IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Anthony Kalmanowicz, :

Petitioner :

:

v. : No. 1790 C.D. 2016

: Submitted: March 17, 2017

Workers ’ Compensation Appeal : Board (Eastern Industries, Inc.), : Respondent :

BEFORE: HONORABLE P. KEVIN BROBSON, Judge

HONORABLE ANNE E. COVEY, Judge

HONORABLE JOSEPH M. COSGROVE, Judge

OPINION BY JUDGE BROBSON FILED: July 7, 2017

Petitioner Anthony Kalmanowicz (Claimant) petitions for review of

an order of the Workers ’ Compensation Appeal B oard (Board). The Board

affirmed the decision of Workers ’ Compensation Judge Howard Spizer (WCJ),

concluding that Eastern Industries, Inc

. (Employer) i s entitled to s ubrogation of

Claimant’s worker s ’ compensation benefits . We now affirm.

On June 1, 2009

, during the course of his employment as a truck

driver for Employer , Claimant was injured in a motor vehicle accident , resulting in

a chest wall contusion, a wrist contusion, and post

- traumatic stress disorder

(PTSD)

. Claimant filed a claim petition on A pril 26, 2010, which was assigned to

Workers’ Compensation Judge Patrick J. Cummings (WCJ Cummings). On or

around April 27, 2011, Claimant entered into a settlement agreement with a

third

- party involved in the June 1, 2009 motor vehicle accident in th e amount of

$15,000 .00 , with a net recovery ( after attorneys’ fees and costs ) of $9,498.25. On

October 11, 2011, after holding a hearing and receiving briefs from the parties,2

WCJ Cummings granted Claimant’s claim petition, awarding benefits for the

inj ur ies, including PTSD, sustained during the June 1, 2009 accident . The

October 11, 2011 decision and order also required Employer to pay Claimant’s

reasonable and necessary medical expenses . (Reproduced Record (R.R .) at 104a.) 1

On June 13, 2012, Employe r filed a petition to modify or suspend

Claimant’s benefits (Suspension Petition) , alleging that Claimant had failed to

reimburse Employer a subrogation lien as required by Section 319 of the Workers’

Compensation Act. 2 By opinion and order circulat ed on June 10, 2013, the WCJ

1 Employer appealed WCJ Cummings’ decision to the Board. T he Board affirmed the

decision of WCJ Cummings on July 10, 2012. Employer appealed to this Court, and we

affirmed the order of the Board by opinion and order dated December 6, 2012. New Enter. Stone

& Lime Co., Inc. v. Workers’ Comp. Appeal Bd. (Kalmanowicz) , 59 A.3d 670 (Pa.

Cmwlth. 2012).

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

provides:

Where 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, h is

personal representative, his estate or his dependents, against such third party to

the extent of the compensation payable under this article by the employer;

reasonable attorney ’ s fees and other proper disbursements incurred in obtaining a

recovery or i n effecting a compromise settlement shall be prorated between the

employer and employe, his personal representative, his estate or his dependents.

The employer shall pay that proportion of the attorney ’ s fees and other proper

disbursements that the amount of compensation paid or payable at the time of

recovery or settlement bears to the total recovery or settlement. Any recovery

against such third person in excess of the compensation theretofore paid by the

employer shall be paid forthwith to the employe, h is personal representative, his

estate or his dependents, and shall be treated as an advance payment by the

employer on account of any future instalments of compensation.

Where an employe has received payments for the disability or medical expense

resultin g from an injury in the course of his employment paid by the employer or

an insurance company on the basis that the injury and disability were not

compensable under this act in the event of an agreement or award for that injury

(Footnote continued on next page...)3

concluded that, at the time of Claimant’s settlement of the third

- party claim,

Employer had not sought subrogation or accepted Claimant’s work injuries. Thus,

the WCJ held that there were no funds available to Employer for subrogat ion and

denied Employer’ s Suspension Petition. Employer appealed the June 10, 2013

order to the Board.

