 30, 2020
order of the Workers’ Compensation Appeal Board (Board), reversing the decision
of a workers’ compensation judge (WCJ), in which the WCJ eliminated the right of
Fastrack Construction Inc. (Employer) to seek subrogation for its payment of
Claimant’s ongoing medical benefits. The WCJ based her decision on Whitmoyer
v. Workers’ Compensation Appeal Board (Mountain Country Meats), 

186 A.3d 947

,
958 (Pa. 2018) (Whitmoyer II), in which our Supreme Court held that an employer’s
right to subrogation under Section 319 of the Workers’ Compensation Act (Act)2 for

       1
        This case was assigned to the opinion writer before January 4, 2021, when Judge Leavitt
completed her term as President Judge.

       2
           Act of June 2, 1915, P.L. 736, as amended, 77 P.S. § 671. Section 319 of the Act provides:

       [w]here 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 . .
       . against such third party to the extent of the compensation payable under this
payment of “future instal[l]ments[3] of compensation” did not encompass a
claimant’s future medical expenses. In adjudicating Employer’s appeal, the Board
declined to follow Whitmoyer II, based on an agreement executed by Claimant and
Employer in which Employer expressly retained its right to subrogation for the
payment of ongoing medical expenses. After review, we reverse the Board and
remand this matter for further proceedings.

                                      I.      Background

       The facts underlying this matter are undisputed. Claimant sustained a work-
related injury on August 10, 2010, which included sprains to his left hip, sprains to
his cervical, dorsal, and lumbar spine, lumbar disc herniation, lumbar radiculopathy,
and inflammation of his right trapezoid. Certified Record (C.R.), Item No. 18 at 6.
On October 21, 2016, a WCJ issued an order approving a Compromise and Release
Agreement (C&R) between the parties.

Id. The C&R resolved

all issues related to
Claimant’s receipt of indemnity benefits by means of a $195,000 lump sum payment,
the proceeds of which would not be added to the total amount of Employer’s accrued
workers’ compensation lien.

Id. at 7.

Employer agreed to pay for Claimant’s
ongoing medical treatment and expressly retained its “full subrogation rights” for
any indemnity benefits paid prior to the $195,000 lump sum payment, for any
previously paid medical benefits, and “for all ongoing medical expenses.”

Id.

article by the

employer . . . . Any recovery against such third person in excess of
       the compensation theretofore paid by the employer shall be paid forthwith to the
       employe . . . and shall be treated as an advance payment by the employer on account
       of any future instalments of compensation.

77 P.S. § 671 (emphasis added).
       3
         While the Act refers to “instalments of compensation,” we shall use the commonly
accepted spelling of “installments” herein.


                                               2
Pertinently, in signing the C&R, Claimant agreed that he understood the C&R’s full
legal significance with regard to a pending third-party claim.

Id. at 8.

      Approximately six weeks later, on December 1, 2016, this Court filed its
decision in Whitmoyer v. Workers’ Compensation Appeal Board (Mountain Country
Meats), 

150 A.3d 1003

(Pa. Cmwlth. 2016) (Whitmoyer I), rev’d, Whitmoyer II, the
relevant facts of which are as follows.          The claimant, Craig Whitmoyer
(Whitmoyer), sustained a work-related injury in January 1993, resulting in the partial
amputation of his arm.

Id. at 1005.

In April 1999, Whitmoyer obtained a third-party
settlement agreement (TPSA), which entitled his employer, Mountain Country
Meats, to a subrogation lien for previously paid workers’ compensation benefits.

Id.
at 1006.

Whitmoyer’s employer remained responsible for the payment of 37% of
his future medical expenses, until the balance of the recovery fund was exhausted.


Id. In a letter

dated May 26, 1999, Whitmoyer’s counsel (Counsel) forwarded a
check to Whitmoyer’s employer to cover the past lien amount that had accrued.

Id.
Counsel advised Whitmoyer’s

employer that any future subrogation credit would
not apply to his future medical bills, as they did not constitute “installments of
compensation” under Section 319 of the Act.

Id.

Whitmoyer’s employer paid

the full balance of his medical bills for several
years.

Id. Approximately 13 years

later, in September 2012, his employer filed a
petition seeking a modification to the TPSA to reflect the medical expenses it had
paid in full.

Id. at 1006-07.

A WCJ granted the petition and reduced the percentage
of the employer’s liability for Whitmoyer’s future medical expenses.

Id. at 1007.

Whitmoyer appealed to the Board, arguing that Section 319 of the Act only permits
a credit for future payment of indemnity benefits.

Id.

3

       The Board agreed with the WCJ, holding that medical expenses were
compensation payments subject to subrogation in the event of a third-party recovery.


