Court Opinion

ID: 4348321
Source: CourtListenerOpinion
Date Created: 2018-12-07 14:27:42.254063+00
Date Added: 2024-06-11T09:39:13.771560
License: Public Domain

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

City of Philadelphia,                          :
                   Appellant                   :
                                               :
              v.                               :
                                               :    No. 479 C.D. 2017
Nancy Dugan                                    :    Submitted: November 13, 2018

BEFORE:       HONORABLE MARY HANNAH LEAVITT, President Judge
              HONORABLE PATRICIA A. McCULLOUGH, Judge
              HONORABLE CHRISTINE FIZZANO CANNON, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE FIZZANO CANNON                             FILED: December 7, 2018

              The City of Philadelphia (City) appeals from the December 20, 2016
order of the Court of Common Pleas of Philadelphia County (trial court) which
disposed of Nancy Dugan’s (Dugan) motion for partial summary judgment and the
City’s cross-motion for summary judgment. The order granted Dugan’s motion,
thereby dismissing count I of the City’s complaint in its entirety and dismissing
count II of the City’s complaint to the extent that it sought subrogation of Dugan’s
salary and medical benefits paid pursuant to what is commonly known as the Heart
and Lung Act.1 The order denied the City’s cross-motion for summary judgment in

       1
         Act of June 28, 1935, P.L. 477, as amended, 53 P.S. §§ 637-638. The Heart and Lung
Act provides for the payment of full salary and all medical expenses to police officers and other
public safety employees temporarily unable to perform their job because of a work-related injury.
City of Philadelphia v. Zampogna, 177 A.3d 1027, 1029 (Pa. Cmwlth. 2017); see Section 1(a) of
the Heart and Lung Act, 53 P.S. § 637(a).
part to the extent that it sought to subrogate the Heart and Lung benefits and the
medical benefits it paid to Dugan. However, the order granted the City’s cross-
motion for summary judgment in part to the extent that the City sought to subrogate
$27,889.90 paid for a specific loss pursuant to the Workers’ Compensation Act.2
                On January 7, 2014, while working as a police officer for the City,
Officer Dugan was involved in a motor vehicle accident. Complaint ¶ 4. As a result
of the accident, Dugan was not able to work as a City police officer. Id. ¶ 5. The
City issued a notice of compensation payable (NCP) recognizing Dugan’s injuries
as compensable under the both the Workers’ Compensation Act and the Heart and
Lung Act.3 Id. The NCP indicated that Dugan was entitled to weekly compensation
at the rate of $929.66 based upon an average weekly wage of $1,394.49, and that the
City would pay Dugan Heart and Lung benefits in lieu of workers’ compensation
benefits. See id.
                Dugan subsequently settled a lawsuit against the driver of the other
vehicle involved in the accident for $250,000.00. Id. ¶ 7. Thereafter, the City filed
a declaratory judgment action against Dugan in the trial court, seeking to assert its
lien against the settlement. The City alleged that, as of November 2, 2015, it asserted
a lien in the amount of $104,785.50, representing medical benefits paid and Heart
and Lung benefits paid, as well as $27,889.90 in workers’ compensation specific

       2
           Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1-1041.4, 2501-2708.
       3
         Police officers and public safety employees entitled to Heart and Lung benefits are also
entitled to benefits under the Workers’ Compensation Act. Zampogna, 177 A.3d at 1029.
However, the employee must turn over and pay into the public employer’s treasury any workers’
compensation payments collected. Section 1(a) of the Heart and Lung Act, 53 P.S. § 637(a). “Self-
insured public employers that pay Heart and Lung benefits do not make workers’ compensation
payments because they would simply be returned to the employer.” Zampogna, 177 A.3d at 1029.
“Nevertheless, self-insured public employers issue a notice of compensation payable to employees
receiving Heart and Lung benefits.” Id.
                                                2
loss benefits paid. Id. at 10. Count I asserted a common law right to subrogation.
Id. at count I. Count II, alternatively, asserted a right to subrogation pursuant to
Article III of the Workers’ Compensation Act. Id. at count II. Dugan filed an answer
and new matter. Reproduced Record (R.R.) at 25a-37a.
               Dugan then filed a motion for partial summary judgment seeking
judgment in her favor with respect to the City’s attempt to subrogate her Heart and
Lung benefits and medical benefits. R.R. at 44a. Dugan did not challenge the City’s
claim for subrogation of the workers’ compensation specific loss benefits. The City
filed an answer along with a cross-motion for summary judgment (Cross-Motion).
Thereafter, the trial court granted Dugan’s motion for partial summary judgment,
dismissing count I of the City’s complaint in its entirety, and dismissing count II to
the extent it sought subrogation of Dugan’s Heart and Lung benefits and medical
benefits. The trial court granted in part and denied in part the City’s Cross-Motion.
The trial court denied the City’s Cross-Motion to the extent that it sought to
subrogate the Heart and Lung benefits and the medical benefits it paid to Dugan.
The trial court granted the City’s Cross-Motion to the extent that the City sought to
subrogate $27,889.90 paid as specific loss benefits pursuant to the Workers’
Compensation Act. The City now appeals to this Court, arguing that the trial court
erred in denying the City’s claim for subrogation of the Heart and Lung benefits paid
to Dugan.4
               Before we address the merits of the City’s arguments, we must address
the nature of the trial court’s order. By order dated May 11, 2017, this Court asked