By opinion and order dated September 10, 2015 , the Board reversed

,

concluding that Section 319 of the Act granted Employer an absolute right to

subrogation, which could only be abrogated by consent. The Board explained that

there was “no indication that [Employer] sought to relinquish or waive its right to

subrogation and, to the contrary, it clearly argued for subro gation.” (R.R. at 60a.)

Accordingly, the Board reversed the order of the WCJ and remanded for further

proceedings to take evidence and make findings on Employer’s entitlement to

subrogation.

On remand, by order and opinion dated May 13, 2016, the WC J

disposed of the matter by adopting and incorporating by reference a stipulation of

facts agreed to by the parties . In pertinent part, the parties’ stipulation provided

that “the subrogation amount being sought by [Employer] equals $9,498.25. . . .

Claim ant agrees [Employer] is entitled to take a credit of $65.00 per week against

the Claimant’s ongoing receipt of indemnity benefits until such time that the

$9,498.25 subrogation lien is paid in full.” (R.R. at 84a.) The stipulation also

(continued...)

the employer or insurance co mpany who made the payments shall be subrogated

out of the agreement or award to the amount so paid, if the right to subrogation is

agreed to by the parties or is established at the time of hearing before the referee

or the board.4

provided that “no thing in this [s]tipulation of [f]acts will prevent either party from

filing an appeal from [the WCJ’s order dated May 13, 2016].” ( Id. ) Thus, the

WCJ concluded that Claimant was entitled to workers’ compensation benefits

subject to deductions as set for th in the parties’ stipulation of facts. Claimant

appealed from the WCJ’s May 13, 2016 order.

On appeal to the Board, Claimant argued that Employer was not

entitled to subrogation because Employer was contesting Claimant’s claim petition

at the time t he third

- party settlement funds were distributed. By order and opinion

dated October 5, 2016, the Board affirmed the WCJ’s order, concluding that it had

previously addressed the issue raised by Claimant in its September 10, 2015

opinion and order. The Bo ard also noted that Claimant had followed proper

procedure to preserve his claim for further appellate review. Claimant

subsequently filed the instant petition for review , asserting this claim of error by

the Board

. 3

In workers’ compensation matters, s u brogation serves several

goals: (1) it prevents a claimant ’ s double recovery for the same injury; (2) it

protects an employer from incurring liability for the negligence of a third party;

and (3) it prevents a third party from evading liability for his negligent conduct.

Dale Mfg. Co. v. Bressi , 421 A.2d 653, 654 (Pa. 1980). Section 319 of the Act

provides that an employer is entitled to recover its expenses when a third party

3 Our scope of review in a workers ’ compensation appeal is limited to determining

whether an error of law was committed, whether constitutional rights were violated, or whether

necessary findings of fact are supported by substantial evidence. Section 704 of the

Administrative Age ncy Law, 2 Pa. C.S. § 704; Bond v. Worker s ’ Comp. Appeal Bd. (Belmont

Center) , 711 A.2d 554, 557 n.6 (Pa. Cmwlth. 1998).5

causes the work injury “in whole or in part.” We have held that “subrogation is

automatic and by its terms, admits n o express exceptions, equitable or otherwise.”

Serrano v. Workers’ Comp. Appeal Bd. (Ametek, Inc.)

, 154 A.3d 445, 450 (Pa.

Cmwlth. 2017). An employer bears the burden to establish its right to subrogation

by demonstrating “that it was compelled to make payments due to the negligence

of a third party and that the fund against which the employer seeks subrogation

was for the same injury for which the employer is liable unde r the Act. ” Young v.

Workers ’ Comp. Appeal Bd. (Chubb Corp.)

, 88 A.3d 295, 302 (Pa. Cmwlth.),

appeal denied , 97 A.3d 746 (Pa. 2014)

.