Id. at 1008.

This Court affirmed the Board, noting that Pennsylvania courts have
long recognized that an employer is entitled to recover from the proceeds of a
claimant’s third-party recovery, up to the total amount of that recovery.

Id. at 1011.

While prior decisions of this Court considered whether “compensation,” as used in
the Act, included payments for medical expenses, we had not addressed the General
Assembly’s use of the term “installments” in Section 319.

Id. at 1012-13.

As to
that, we reasoned that future medical expenses, which may occur periodically over
time, are typically not payable in a lump sum.

Id. at 1015.

Accordingly, in keeping
with the General Assembly’s objective in enacting Section 319 of the Act, we opined
that the phrase “installments of compensation” encompassed medical expenses as
well as indemnity benefits.

Id. Whitmoyer filed a

Petition for Allowance of Appeal
with the Pennsylvania Supreme Court on December 29, 2016.

       Instantly, on December 22, 2016, Claimant executed a TPSA following his
receipt of a third-party recovery in the amount of $750,000. C.R., Item No. 17.
Pursuant to Section 121.18(a) of the regulations promulgated by the Department of
Labor and Industry (Department), which govern the Bureau of Workers’
Compensation (Regulations),4 the parties utilized a Department form, the LIBC-380,
to memorialize the terms of the TPSA, which in part calculated the distribution of
proceeds from Claimant’s third-party recovery “[i]n accordance with Section 319 of
the [Act].” C.R., Item No. 17. Employer’s accrued workers’ compensation lien for
previously paid indemnity and medical benefits totaled $470,457.20.

Id. This

4
34

Pa. Code § 121.18(a) (LIBC-380 “shall be executed” if an employee obtains a third-
party recovery under Section 319 of the Act).


                                              4
amount was reduced to $332,517.20, after deduction of Employer’s proportionate
share of litigation expenses incurred in obtaining the third-party recovery.5

Id.
Claimant’s balance of

recovery, after deduction of Employer’s accrued lien, totaled
$279,542.80.

Id. This sum represented

the amount of Employer’s subrogation
interest.

Id. Going forward, Employer

was responsible for 29.33% of Claimant’s
“future weekly benefits and medical expenses,” until the $279,542.80 subrogation
interest was exhausted.6

Id.

Additionally, in a

section of the LIBC-380 reserved for “Further Matters
Agreed Upon,” the TPSA provided that Employer would accept $280,000 “in full
and final reimbursement of its lien for workers’ compensation benefits paid to or on
behalf of [Claimant.]”

Id. Employer retained, however,

                all rights to future credit/offset as determined by the “gross
                method” calculation set forth in [the TPSA], or in the
                amount of [Claimant’s] “actual net recovery” from his
                third[-]party claim after reduction for [attorneys’] fees,
                costs of suit, and [Employer’s] lien reimbursement,
                whichever is greater.

Id. (emphasis added).

Put

simply, Claimant could satisfy Employer’s $332,517.20 accrued workers’
compensation lien upon payment of $280,000. In exchange for waiving its right to
immediate payment of the remaining balance of $52,517.20, Employer retained its
right to a credit in this amount against Claimant’s future medical expenses, as well
as a subrogation interest in the amount of $279,542.80. Employer’s credit against
Claimant’s future medical expenses would include any additional funds received by

       5
           The TPSA reflects that litigation expenses totaled $220,000. C.R., Item No. 17.

       6
         Given that Claimant’s receipt of future indemnity benefits was resolved through the C&R,
this provision was necessarily limited to Claimant’s future medical expenses.


                                                 5
Claimant in the third-party action, in the event his net recovery exceeded the amount
calculated in the TPSA.

Id.

Approximately 18 months

later, on June 19, 2018, our Supreme Court
reversed the decision this Court issued in Whitmoyer I.           The Supreme Court
recognized that the term “compensation,” as used elsewhere in the Act, could
encompass payment of both indemnity and medical expenses. Whitmoyer 

II, 186
A.3d at 949

. That term was distinct, however, from “installments of compensation,”
the plain meaning of which was compensation paid in installments.

Id. The
Supreme Court

reasoned that, unlike indemnity benefits, the amount of future
medical expenses would be unknown at the time of a third-party settlement and,
therefore, the term “installments of compensation” did not refer to medical expenses.


Id. at 957-58.

To conclude otherwise would render the words “installments of”
meaningless.

Id. Accordingly, the Supreme

Court held that an employer’s right to
subrogation of a claimant’s third-party recovery under Section 319 of the Act is
limited to the claimant’s receipt of future disability benefits.

Id.