       4
          In reviewing a motion for summary judgment, our scope of review is plenary and our
standard of review requires that we affirm the trial court’s order only where the record, when
viewed in the light most favorable to the non-moving party, clearly shows that there are no genuine
issues of material fact and that the moving party is entitled to judgment as a matter of law. P.J.S.
v. Pa. State Ethics Comm’n, 894 A.2d 174, 176 (Pa. 1999).
                                                 3
the parties to address whether the underlying order was final and appealable. After
reviewing the parties’ arguments, we agree that the trial court’s order is final and
appealable because it disposed of all of the claims. See Pa.R.A.P. 341(b)(1) (stating
a final order is one that disposes of all claims and all parties). The City’s Complaint
set forth two counts. The trial court’s order dismissed count I in its entirety. With
respect to count II, the trial court partially dismissed it to the extent it sought
subrogation of Dugan’s Heart and Lung benefits and medical benefits, and granted
the City relief with respect to the balance of count II to the extent that it sought
subrogation of Dugan’s specific loss benefits in the amount of $27,889.90. The trial
court’s order resolved all claims. Therefore, the order was final and appealable.
               Turning to the parties’ arguments, the City first argues that the 1990
Amendments to the Pennsylvania Motor Vehicle Financial Responsibility Law
(MVFRL)5 restored an employer’s common law right to subrogation for Heart and
Lung benefits paid to eligible employees for injuries arising out of the use or
maintenance of an automobile. Appellants argue that the 1990 amendments to the
MVFRL replaced the phrase “benefits in lieu thereof paid or payable” in Section
1720 with the phrase “benefits paid or payable by a program, group contract or other
arrangement whether primary or excess under section 1719 (relating to coordination
of benefits”).6 Appellants contend that this amendment removing the “in lieu

      5
          75 Pa. C.S. §§ 1701-1799.7.
      6
          The enacted 1984 version of Section 1720 stated:

               In actions arising out of the maintenance or use of a motor vehicle,
               there shall be no right of subrogation or reimbursement from a
               claimant’s tort recovery with respect to workers’ compensation
               benefits, benefits available under Section 1711 (relating to required
               benefits), 1712 (relating to availability of benefits) or 1715 (relating

                                                  4
thereof” language reinstated a municipality’s right to assert claims of subrogation.
The City contends that the anti-subrogation provision of Section 1720 of the
MVFRL now only applies to benefits available under Sections 1711 (relating to
required benefits), 1712 (relating to availability of benefits), 1715 (relating to
availability of adequate limits) and 1719 (relating to coordination of benefits) of the
MVFRL. Moreover, the City claims that Heart and Lung benefits are not among
those that are not recoverable in a third-party action against a tortfeasor and/or
uninsured/underinsured motorist claim as prescribed in Section 1722 of the
MVFRL.7

               to availability of adequate limits) or benefits in lieu thereof paid or
               payable under Section 1719 (relating to coordination of benefits).

