The Pennsylvania Supreme Court has issued several recent cases that have a significant impact on an insurance company's right to recover from the proceeds of personal injury cases against third parties arising out of cases in which the plaintiff has received benefits for a work-related injury.
Watch out if an insurance company tries to assert a right of subrogation in a case under the Motor Vehicle Financial Responsibility Law where the plaintiff is receiving Heart and Lung Act benefits. The Heart and Lung Act provides for payment of full salary and medical expense benefits to certain municipal employees including firefighters and police officers who are temporarily disabled because of work-related injuries. An insurance company has no right of subrogation for either salary or medical expense benefits paid under this statute. Sometimes an insurance company will claim they are entitled to recover the amounts that were otherwise payable under the Pennsylvania Workers’ Compensation Act, or approximately two‑thirds of salary benefits and all medical expense payments. They have no such right. If the third-party claim is covered by the Motor Vehicle Financial Responsibility Law and the benefits were paid pursuant to the Heart and Lung Act, the insurance company or the employer has no right of subrogation. Pennsylvania State Police v. Workers’ Compensation Appeal Board, 184 A.3d 958 (Pa. 2018).
Sometimes insurance companies try to slip language into third-party settlement agreements that give them the right to reduce payment of future medical expenses. For example, an insurance company may put language in a third-party settlement agreement in which they agree to pay 40 percent of future medical bills with the plaintiff/claimant to pay the remainder. Under Pennsylvania law, following repayment of compensation paid to the date of the third-party settlement, the employer or the insurance company may not reduce payment of future medical expense benefits. They have the right to pay reduced wage loss benefits in the future if the third-party recovery exceeds the amount of the lien, but they do not have the right to reduce future medical expense payments. Whitmoyer v. Workers' Compensation Appeal Board, 186 A.3d 647 (Pa. 2018). For more on the current state of the law of subrogation in workers’ compensation cases, see “Understanding Pennsylvania Work Comp Subrogation: When Does A Carrier Not Have A Lien, And What You Should Do When It Does.”