Opinion ID: 3014115
Heading Depth: 2
Heading Rank: 2

Heading: Workers’ Compensation Lien

Text: Wausau was also Brenner’s workers’ compensation insurer. Wausau notified Staples, via letter to its insurer CNA, on February 12, 1997 that it had been called upon to extend workers’ compensation to Kline and that no settlement should be made without protection of its workers’ compensation lien. CNA did not respond to this letter. Staples contends that the District Court erred in holding that Staples (the thirdparty tortfeasor) was required to reimburse Wausau for the amount of its workers’ compensation payment to Kline. Pursuant to the Pennsylvania Workers’ Compensation Act, the subrogation rights of an employer of an insurer are absolute. The insurer, here Wausau, may recover the entire amount of workers’ compensation paid to the injured employee out of any recovery paid by the third-party tortfeasor, here Staples. 77 P.S. § 671. This provision prevents the injured party from receiving a double recovery. Skoda v. National Mines Corp., 249 A.2d 829 (Pa. Super. 1968). To this end, Wausau notified Staples of its workers’ compensation lien by letter to CNA which stated: This letter is to advise you of our rights to recovery of all payments. Under the law we have the right to recovery of all payments made and no settlement should be made with the injured party without protection of our lien for any payments we are called upon to make. When you are ready to settle this claim, please contact us so that we may advise you of the amount of our lien. App. at 249. 11 On April 25, 1997, Kline’s attorney sent Wausau a letter stating, “Please note my client will certainly protect your lien out of any 3rd party recovery pursuant to the Workers’ Compensation Act . . . .” App. at 253. Staples contends that “while the employer’s subrogation rights are generally absolute, they are not automatic and can be abrogated if the subrogee does not exercise ‘reasonable diligence.’” Appellant’s Br. at 34 (quoting Harford Mut. Ins. Co. v. Decker, 1989 WL 79756, at  (E.D. Pa. 1989)). The court in Harford stated that what constitutes “reasonable diligence” is vague, but that it “requires more than mere notice of the insurer’s intent to assert a subrogation claim, but less than actual intervention in the third-party action.” Id. (quoting Travelers Ins. Co. v. Hartford Accident & Indem. Co., 294 A.2d 913 (Pa. Super. 1972)). In Travelers, the Pennsylvania Superior Court stated that a court must inquire into the nature of the communications between the parties to see whether the subrogration claim was abrogated in any way. Travelers, 294 A.2d at 915. The notice from Wausau to Staples requesting coverage was clear and unequivocal. Had Staples notified Wausau of the Kline action, Wausau could have taken steps to protect its subrogration rights. Staples’ failure to notify it of the Kline suit prevented it from undertaking any such protection. Staples argues that because Kline’s attorney promised to protect Wausau’s lien out of any third party recovery, Staples was not required to do so. Wausau’s subrogation 12 rights are absolute under Pennsylvania law and cannot be excused because of Kline’s failure to fulfill his independent promise. Therefore, the District Court did not err when it concluded that Wausau was entitled to recover its workers’ compensation lien from Staples.