Former 75 Pa. C.S. § 1720.
        In 1990, the General Assembly amended Section 1720, replacing the language “benefits in
lieu thereof paid or payable” with “benefits paid or payable by a program, group contract or other
arrangement whether primary or excess[.]” See Act of February 7, 1990, P.L. 11, No. 6, § 9.
Section 1720 now provides:

               In actions arising out of the maintenance or use of a motor vehicle,
               there shall be no right of subrogation or reimbursement from a
               claimant’s tort recovery with respect to workers’ compensation
               benefits, benefits available under section 1711 (relating to required
               benefits), 1712 (relating to availability of benefits) or 1715 (relating
               to availability of adequate limits) or benefits paid or payable by a
               program, group contract or other arrangement whether primary or
               excess under section 1719 (relating to coordination of benefits).

75 Pa. C.S. § 1720.
       7
          Section 1722 prohibits a plaintiff from recovering in any action against a tortfeasor
benefits such as workers’ compensation “or any program, group contract or other arrangement for
payment of benefits as defined in Section 1719.” 75 Pa. C.S. § 1722.

                                                  5
               This Court addressed these same arguments in City of Philadelphia v.
Zampogna, 177 A.3d 1027 (Pa. Cmwlth. 2017).8                    Our decision in Zampogna
reviewed the three statutes governing a public employer’s subrogation claim against
an employee’s third-party tort recovery for his work injury caused by a motor vehicle
accident and analyzed the 1990 amendments to the MVFRL.9 We need not revisit
that history and analysis here. This Court has since issued decisions following and
applying Zampogna.10 Further, in City of Philadelphia v. Workers’ Compensation
Appeal Board (Tucker) (Pa. Cmwlth., No. 1618 C.D. 2017, filed June 26, 2018), this
Court rejected the argument that Zampogna was wrongly decided and declined an
invitation to overrule that case. See Tucker, slip op. at 8 & 13. In short, this Court
held that (i) the anti-subrogation provision of the MVFRL prohibits subrogation of
Heart and Lung benefits; and (ii) the 1990 MVFRL amendment did not restore a
public employer’s right to subrogate Heart and Lung benefits from an employee’s
tort recovery arising from a motor vehicle accident. Zampogna, 177 A.3d at 1038.
               Further, we are not persuaded by the City’s argument that prohibiting
subrogation conflicts with the legislative purpose of the Heart and Lung Act. The
City argues that allowing a municipality to subrogate for Heart and Lung benefits
will prevent double recovery by a plaintiff and will also prevent financial harm to

       8
         We note that the City was also a party in Zampogna. Although this Court issued its
decision in Zampogna prior to the City filing its brief in this matter, the City’s brief does not
mention our Zampogna decision.

      The three statutes are the Workers’ Compensation Act, the Heart and Lung Act and the
       9

MVFRL.
       10
          This Court has since followed the ruling in Zampogna in the unreported decisions of City
of Philadelphia v. Workers’ Compensation Appeal Board (Tucker) (Pa. Cmwlth., No. 1618 C.D.
2017, filed June 26, 2018) and in City of Philadelphia v. Hargraves (Pa. Cmwlth., No. 1928 C.D.
2016, filed Feb. 28, 2018) (en banc).

                                                6
the public employer, as it is unjust to make the public treasury bear the burden when
the burden should be borne by the tortfeasor. Even accepting for the sake of
argument that inequities result,11          this Court has previously rejected a policy
argument of inequities and declined, in this context, to extend the MVFRL beyond
its terms based on such an argument, as policy considerations are a matter for the
General Assembly.         See Tucker (rejecting the City’s assertions regarding the
potential for double recovery and declining to extend the MVFRL beyond its terms
based on a policy argument of inequities, as that is a matter for the General
Assembly).12      Thus, the 1990 amendments to the MVFRL did not restore an
employer’s common law right to subrogation for Heart and Lung benefits paid to
employees for injuries arising out of the use or maintenance of an automobile, and
the City cannot subrogate under this theory as a matter of law.
               Alternatively, the City argues that Section 319 of the Workers’
Compensation Act authorizes the City to subrogate to the extent of all benefits paid
or payable pursuant to Article III of the Workers’ Compensation Act. The City

