For many civil litigation practitioners, Pennsylvania workers’ compensation law remains a foreign area of law. Admittedly, there are significant procedural and substantive differences between civil litigation and workers’ compensation which warrant caution for civil litigators traversing into the workers’ compensation arena.

             However, basic knowledge of the concepts of workers’ compensation law and the understanding of its overlapping effects can provide powerful ammunition for the defense of civil litigation suits where the claimant/plaintiff has pursued a workers’ compensation claim arising from the same injury.

I.        AN OVERVIEW OF THE WORKERS’ COMPENSATION CLAIM:

To establish a right to compensation, a claimant must establish the existence of: a) an employment relationship; b) during which an injury arises in the course of employment and c) which is related thereto, and d) results in disability (loss of earnings), Pennsylvania Workers’ Compensation Act, Act of June 2. 1915, as amended, Section 306(c)(1), 77 P.S. Section 411 (1); Inglis House v. WCAB; 634 A.2d 592 (Pa. 1993). The burden of proving negligence is notably absent from the requirements of establishing a workers’ compensation claim.

The damages awarded to a successful claimant in the workers’ compensation forum are primarily composed of indemnity benefits and medical benefits. Indemnity benefits are compensation for lost earnings due to the injury, which are generally awarded at the rate of 2/3 of the average weekly wage. Section 306(a)(i) of the Pennsylvania Workers’ Compensation Act. Medical benefits are recoverable for the payment of related, reasonable, necessary medical expenses at the rate of 113 % of the Medicare rate.  Section 306(f.l) of the Pennsylvania Workers’ Compensation Act.

The procedure and substance of Pennsylvania workers’ compensation law is governed by statute through the Pennsylvania Workers’ Compensation Act. This statutory scheme is supplemented by rules and regulations promulgated by the Pa. Workers’ Compensation Bureau and interpreted by case law through the Pennsylvania appellate courts.

Litigation in the workers’ compensation forum is initiated through the filing of petitions with the Workers’ Compensation Bureau, which are then assigned to workers’ compensation judges for hearings. Employees seeking to obtain weekly indemnity benefits and payment of related medical expenses file claim petitions. In turn, employers may file petitions to terminate, suspend or modify a claimant’s benefits. The evidence presented at workers’ compensation hearings includes: factual testimony, administrative records and expert deposition testimony (mostly medical). Following conclusion of the evidence, the parties submit briefs. Thereafter, the workers’ compensation judge issues a decision with findings of fact and conclusion of law. As the fact finder, the judge has broad discretion to determine the credibility of witnesses and evidence.

Workers’ compensation judge’s decisions may be appealed with the Workers’ Compensation Appeal Board. The respective parties, as a matter of right, may thereafter file an appeal with the Commonwealth Court. Allocatur must be granted for further review by the Pennsylvania Supreme Court.

II.           COLLATERAL ESTOPPEL ARISING FROM A WORKERS’ COMPENSATION CLAIM:

Collateral estoppel (or issue preclusion) “operates to prevent a question of law or an issue of fact which has once been litigated and adjudicated finally in a court of competent jurisdiction from being relitigated in a subsequent suit.” Day v. Volkswagenwerk Aktiengesellschaft, 464 A.2d 1313, 1318 (Pa. Super. 1983); Capobianchi v. BIC Corp., 666 A.2d 344 (Pa. Super. 1995).

Collateral estoppel applies only when all of the following elements are met:1) the issue decided in the prior action is identical to the one presented in the subsequent action; 2) the prior action resulted in a final judgment on the merits; 3) the party or parties against whom issue preclusion is asserted was a party or is in privity with a party to the prior action; and 4) the party against whom issue preclusion is asserted had a full and fair opportunity to litigate the issue in the prior action. Rue v. K-Mart Corp.,713 A.2d 82, 84 (Pa. 1998); Shaffer v. Smith, 673 A.2d 872, 874 (Pa. 1996).

A judgment is final for purposes of collateral estoppel unless and until reversed on appeal, Philadelphia Fraternal Order of Correctional Officers v. Rendell, 701 A.2d 600, 607 (Pa. Commw.), aff’d, 736 A.2d 573 (Pa. 1997).  Any further appeal will not affect the finality of the judgment. Id.; see also, Yonkers v. Donora Borough, 702 A.2d 618, 620 (Pa. Commw. 1997) (noting that pending appeal does not destroy finality of decision for purposes of res judicata or collateral estoppel; rather finality is destroyed only if final judgment is reversed on appeal).