Instantly, citing Whitmoyer

II, Claimant filed a review petition on October 17,
2018, seeking to eliminate Employer’s right to future subrogation credit against
Claimant’s ongoing medical benefits. C.R., Item No. 2. Relying on Whitmoyer II’s
central holding that only future indemnity benefits are subject to such a credit under
Section 319 of the Act, the WCJ granted Claimant’s review petition in a decision
and order circulated on April 23, 2019.

Id., Item No. 5.

      Employer appealed to the Board, arguing that Whitmoyer II should not apply
retroactively as Employer executed the C&R with the express understanding it
would be entitled to an ongoing future credit for payment of Claimant’s medical
expenses.

Id., Item No. 6.

                                           6
       The Board agreed with Employer, finding that Whitmoyer II was
distinguishable on the facts, as the parties in that matter utilized a boilerplate form
(LIBC-380) when executing their TPSA and Whitmoyer’s employer fully paid his
medical expenses for 13 years before unilaterally seeking its right to a subrogation
credit. C.R., Item No. 12, at 3. In the instant matter, the Board found that Claimant
bargained for, and agreed to, the terms in the C&R and the TPSA, each of which
provided that Employer retained its future subrogation rights with regard to payment
of Claimant’s future medical expenses.

Id. Furthermore, the Board

noted, the instant
matter was not pending appellate review when the decision in Whitmoyer II issued.


Id. Consequently, the Board

opined that Whitmoyer II should not invalidate the
“otherwise valid agreements” executed by Claimant and Employer and reversed the
WCJ.

Id. at 4-5.

This appeal followed.7

                                          II.    Analysis

       Claimant argues that the Board erred in reversing the WCJ because, under
Whitmoyer II, employers are no longer permitted to subrogate future medical
expenses against third-party settlements, including those executed prior to June 19,
2018, the date Whitmoyer II was decided.8 Claimant asserts that the Supreme Court
announced a new rule of law when it decided Whitmoyer II, and retroactive
application of that decision is a matter of judicial discretion.


       7
         Our review is limited to determining whether constitutional rights have been violated,
whether an error of law has been committed, and whether necessary findings of fact are supported
by substantial evidence. Universal Am-Can, Ltd. v. Workers’ Comp. Appeal Bd. (Minteer), 

762
A.2d 328

, 331 n.2 (Pa. 2000).

       8
        A September 1, 2020 order of this Court directed Employer to file its brief within 14 days.
Employer failed to comply and was subsequently precluded from filing a brief by order of this
Court dated October 21, 2020.


                                                7
      Before we address the retroactive application of Whitmoyer II, we must first
review the extent to which that decision applies in the instant matter. In Whitmoyer
II, the claimant’s balance of recovery was $189,416.27, an amount which exceeded
his employer’s net subrogation lien by $81,627.17. Whitmoyer 

II, 186 A.3d at 950

.

      In analyzing whether Whitmoyer’s employer had a subrogation interest
against his future medical expenses, the Supreme Court observed that Section 319
addresses two distinct scenarios. Under the first scenario, the employer had a claim
against the claimant’s third-party recovery for indemnity benefits and medical
expenses it paid “to the date of the third-party recovery . . . .”

Id. at 955

(internal
citations omitted). This claim constituted the employer’s accrued lien.

Id. The
second scenario

related to the disposition of the net settlement proceeds, which was
the amount of the claimant’s recovery remaining after deducting his employer’s
accrued lien.

Id. This “excess recovery”

was to be paid to the claimant as “an
advance payment by the employer on account of any future installments of
compensation,” which were limited to the payment of indemnity benefits.

Id. at 956;
77

P.S. § 671. Accordingly, an employer whose accrued lien was satisfied at the
time of the third-party settlement may not seek reimbursement for future medical
expenses from an employee’s balance of recovery. Whitmoyer 

II, 186 A.3d at 958

.

      Instantly, the proceeds of Claimant’s $750,000 third-party recovery well
exceeded Employer’s accrued lien of $332,517.20, leaving Claimant with a balance
of recovery in the amount of $279,542.80. Prior to Whitmoyer II, Employer had the
unquestioned right to a credit against its payment of Claimant’s future medical bills
up to the amount of this balance of recovery. This right would no longer exist,
however, in the wake of Whitmoyer II. In concluding that Whitmoyer II was
inapplicable, the Board considered the additional terms set forth in the TPSA, as


                                          8
well as the terms negotiated in the C&R, which resolved Claimant’s right to future
indemnity benefits through a $195,000 lump sum payment. The parties’ deviation
from the boilerplate language in the LIBC-380, and Claimant’s receipt of $195,000,
contributed to the Board’s determination that Employer’s future subrogation rights
remained unaltered by Whitmoyer II.