       11
          Contrary to Employer’s assertion, this Court’s precedent states that Section 1722
includes Heart and Lung benefits and precludes a plaintiff involved in a motor vehicle accident
from recovering those benefits from the responsible tortfeasors. See Commonwealth v. Workers’
Comp. Appeal Bd. (Piree), 182 A.3d 1082, 1089 (Pa. Cmwlth. 2018) (stating that “the reason Heart
and Lung benefits are not subject to subrogation is because Section 1722 of the MVFRL, 75 Pa.
C.S. § 1722, precludes plaintiffs from recovering those benefits from the responsible tortfeasors”);
Zampogna, 177 A.3d at 1038-39 (stating that a “plaintiff may not include the receipt of Heart and
Lung benefits as an item of damages in its tort [claim] against a third party with liability for a
work-related motor vehicle accident”); Stermel v. Workers’ Comp. Appeal Bd. (City of Phila.), 103
A.3d 876, 879 (Pa. Cmwlth. 2014) (stating Section 1722 prohibits a plaintiff injured in a motor
vehicle accident from recovering from the third-party tortfeasor lost wages covered by workers’
compensation or Heart and Lung benefits); see also Pa. State Police v. Workers’ Comp. Appeal
Bd. (Bushta), 184 A.3d 958, 968 (Pa. 2018) (stating that the claimant “was precluded from
recovering his lost wages and medical benefits from the tortfeasors under the MVFRL because
[c]laimant’s wages and medical benefits were fully covered by the Heart and Lung Act”).
       12
          While this Court’s unreported memorandum opinions may not be cited as binding
precedent, they may be cited for persuasive value. 210 Pa. Code § 69.414(a).
                                                 7
argues that once an NCP is issued, benefits are payable pursuant to Article III of the
Workers’ Compensation Act. The City argues that compensation was payable to
Dugan in the amounts set forth in the NCP, not just for the specific loss benefits.
Further, the City contends that medical benefits paid pursuant to the Heart and Lung
Act are subject to re-pricing under the Workers’ Compensation Act; therefore,
medical benefits paid are compensation payable under the Workers’ Compensation
Act.
                 In Zampogna, this Court rejected the City’s argument that Section 319
of the Workers’ Compensation Act authorizes the City to subrogate against a third-
party tortfeasor to the extent of the compensation payable under Article III of the
Workers’ Compensation Act.               Zampogna, 177 A.3d at 1038 (holding that an
employer “may not subrogate a portion of Heart and Lung benefits under the artifice
that those benefits are payable as workers’ compensation benefits”); see Stermel v.
Workers’ Comp. Appeal Bd. (City of Phila.), 103 A.3d 876, 883 (Pa. Cmwlth. 2014)
(rejecting the argument that the issuance of a notice of compensation payable
transforms Heart and Lung benefits into workers’ compensation benefits, stating the
two are separate).
                 Recently, in Pennsylvania State Police v. Workers’ Compensation
Appeal Board (Bushta II), 184 A.3d 958 (Pa. 2018),13 our Supreme Court addressed
whether a self-insured municipality is entitled to subrogation to the extent of
compensation payable pursuant to the Workers’ Compensation Act where the
municipality has concurrent obligations to the injured employee under both the
Workers’ Compensation Act and the Heart and Lung Act. Our Supreme Court stated
that if the claimant does not actually receive or collect workers’ compensation

       13
            The City filed its brief before the Supreme Court decided Bushta II.
                                                  8
benefits, there can be no basis for subrogation. Id. at 966. Our Supreme Court held
that the “mere acknowledgment in an NCP of a work injury and the specification of
the amount of benefits to which an injured employee would be entitled” under the
Workers’ Compensation Act does not transform Heart and Lung benefits into
workers’ compensation benefits. Id. at 969. Further, the Supreme Court rejected
the argument that use of the re-pricing formula set forth in the Workers’
Compensation Act meant that such medical payments constituted compensation
payable under the Workers’ Compensation Act. Id. Our Supreme Court reasoned
that because payment of the claimant’s medical care and treatment is required under
the Heart and Lung Act, those payments constituted a Heart and Lung Act benefit,
regardless of the pricing scheme used. Id.
             Here, the City’s complaint alleged that the NCP indicated that the City
would pay Dugan Heart and Lung benefits in lieu of workers’ compensation
benefits. Complaint ¶ 4. The City also alleged that it paid Dugan $21,757.66 in
Heart and Lung Act “injured on duty” benefits, $62,391.39 in medical benefits and
$27,889.90 in workers’ compensation specific loss benefits for scarring. Id. ¶ 9.
Excepting the $27,889.90 in specific loss benefits, which are not challenged on
appeal, the City’s complaint did not allege that the City actually paid Dugan, or that
Dugan actually received, any workers’ compensation benefits. Therefore, there is
no basis for subrogation of the Heart and Lung Act “injured on duty” benefits and
medical benefits the City paid to Dugan. See Bushta II; see also Commonwealth v.
Workers’ Comp. Appeal Bd. (Piree), 182 A.3d 1082, 1083 & 1089 (Pa. Cmwlth.
2018) (holding that the Commonwealth, as the employer, was not entitled to
subrogate for Heart and Lung benefits an employee received during a period for