Despite the differences in procedures between the workers’ compensation forum  and the civil litigation forum, the courts have consistently held that a decision in the workers’ compensation forum may serve to collaterally estop a claimant/plaintiff from re-litigating identical issues in his/her related civil case. Phillips v. AP Green Refractories Co., 630 A.2d 874 (Pa. Super. 1993); Capobianchi v. BIC Corporation, 666 A.2d 344 (Pa. Super. 1995); Grant v. GAF Corporation, 608 A.2d 1047 (Pa. Super. 1992), aff’d, 356 Pa. 429 639 A.2d 1170 (1994) (per curiam).

The Pennsylvania courts have specifically precluded the following issues from being re-litigated after a workers’ compensation decision:

a)                  Whether the injury occurred during the course of employment.   Kohler v. McCory Stores, 532 Pa. 130. 61’5 A.2d 27(1992):

b)                  Whether claimant/plaintiff’s injuries were causally related to the alleged incident. Capobianchi; Phillips; Grant; supra.

c)                  Whether claimant’s disability from his/her alleged injury had fully resolved, Wisnewski v. Home Mutual Insurance Company, 42 Pa. D&C 3d 207 (1986).

Thus, it is apparent that the doctrine of collateral estoppel may be an effective tool in limiting or eliminating a plaintiff’s related third party action.  At the same time, collateral estoppel may not be used by the plaintiff/claimant against the third party defendant, as such party was not a party in the workers’ compensation action.  To preserve the affirmative defense of collateral estoppel, it must be plead in the Answer with New Matter in the civil action. Rule 1030(a) of the Pennsylvania Rules of Civil Procedure.

The collateral estoppel obtained from a prior workers’ compensation decision can be used as a knockout punch to eliminate or reduce the claims of a claimant/plaintiff through a motion for summary judgment. If that fails, then a motion in limine can be pursued.

The use of collateral estoppel arising from workers’ compensation decisions also applies in federal court cases. See generally, Pennsylvania Pub. Interest Research Group v. P.R. Glatfelter Co., 128 F. Supp. 2d 747 (U.S. Dist. 2001), citing favorably Hebden v. Workmen’s Comp. Appeal Bd., 632 A.2d 1302, 1305 (Pa. 1993) (granting preclusive effect to factual findings of worker’s compensation referee).

III.       BURIED TREASURE FROM THE WORKERS’ COMPENSATION FILE:

The related workers’ compensation file may also provide a treasure trove of useful information for defenses in your civil litigation matter.   Such buried treasure may include the following: 1) decisions with adverse findings against the claimant/plaintiff; 2) medical records; 3) transcripts of testimony; 4) IME reports; 5) wage information; 6) lien information; 7) witness information; 8) agreements/stipulations; and 9) surveillance.

Information obtained regarding work related incidents other than the incident involved in your claim could also be helpful. Similar claims of injury could serve to challenge claims of causation and/or undermine the plaintiff’s credibility.

Discovery of workers’ compensation information and records may be sought through interrogatories and requests for production of documents to claimant/plaintiff and subpoenas to others. Subpoenas may be issued to: 1) the counsel for claimant or employer and 2) the workers’ compensation employer and insurer and 3) the Bureau of Workers’ Compensation Department of Labor and Industry, located at 171 S. Cameron Street, Room 103, Harrisburg, PA 17104-2501.

IV.       THE OFTEN MISUNDERSTOOD WORKERS’ COMPENSATION LIEN:

The right of subrogation under Pennsylvania workers’ compensation law is statutory and absolute. To paraphrase Charles Dickens, these facts must be “distinctly understood” before any useful analysis of subrogation may begin.

The statutory right of subrogation is governed by Section 319 of the Pennsylvania Workers’ Compensation Act, which, in relevant part provides that: “where the compensable injury is caused in whole or in part by the act or omissions of a third party, the employer shall be subrogated to the right of the employee …against such third party to the extent of the compensation payable under this article by the employer…” Pennsylvania Workmen’s Compensation Act, Act of June 2, 1915, P.L. 736, as amended, 77 P.S. 671.