      Our review of the pertinent provisions in the C&R and TPSA leads us to the
opposite conclusion, as those provisions did not grant Employer subrogation rights
to which it was not already entitled. Our courts have consistently held that an
employer’s right to subrogation under Section 319 of the Act is “‘statutorily absolute
and can be abrogated only by choice.’” Thompson v. Workers’ Comp. Appeal Bd.
(USF&G Co. & Craig Welding Equip. Rental), 

781 A.2d 1146

, 1152 (Pa. 2001)
(quoting Winfree v. Phila. Elec. Co., 

554 A.2d 485

, 487 (Pa. 1989)). Where an
employee's work injury is caused by the negligent conduct of a third party, “there is
a clear, justifiable right to subrogation under Section 319 of the Act.” Id.; Dale Mfg.
Co. v. Bressi, 

421 A.2d 653

, 654 (Pa. 1980).

      While Employer waived its right to immediately collect a portion of its
accrued lien, it expressly reserved a right to reimbursement of that amount through
a credit against Claimant’s future medical bills. Therefore, Employer’s right to
recover the entirety of its accrued lien was only deferred by the TPSA; it was not
extinguished.

      Employer’s right to subrogate Claimant’s future medical expenses likewise
originated, not with any language added by the parties, but with unmodified
boilerplate terms contained in the LIBC-380 form, which the parties were bound to




                                          9
utilize under Section 218.19(a) of the Regulations.9 Based on the formula contained
in the LIBC-380, Employer was responsible for 29.33% of Claimant’s “future . . .
medical expenses” until Employer’s subrogation interest in the amount of
$279,542.80 was exhausted. There is no language in the C&R or the TPSA that
would suggest Claimant bargained for, and agreed to, Employer receiving
subrogation credit beyond that provided for in Section 319 of the Act. Claimant
merely consented to Employer’s retention of its existing subrogation rights, which
at that time included future medical expenses.

       We cannot agree, therefore, that the additional terms set forth in the TPSA
render the instant matter distinguishable from Whitmoyer II. The resolution of
Claimant’s right to future indemnity benefits does not change our analysis, as an
excess recovery would still exist, even if the entire $195,000 lump sum had been
added to Employer’s accrued lien.10

       Problematically, the purpose of Employer’s continued credit against
Claimant’s medical expenses is not clear, and the record is silent as to whether
Employer’s accrued lien has been satisfied.11 Consequently, we are unable to
determine whether Employer’s continued subrogation of Claimant’s future medical
expenses represents a permissible reimbursement of Employer’s accrued lien, or

       9
         It is noteworthy that the reference to future medical expenses no longer appears in the
most recent version of the LIBC-380, which was revised in October 2018.                      See
https://www.dli.pa.gov/Businesses/Compensation/WC/claims/wcais/Documents/wcais%20forms
/LIBC-380%20int.pdf (last visited March 10, 2021).

       10
         Any increase in the amount of Employer’s accrued lien would have resulted in a
corresponding increase in the amount of its share of expenses attributable to the third-party action.

       11
         The evidence submitted by the parties in this matter consisted of the TPSA, Claimant’s
fee agreement, and the October 21, 2016 decision by a WCJ approving the C&R, to which the
C&R was attached. C.R., Item Nos. 16-18.


                                                10
whether Employer’s subrogation interest has been maintained in contravention of
Whitmoyer II.

      Accordingly, we reverse the Board’s order and remand this matter to the
Board for further remand to the WCJ, who shall make findings of fact regarding the
extent to which Employer’s subrogation of Claimant’s future medical benefits
represents a reimbursement of Employer’s accrued subrogation lien.

                                     __________________________________
                                     ELLEN CEISLER, Judge




                                       11
             IN THE COMMONWEALTH COURT OF PENNSYLVANIA


James Todd,                            :
                     Petitioner        :
                                       :
        v.                             : No. 505 C.D. 2020
                                       :
Workers’ Compensation Appeal           :
Board (Fastrack Construction Inc.),    :
                  Respondent           :


                                      ORDER


        AND NOW, this 23rd day of March, 2021, the April 30, 2020 order of the
Workers’ Compensation Appeal Board (Board) is hereby REVERSED and this
matter is REMANDED to the Workers’ Compensation Appeal Board for further
remand to a workers’ compensation judge (WCJ). Upon remand, the WCJ shall
make findings of fact as to the extent of James Todd’s (Claimant) third-party
recovery and whether Fastrack Construction Inc.’s continued subrogation of
Claimant’s future medical benefits is necessary to satisfy its accrued subrogation
lien.

        Jurisdiction relinquished.

                                       __________________________________
                                       ELLEN CEISLER, Judge

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