                                          9
which the employee was entitled to both Heart and Lung benefits and workers’
compensation benefits).
             Finally, the City argues that the trial court failed to fully address the
City’s arguments regarding equal protection. The City claims that if Dugan was a
police officer of a municipality that maintained workers’ compensation insurance
through an outside vendor, then the City would have been reimbursed two-thirds of
the amount of the benefits paid to Dugan for the period during which the City paid
Dugan the full salary amount, regardless of whether the vendor/insurer paid the
benefits directly to Dugan and she returned the payment to the City or the
vendor/insurer paid the workers’ compensation amount directly to the City. The
City claims that because it elected to self-insure and not to maintain workers’
compensation insurance through an outside vendor, it must forego reimbursement.
The City claims its election is the only difference in the two scenarios and that there
is no other difference that justifies treating a self-insured municipality differently
from one that maintains workers’ compensation insurance through an outside
vendor.
             We reject the City’s argument that prohibiting subrogation in these
circumstances runs afoul of equal protection concerns because it treats a self-insured
municipality different than an insured municipality. In Oliver v. City of Pittsburgh,
11 A.3d 960 (Pa. 2011) (Oliver II), our Supreme Court granted review to consider
whether a restoration of employer subrogation rights arising from payment of
workers’ compensation benefits also afforded public employers a right of
subrogation for benefits paid under the Heart and Lung Act. Id. at 961. The court
determined there was no right of subrogation. Id. at 966. When the same issue was
before this Court, we allowed subrogation, reasoning that it would be unreasonable

                                          10
to protect only private interests and to permit a private employer that has paid
workers’ compensation benefits to subrogate against a third-party recovery for
injuries sustained in a motor vehicle accident, while holding that a public employer
that has paid Heart and Lung benefits under the same circumstance could not
subrogate. Oliver v. City of Pittsburgh, 977 A.2d 1232, 1241 (Pa. Cmwlth. 2009),
rev’d, Oliver II. Our Supreme Court disagreed, however, and did not consider such
an approach to be unreasonable. Oliver II, 11 A.3d at 966. The Supreme Court’s
reasoning recognized that the Heart and Lung Act treats public-safety employees in
essential high-risk professions more favorably. However, that was not its only
reason. The Supreme Court also stated:

              [s]ignificantly, the MVFRL’s remedial scheme has
              become increasingly complicated, in light of the need to
              address premium costs while maintaining financial
              viability in the insurance industry. The Legislature has
              made numerous specific refinements impacting the
              competing, and legitimate, rights and interests of insurers,
              employers, and injured persons. In this landscape, where
              there are mixed policy considerations involved, we decline
              to extend clear and specific refinements beyond their plain
              terms.

Id. at 966.
              We acknowledge that the Supreme Court’s reasoning regarding the
more favorable treatment of public employees under the Heart and Lung Act does
not apply to the City’s argument here, as both of the City’s scenarios concern a
public employer. However, we find the Supreme Court’s additional reasoning to be
applicable and persuasive. Indeed, in Stermel, which also involved the City, the
Workers’ Compensation Appeal Board (Board) found that the City was entitled to
subrogate a portion of the Heart and Lung benefits it paid to the claimant from the

