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Wickert: The 'Domtar Paper' Chase Continues

  • State: Pennsylvania
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It seems that there are no lengths parties won’t go to in order to destroy what they perceive as the evil known as “subrogation.”

Gary L. Wickert

Gary L. Wickert

Workers’ compensation subrogation professionals in Pennsylvania are familiar with the saga of the Domtar case, which began in 2013 and culminated in 2015 with the Supreme Court announcing that although § 671 does not confer on a workers’ compensation carrier/employer the statutory right to bring suit directly against a third-party tortfeasor in its own name, the same result can be achieved “through an action brought in the name of the injured employee, either by joining the employer as a party plaintiff …, or as a use plaintiff” (Liberty Mut. Ins. Co. v. Domtar Paper Co., 113 A.3d 1230 (Pa. 2015)).

Because Liberty Mutual filed suit “as subrogee of” the employee, the suit was not authorized under § 671, and the case was dismissed. The decision acknowledged, however, that these types of “for use” suits by a subrogee remain viable, as long as the carrier does not file “as subrogee of” the employee, but rather, files as “to the use of” the employee, with the caption being “John Doe, to the use of, ABC Insurance Co.”

However, trial lawyers did not give up.

In 2016, a Philadelphia County trial judge sitting on the Court of Common Pleas (trial court) dismissed a subrogation suit correctly brought by Hartford Insurance Group on behalf of Chunli Chen, who was injured while working for Reliance Sourcing Inc. (The Hartford Insurance Group, on Behalf of Chen v. Kamara, 155 A.3d 1108 (Pa. Super. 2017)).

Hartford went to great lengths to comply with Domtar, but the defendants argued that Chen neither assigned her cause of action to Hartford nor was a party to the lawsuit. The defendants argued that the entire complaint should be dismissed, because Chen did not verify the complaint. The defendants further claimed that the individual who did verify the complaint (an employee of the workers’ compensation carrier) had no firsthand knowledge of the accident.

They argued that Domtar was not applicable because in that case, Liberty Mutual filed suit “as subrogee of [the injured employee]”, while in Kamara, Hartford sued “on behalf of Chunli Chen” to show that they were appropriately pursuing the action in the name of the employee.

The trial court dismissed Hartford’s complaint.

On appeal, the superior court stated that the carrier’s right of subrogation under § 319 must be achieved through a single action brought in the name of the injured employee or joined by the injured employee. It confirmed that the carrier should not to be denied its subrogation right merely because the employee does not sue, but rather, may institute the action in the employee’s name. The carrier’s third-party action must be brought in the name of the injured employee, either by joining the employer as a party plaintiff or as a use plaintiff.

The court held that Hartford, which filed suit as “The Hartford Insurance Group on behalf of” the injured employee, Chunli Chen, properly followed the precedent set in Domtar. Within the complaint, Hartford sought to establish the liability of the defendant to Chen, and sought recovery in the full amount to which Chen is entitled as a proximate cause of the defendants’ negligence.

The superior court held that Hartford was not attempting to “pursue a subrogation claim directly against a third-party tortfeasor,” was not seeking to recover only the amount that it paid to Chen in workers’ compensation benefits, and was not “splitting” Chen’s cause of action. Instead, it acknowledged that Hartford brought a single action against the third-party tortfeasors in the name of the injured employee, purporting to recover the entire amount to which the employee was entitled.

However, as to the objection that Hartford’s affidavit constituted an improper verification of the complaint, the superior court concluded that Hartford was a party to this action because the injured employee did not file a third-party action. Hartford had a real interest in the lawsuit because it had a statutory right of subrogation to Chen’s recovery against the third-party tortfeasors.

It stated that Hartford was the entity that was controlling the litigation and therefore, the Hartford representative properly verified the complaint. Although the Hartford representative did not have personal knowledge of the accident, the court noted that he averred that the allegations of fact made in the complaint were true and correct, to the best of his information and belief. This was proper, and the trial court erred when it dismissed the suit.

Due to the above hyper-technicality regarding the affidavit, defendants petitioned the Supreme Court in May to consider whether simply captioning the case as being “on behalf of Chunli Chen” was effectively no different than Liberty Mutual having noted its status “as subrogee” in the Domtar case.

On Aug. 9, 2017, the Supreme Court agreed to hear the appeal and determine whether the suit filed by Hartford properly complied with the requirements and parameters set forth in Domtar. The Supreme Court announced it would consider arguments that Chen had not properly consented to the suit — a new hurdle that trial lawyers argue must be complied within Pennsylvania before a workers’ compensation carrier can bring a subrogation suit on its own.

Section 319 of the Pennsylvania Workers’ Compensation Act provides that an employer (or its insurance carrier) that pays benefits is entitled to recover its payments from a third-party tortfeasor who causes the work injury “in whole or in part.” Pennsylvania law is clear that subrogation is automatic and, by its terms, admits no express exceptions, equitable or otherwise" (Serrano v. Workers’ Comp. Appeal Bd. (Ametek Inc.), 154 A.3d 445 (Pa. Cmwlth. 2017)).

The issue before the Supreme Court is whether the failure to attach the verification of Chunli Chen to the plaintiff’s complaint and the carrier’s attaching a verification of the insurance adjuster instead amounts to the lawsuit being brought “without the cooperation of Chunli Chen and solely on behalf of the insurance company.”

In short, the Supreme Court will determine — once again — whether a subrogation suit brought solely by a subrogated workers’ compensation carrier complies with the ever-expanding requirements established in Domtar. No timetable was given for when this decision would ultimately be handed down. However, even if the case is dismissed for failing to follow the Domtar paper chase, subrogation professionals will once again know just a little bit more about how to properly file suit in a state that has historically tended to be unfriendly toward subrogation rights.

Gary Wickert is a partner with the Matthiesen, Wickert & Lehrer law firm in Hartford, Wisconsin. This blog post is reprinted with permission.

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