Under Sect. 319, the employer is subrogated against the third party to the extent of compensation paid. The extent of compensation paid equals medical expenses plus indemnity benefits. See, Thompson v. WCAB (USF&G), 781 A.2d 1146 (Pa. 2001); Winfree v. Philadelphia Electric Company, 554 A.2d 485 (Pa. 1989); Smith v. Yellow Cab Company, 135 A. 858 (Pa. 1927); Bumbarger v. Bumbarger, et al., 155 A.2d 216 (Pa. Super. 1959). Brubacher Excavating, Inc. v. Workers’ Comp. Appeal Bd. (Bridges), 835 A.2d 1273 (Pa. 2003).

Despite the straightforward statute, backed up by unwavering support from the appellate courts of this Commonwealth, counsel for claimants/plaintiffs and civil judges seeking to effect a settlement may argue in equitable terms. These arguments have no basis.

Alternatively, counsel for plaintiffs may seek to structure a tort settlement or verdict to defeat employer’s subrogation interest. This conduct is also prohibited by law. While pain and suffering damages are not awardable in workers’ compensation claims, the pain and suffering damages awarded to the plaintiff/claimant in the civil forum are subject to the lien recovery. See, Kidd-Parker v. Workers’ Comp. Appeal Bd. (Phila. Sch. Dist.), 907 A.2d 33 (Pa. Cmwlth. 2006); Thompson, 781 A.2d at 1155.

Although loss of consortium settlements provided to the injured plaintiff’s spouse are not subject to the lien recovery, they may be subject to review by the court where designed to defeat the subrogation interest. Darr Constr. Co. v. Workmen’s Comp. Appeal Bd. (Walker), 715 A.2d 1075 (Pa. 1998).[1] As a derivative claim, loss of consortium damages apportioned for settlement should be significantly less than the amount provided to the injured plaintiff.

The amount of the workers’ compensation lien may also be used by plaintiff’s counsel to inflate the value of their related civil action.  Routinely, counsel for plaintiffs argue that the civil case cannot be settled for anything less than several thousand dollars in excess of the workers’ compensation lien.  In reality, the value of the liability case should be analyzed on its own merits.  A good workers’ compensation claim does not necessarily equal a good plaintiff’s liability case.  In the workers’ compensation case, the employee does not need to establish negligence to establish liability.

Furthermore, counsel for plaintiffs often argue that the poor claimant/plaintiff has to pay back his workers’ compensation lien and, thus, requires a significantly larger settlement than the value of his liability case.  This argument fails to take into account that the claimant/plaintiff is already at an advantage as compared to other civil litigants, as he has already been compensated, at least in part, by the workers’ compensation claim.

In civil cases involving a significant workers’ compensation lien, with less than certain civil liability lawsuit, an agreed upon compromise of the workers’ compensation lien with the workers’ compensation insurer might be advisable.  Furthermore, it might be beneficial to have the employer’s workers’ compensation representative apprised of settlement negotiations and even involved in the settlement conference where the amount of the lien is a stumbling block to resolution.

Again, in doing so, the value of the liability case should be analyzed on its own merits.  Ultimately, the amount of subrogation recovery to the workers’ compensation insurer is limited by the award or settlement in the third party action.  In a case involving uncertain liability, there is incentive for the workers’ compensation carrier to compromise a lien to ensure some recovery of that lien.

V.        CONCLUSION:

In summary, basic knowledge of Pennsylvania Workers’ Compensation law in civil cases involving a related workers’ compensation claim is essential for providing an effective defense to such claims with respect to both liability and damages.  Such knowledge may further prove effective in negotiations for settlement.

JOHN J. MULDOWNEY

A Partner at ConnorsLaw, LLP

Specializing in General Litigation &

Pennsylvania Workers’ Compensation Law

ConnorsLaw LLP

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Questions concerning tort and/or contract liability that might arise in the context of casualty claims can be directed to Kevin L. Connors at kconnors@connorslawllp.com (Phone: 610-524-2100 Ext. 112).


[1] The rationale for precluding lien recovery of loss of consortium damages is that such damages belong to the spouse and not the injured worker litigant.