                                          11
claimant’s third-party tort claim settlement. 103 A.3d at 877. The Board’s decision
focused, in part, on fairness, reasoning that it was unfair and unreasonable to treat a
self-insured public employer differently than an insured public employer. Id. at 882
& 885. This Court reversed the Board’s decision. Before this Court, the parties did
not present their arguments in terms of an “equal protection” claim. Nonetheless, in
reversing the Board, we noted that in Oliver II, our Supreme Court rejected this
Court’s reasoning, which has focused on the public employer and, instead, focused
on the preferential treatment of public safety employees. We held that the Board
likewise erred in focusing on the impact on the employer. Stermel, 103 A.3d at 885.
We stated, “[o]nly the legislature may undertake further refinements and eliminate
the distinction between the self-insured public employer and the public employer
who [sic] purchases an employer’s liability policy of insurance.”14 Id. at 886.
              Our recent decision in DeHoratius v. Workers’ Compensation Appeal
Board (Upper Darby Township), 187 A.3d 273 (Pa. Cmwlth.), appeal denied, 187
A.3d 911 (Pa. 2018), presents an instructive analogy. In DeHoratius, we considered
whether the public employer was entitled to subrogation where the employer was
self-insured for both Heart and Lung benefits and workers’ compensation benefits
and one of its police officers was injured in a work-related motor vehicle accident.
Id. at 274. The employer paid Heart and Lung benefits. Id. The employer also paid
workers’ compensation indemnity benefits pursuant to an NCP; the claimant signed
the workers’ compensation indemnity checks and returned them to the employer as
required by law. Id. The employer also paid medical benefits under the NCP. Id.
The employer did not dispute that it was not entitled to subrogation for the lost wages

       14
          Nonetheless, any “perceived unfairness or disparate treatment does not exist in every
case. Self-insured employers paying Heart and Lung benefits are only precluded from subrogating
against a third party recovery where the injury involves a motor vehicle.” Stermel, 103 A.3d at
885 n.15.
                                              12
it paid the claimant under the Heart and Lung Act. Id. at 275. However, the
employer claimed that because it paid the claimant indemnity and medical benefits
from its workers’ compensation account, it was entitled to subrogation for those
benefits from the claimant’s third-party tort recovery. Id. We agreed with the
claimant that it was irrelevant that the employer chose to pay the claimant’s benefits
from its workers’ compensation account. Id. We noted that it appeared that the
employer was “seeking to use its accounting method of separating the Heart and
Lung benefits from the [workers’ compensation] benefits as the basis to establish
subrogation rights.” Id. at 276. We stated that the Heart and Lung Act provides for
wage and medical benefits. Id. Further, the claimant was required to endorse his
workers’ compensation checks to employer. Id.; see 53 P.S. § 637(a). We further
noted that it appeared that the employer was the party “seeking double recovery by
requesting subrogation of these same payments.” DeHoratius, 187 A.3d at 276. We
held that the employer could not subrogate against the claimant's third-party
recovery. Id.
              This court subsequently followed DeHoratius in the unreported
decision of Upper Darby Township v. Workers’ Compensation Appeal Board
(Dockery), (Pa. Cmwlth. No. 647 C.D. 2018, filed October 11, 2018). Dockery
involved the same Township and similar facts as in DeHoratius.15 This Court
followed its ruling in DeHoratius but further noted that its decision was supported
by Bushta II, which had been issued in the interim, and held that if the claimant does
not actually receive or collect workers’ compensation benefits, there can be no basis
for subrogation. Dockery, slip op. at 14-15. We stated that the claimant in Dockery

       15
           The municipality was still self-insured for workers’ compensation purposes and the
workers’ compensation checks were paid out of the employer’s funds; however, instead of paying
the workers’ compensation benefits from the employer’s account, the check was actually written
by a third-party administrator. Dockery, slip op. at 3-4.
                                             13
“did not actually receive or collect any workers’ compensation benefits; rather, [the]
[e]mployer required him to endorse all of his workers’ compensation checks to [the]
[e]mployer.”      Id. at 15-16.      Consequently, we held there was no basis for
subrogation.
               Similarly, here, an employer who chooses to purchase workers’
compensation insurance is, in effect, setting up a separate account from which to pay
workers’ compensation benefits, i.e., its insurance coverage. This is a contractual
relationship between the public employer and the insurance company, one which the
municipality voluntarily enters into by its own choice, i.e., its decision to self-insure
or to purchase insurance through an outside vendor. If the insurance company is to
pay workers’ compensation benefits while the employee is concurrently receiving
Heart and Lung benefits, “the Heart and Lung Act requires the employee to turn over
to the employer all workers’ compensation benefits received or collected.”16 Bushta
II, 184 A.3d at 966 (internal quotation marks omitted); see 53 P.S. § 637(a). Thus,
the employee would not actually receive or collect any workers’ compensation
benefits, and consequently, there would be no basis for subrogation. See Dockery,
slip op. at 15-16.
               Further, when a municipality purchases insurance, the insurance
company stands in the shoes of the municipality as the employer. See Risius v.
Workers’ Comp. Appeal Bd. (Penn State Univ.), 922 A.2d 72, 76 (Pa. Cmwlth.
2007). The insurance carrier would have the same right to subrogation as the