Claimant does not suggest that Employer failed to meet the first prong

of the test set forth in Young by failing to demo nstrate that it was compel led to

make payments due to the negligence of a third party. Claimant argued before the

Board that because the third

- party settlement funds were distributed prior to

Employer accepting Claimant’s work

- related injury, there was no “fund against

which [E]mployer [may] seek[] subrogation,” but Claimant does not raise this

argument on appeal to this Court

. See Young

, 88 A.3d at 302

. Instead, Claimant

contends that Employer effectively waived its right to subrogation by contesting

Claimant’s claim petition . We disagree.

There are very narrow circumstances in which a court may find that

an employer waived its right to subrogation under the Act. An employer may

agree via contract to waive its right to subrogation of accrued lie ns as well as

future third

- party settlements. Fortwangler v. Workers’ Comp. Appeal Bd. (Quest

Diagnostics) , 113 A.3d 28, 35 (Pa. Cmwlth. 2015). Such a contract, however,

must expressly waive the right to subrogation. Id. at 36 (concluding that settlemen t

contract did not include waiver of future subrogation rights because such rights6

were not expressly provided for in contract). We have held that a party’s failure to

exercise “due diligence” in pursuing a claim

— i.e. failing to raise a claim for

subrogat ion until fourteen months after a claimant settled his or her claim

— may

constitute waiver of the right to subrogation. Independence Blue Cross v.

Workers ’ Comp. Appeal Bd. (Frankford Hosp.) , 820 A.2d 868 , 872 (Pa.

Cmwlth. 2003). Absent bad faith or “dere liction of duty,” we have never

concluded that an employer has waived its right to subrogation under the Act

without an express agreement to waive that right. Glass v. Workers’ Comp. Appeal

Bd. (City of Philadelphia) , 61 A.3d 318, 326 (Pa. Cmwlth. 2013), ( quoting

Thompson v. Workers ’ Comp

. Appeal B d. (USF & G) , 781 A.2d 1146 , 1154

(Pa. 2001) )

.

Claimant cites no precedent to support his argument that an employer

consents to forego subrogation by contesting a claim petition. Instead, Claimant

asserts that he and others similarly situated would be “held hostage with regard to

the settlement and distribution of third[

- ]party claims when their employer refuses

to accept a work[

- ]related injury claim.” (Claimant’s br. at 10.) Claimant

develops no argume nt other than his bald assertion t hat an employer may not

recove r a subrogation lien if a third party settles the claim prior to an employer

accepting liability for the asserted injury. To the contrary, such a conclusion

would hold an employer “hostage” b y forcing them to accept any injury alleged by

a claimant when a third part y is involved in the incident. Any employer failing to

accept a claim would expose itself to the possibility that a Claimant may protect a

third

- party settlemen t from subrogation b y settling the third

- party claim while the

employer contests the claim petition. Furthermore , Employer was well within its

rights to contest Claimant’s claim petition and was under no obligation to accept7

the work

- relatedness of any injury Claimant sustai ned in the June 1, 2009 motor

vehicle accident. 4

In the instant case, we discern no evidence that could support a

conclusion that Employer acted in bad faith or failed to exercise due diligence in

enforcing its subrogation rights, and we decline to expand our definition of conduct

by which an employer may implicitly waive its absolute right to subroga tion. See

Thompson , 781 A.2d at 1151. Thus, Employer did not waive its right to

subrogation pursuant to Section 319 of the Act by contesting Claimant’s claim

petition.

Accordingly, the October 5, 2016 order of the Board

, affirming the

May 13, 2016 orde r of the WCJ, is affirmed.

P. KEVIN BROBSON, Judge

4 In response to the dissent, we note that throughout the course of this proceeding,

Claimant has never contended that Employer’s conte st of his claim petition was unreasonable or

otherwise an act of bad faith. In other words, we are not here presented with any argument that

Employer should be precluded from pursuing subrogation because it acted in bad faith when it

challenged the work

- r elatedness of Claimant’s injury in the claim petition proceeding.

