Edelstein Law Wins Supreme Court Case as PA. Justices Require Consent For 3rd-Party Insurance Claims

Law360 (November 21, 2018, 6:19 PM EST) -- A worker’s compensation insurer needs the consent and participation of an injured worker in order to bring claims against the parties responsible for the injury, and merely claiming a lawsuit was filed “on behalf of” the injured worker is insufficient, a split Supreme Court of Pennsylvania ruled Wednesday.

Clarifying an earlier ruling on a different case that barred independently launched subrogation actions while allowing claims properly filed on behalf of a subrogee, the 5-2 Supreme Court majority found that The Hartford Insurance Group couldn’t bring a lawsuit against the driver and rental car company that injured insured worker Chunli Chen if Chen herself had not filed claims against them or joined in Hartford’s lawsuit, since the insurer trying to subrogate and recover some of what it paid Chen was effectively preventing Chen from filing her own actions against the defendants.

“Sanctioning a workers’ compensation carrier to pursue litigation of the injured employee merely by captioning the complaint as ‘on behalf of’ the employee and including a bald assertion seeking any recovery due the employee, contravenes the very jurisprudence establishing that it is the injured worker who retains the cause of action,” wrote Justice Max Baer in the majority’s opinion. “Absent the injured employee’s assignment or voluntary participation as a party plaintiff, the insurer may not enforce its … right to subrogation by filing an action directly against the tortfeasor.”

The court majority reiterated and clarified the precedent it had set in the 2015 case of Liberty Mutual Insurance v. Domtar Paper , noting that even if the insurer were filing the suit “on behalf of” Chen and seeking to establish the defendants’ liability to her, the point of Pennsylvania’s Workers’ Compensation Act was to first serve the injured worker and give her the right to file any lawsuits, which would be precluded by allowing insurers to independently sue since the law doesn’t allow for the same damages to be recovered twice by different parties.

“Granting an employer an independent cause of action against the tortfeasor would impermissibly split the employee’s cause of action, thereby subjecting the tortfeasor to multiple suits for the same harm,” the opinion says.

The decision overturned a Superior Court ruling and upheld the Philadelphia Court of Common Pleas’ ruling that had tossed the case on the defendants’ preliminary objections, which cited the Domtar Paper case and said The Hartford couldn’t bring the case against them without Chen.

One day in October 2013, Chen was waiting to rent a vehicle in the parking lot of a Thrifty Car Rental when she was struck and injured by a vehicle driven by defendant Kafumba Kamara.

Both the defendants and the Pennsylvania Association for Justice, which filed an amicus brief for them, said the insurer could not independently sue regardless of whether it was filing the suit “as a subrogee of” or “on behalf of” Chen.

The Hartford countered that its lawsuit was still preserving Chen’s independent claims and she could still elect to join it, and it noted that while it would need her cooperation during discovery and her testimony at trial, her participation was not needed when it came to filing the lawsuit.

In a pair of dissenting opinions, Chief Justice Thomas G. Saylor and Justice Debra Todd reiterated why they had also dissented in the Domtar Paper case, saying it had limited a longstanding precedent allowing employers to sue in their employees’ name.

Though the majority had noted that letting insurers sue on employees’ behalf could preclude their rights to sue independently, Justice Saylor said the court could dictate procedures for notifying employees and giving them the opportunity to participate so those rights could be preserved.

Justice Todd joined Justice Saylor’s dissent and added her own, saying that the majority ruling tied the hands of insurers whose clients chose not to sue and left them without a way to recover their costs.

“It leaves an insurer which has paid an injured employee’s workers’ compensation claim arising out of the tortious actions of a third party without a means to enforce its statutory right to subrogation against the third party in situations such as this one, where the injured employee elects, for whatever reason, not to pursue a tort action against the third party,” Justice Todd wrote. “This, in turn, will unavoidably, and unnecessarily, lead to higher workers’ compensation insurance rates.”

Since it decided the case based solely on whether Domtar Paper applied, the Supreme Court did not weigh the second question in the appeal, which was whether the insurance company could have one of its employees verify the complaint instead of Chen.

“We are extremely pleased with the high court’s ruling, in particular its strict adherence to the precedent it established in Domtar,” said Christopher N. Leeds of Edelstein Law LLP, who represented the defendants.

David R. Kunz of Kunz & Germick, representing The Hartford, said that despite losing the appeal, he was grateful for the clarity it provided his client, which could now avoid litigating other cases the same way as Chen’s and fighting to preserve them in preliminary objections.

David C. Harrison of the Pennsylvania Association for Justice said he was happy the court recognized the risk to injured workers if insurers were able to sue without including them — and without even notifying them that they were suing. Since subrogation claims don’t include damages for a plaintiff’s pain and suffering, the insurer could theoretically settle with a defendant for less money, and the injured party would then be blocked from recovering the rest, he said.

“It’s a good opinion and I agree with it,” Harrison said. “I’m glad the court is recognizing the danger and sympathizing with the injured parties.”

The Pennsylvania Association for Justice is represented by David C. Harrison.

The Hartford Insurance Group is represented by David R. Kunz of Kunz & Germick.

Kamara, Thrifty Car Rental and Rental Car Finance Group are represented by Jay L. Edelstein and Christopher N. Leeds of Edelstein Law LLP..

The case is The Hartford Insurance Group on behalf of Chunli Chen v. Kamara et al., case number 24 EAP 2017, in the Supreme Court of Pennsylvania.

--Editing by Adam LoBelia.