       16
          Indeed, in Bushta II our Supreme Court acknowledged that its precedent recognizes that
an injured employee who is receiving benefits under the Heart and Lung Act may seek benefits
under the Workers’ Compensation Act for concurrent employment; however, the Supreme Court
stressed that such precedent “‘should not be read to imply that an injured employee can, in good
faith, seek workers’ compensation benefits for the same job that gives rise to Heart and Lung
benefits.’” Bushta II, 184 A.3d at 966 (emphasis added) (quoting City of Erie v. Workers’ Comp.
Appeal Bd. (Annunziata), 838 A.2d 598, 606 n.8 (Pa. 2003)).
                                              14
employer. See id. (stating, “although Section 319 of the [Workers’ Compensation]
Act does not include the term insurance carrier, if an employer has an insurance
carrier, such carrier would have subrogation rights”); cf. section 401 of the Workers’
Compensation Act, 77 P.S. § 701 (defining “employer” to include an insurer if such
insurer has assumed the employer’s liability). Consequently, where the public
employer would have no right to subrogation, its insurance carrier that has those
same rights (and nothing more) also would not be able to subrogate. It is the nature
of the benefits for which subrogation is sought, i.e., are they Heart and Lung benefits
or workers’ compensation benefits, that is critical to the determination of whether a
right of subrogation exists, not who is paying the benefits or whether the benefits are
being paid from a “separate account.” Therefore, under these circumstances, this
situation is no different than that in DeHoratius, and the carrier could not subrogate
against the third-party tort recovery.
             “The first step in an equal protection inquiry is to determine whether
the statute creates a classification for the unequal distribution of benefits or
imposition of burdens.” Caputo v. Workers’ Comp. Appeal Bd. (Commonwealth),
34 A.3d 908, 913 (Pa. Cmwlth. 2012). Notably, under the scenario as presented by
the City --- that if Dugan was a police officer of a municipality that maintained
workers’ compensation insurance through an outside vendor, then the City would
have been reimbursed two-thirds of the amount of the benefits paid to Dugan for the
period during which the City paid Dugan the full salary amount, regardless of
whether the vendor/insurer paid the benefits directly to Dugan and she returned the
payment to the City or the vendor/insurer paid the workers’ compensation amount
directly to the City --- the City does not claim that it would be reimbursed two-thirds
of any benefits paid because of any right of subrogation; rather, it would be receiving

                                          15
the two-thirds “reimbursement” by virtue of having entered into a private contractual
relationship by electing to purchase insurance. This is not something subject to a
claim of equal protection.17 The City’s argument has nothing to do with equal
protection and is specious.
              For the foregoing reasons, the City was not entitled to subrogate Heart
and Lung benefits and medical benefits paid to Dugan, as a matter of law.
Consequently, no genuine issues of material fact existed. Therefore, the trial court
did not err in granting Dugan’s motion for partial summary judgment with respect
to count I and dismissing count I of the City’s complaint in its entirety. The trial
court also did not err in granting Dugan’s motion for partial summary judgment in
part with respect to count II and dismissing count II to the extent that it sought
subrogation of Heart and Lung benefits and medical benefits paid to Dugan.
              Accordingly, we affirm.

                                            __________________________________
                                            CHRISTINE FIZZANO CANNON, Judge

       17
          See U.S. Const. amend. XIV § 1 (stating no state shall deny equal protection of the law
to any person within its jurisdiction); Pa. Const. art. I § 1.
                                               16
         IN THE COMMONWEALTH COURT OF PENNSYLVANIA

City of Philadelphia,                :
                   Appellant         :
                                     :
            v.                       :
                                     :   No. 479 C.D. 2017
Nancy Dugan                          :

                                 ORDER

            AND NOW, this 7th day of December, 2018, the December 20, 2016
order of the Court of Common Pleas of Philadelphia County is AFFIRMED.

                                   __________________________________
                                   CHRISTINE FIZZANO CANNON, Judge