A remand, therefore, may help resolve the questions that the dissent raises, but all of Claimant’s

questions and related contentions are resolved above.IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Anthony Kalmanowicz, :

Petitioner :

:

v. : No. 1790 C.D. 2016

:

Workers ’ Compensation Appeal : Board (Eastern Industries, Inc.), : Respondent :

O R D E R

AND NOW, this 7 th day of July , 201 7

, the order of the Workers’

Compensation Appeal Board in the above matter , dated October 5, 2016, is

AFFIRMED.

P. KEVIN BROBSON, JudgeIN THE COMMONWEALTH COURT OF PENNSYLVANIA

Anthony Kalmanowicz

, :

Petitioner :

:

v. :

:

Workers’ Compensation Appeal :

Board (Eastern Industries, Inc.), : No. 1790 C.D. 201 6

Respondent : Submitted: March 1 7

, 201 7

BEFORE: HONORABLE P. KEVIN BROBSON

, Judge

HONORABLE ANNE E. COVEY

, Judge

HONORABLE JOSEPH M. COSGROVE, Judge

DISSENTING OPINION

BY JUDGE COSGROVE FILED: July 7, 2017

Within the context of affirming the expansive nature of an employer’s

right to subrogation under Section 319 of the Workers ’ Compensation Act (Act), 1

the Majority recognizes that this right is not without limitation. One such

restriction is present when the employer acts in “b ad faith or dereliction of duty...”

Majority

, s lip o p

. at 6 (internal citation omitted). As the Majority and I disag ree on

the application of this bad faith doctrine to the present case, I must dissent.

Bad faith, as an impediment to an otherwise absolute r ight to

subrogation has its genesis in our Supreme Court’s decision in Thompson v.

Workers’ Compensation Appeal Board (USF&G)

, 781 A.2d 1146 (Pa. 2001). In

that case, the Court favorably noted the decision of the United States District Court

for the Easte rn District of Pennsylvania in Curtis v. Simpson Chevrolet

, 348

F.Supp. 1062 (E.D. Pa. 1972). The question of bad faith arose in Curtis in the

context of whether an employer’s actions may have, at least in part, interfered with

1 Act of June 2, 1915, P.L. 736, as amended

, 77 P.S. § 671.JMC

- 2

presentation of the claim a gainst a third party, thus precluding the employer’s

subrogation claim. Although the Curtis court ultimately allowed the subrogation

claim to proceed, the Supreme Court noted that a showing of “bad faith” may have

“altered [the District Court’s] analysis.” Thompson

, 781 A.2d at 1154.

In the present case, Eastern Industries, Inc. ( Employer ) cont ested what

was an otherwise valid workers ’ compensation claim. The Majority holds that

“Employer was well within its rights to contest [Anthony Kalmanowicz’s]

Claimant’s claim petition and was under no obligation to accept the work

relatedness of any inju ry Claimant sustained...” Majority

, s lip o p

. at 6

- 7. Caveat

to Employer’s right is the responsibility that any such contest be made in good

faith. Whether Employer’s actions in this case constitute good faith, and whether

its actions impacted pursuit of t he third

- party claims, are open questions. As such,

and at the very least, I would rema nd this matter for review of these question s

.

Although respecting the Majority’s thoughtful analysis, I am thus compelled to

dissent. 2

, 3

__________________ _________ JOSEPH M. COSGROVE, Judge

2 The Majority notes that “Claimant cites no precedent to support his argument...

. ”

Majority s lip o pinion at 6. There is likewise no precedent contrary to Claimant’s position,

although presenting its Opinion in published form, the Majority creates such here. A decision of

such consequence should not be decided unargued, and by a three judge panel of t his Court. It

instead should be addressed en banc so as to allow its magnitude to reflect the position of the

entire Court.

3 The Majority suggests that Claimant has not raised the question of Employer's bad faith,

thus precluding us from remandi ng this matter to explore that issue. Since it is Claimant's

position that the challenge to his claim negates the right to subrogation, examination of the bad

faith question is well within the context of that position and thus welcomes remand.