Court Opinion

ID: 9735807
Source: CourtListenerOpinion
Date Created: 2023-08-26 18:31:24.717893+00
Date Added: 2024-06-11T18:27:01.400795
License: Public Domain

McGINLEY, Judge,
dissenting.
I respectfully dissent. Initially, I believe the majority incorrectly calculates the ratio used to determine employer’s pro rata share of attorney’s fees for credits and for reimbursement in connection with the subrogation lien. Under section 819 of The Pennsylvania Workmen’s Compensation Act (Act)1, the employer is subrogated to the full recovery but must pay attorney’s fees on any recovery that is actually realized. Accordingly, attorney’s fees must be allocated between claimant and employer based on the entire settlement regardless of who the initial payment goes to. The calculation of the attorney’s fee rate, then, should be $110,000/$560,000 = .1964 or 19.64%.
However, $560,000 is not the appropriate figure for this calculation because the claimant did not receive a lump sum at the time of settlement. Through the settlement claimant secured the right to receive payments of varying amounts with a minimum guaranteed total of $560,000 over twenty-five years. There is no dispute that the right to receive payments of varying amounts totalling $560,000 twenty-five years from now is worth far less than the right to receive $560,000 *661presently. All of the parties recognized this (including employer’s insurer in the escrow agreement) and expressly agreed that the net present value of the structured payments at the time of settlement was $275,000. This is further reflected in the attorney’s fees. Because of the open-ended settlement structure, there was no lump sum on which to calculate the attorney’s fee. The fee was determined by multiplying the 40% rate times - the net present value of $275,000 to arrive at a fee of $110,000.
Section 319 provides for calculation of attorney’s fees relating to the accrued lien by taking the proportion of the gross lien to the total recovery and multiplying that amount to the total attorney’s fees. As the gross lien is $93,683 and the total recovery is $275,000 then the calculation works as follows: $93,683/$275,000 x $110,000 = $37,473. Claimant’s actual debt to PMA for the accrued lien therefore is $93,683 minus the corresponding attorney’s fees of $37,473 which results in a net accrued lien of $56,210. Employer, however, is not only liable for a pro rata share of attorney’s fees based on the amount of compensation already paid but is also liable on the amount of future compensation it is relieved from paying due to the settlement. Wall v. Conn Welding & Machine Co., 197 Pa.Superior Ct. 360, 179 A.2d 235 (1962).
Substituting this computation for the majority’s results in the following:
The suspended compensation $1,135.33
multiplied by the factor of 40% equals the monthly debiting of the amount owed $ 454.13
multiplied by the 103 months from February, 1986, to September, 1994,
($454.13 x 103 = $46,775.60),
or the amount the employer owed the claimant $46,775.60
leaving a balance due to the employer from claimant as of September 1, 1994, in the amount ($56,210 - $46,775.60) = $ 9,434.40
On a monthly basis the claimant should pay to the employer the monthly excess that the claimant receives, as a difference between the $1,250.00
recovery and the suspended compensation of $1,135.33
resulting in $ 114.67
*662added together with employer’s allocation of attorney’s fees of $454.13 = $ 568.80
the combined monthly reduction would continue until the next balloon payment due May, 1995, eight months equalling (8 x 568.80) $ 4,550.40
leaving the balance due to the employer by the claimant before the balloon payment on May 20, 1995 of $ 4,884.00
The remaining $4,884 should be paid to the employer from the balloon payment which is due on May 20, 1995. At this point the lien will be satisfied. Thereafter the employer will be realizing a benefit on a monthly .basis as the claimant receives the $1,250 settlement payments. Accordingly, employer will be obligated to keep paying the attorney’s fees for such benefits. As of May, 1995, employer will have paid a total of $87,881.43 in attorney’s fees. I believe Employer should pay $454.13 each month until May, 1998, when the amount will have reached $110,000.
This delay in payment of PMA’s perfectly legitimate lien is traceable to the settlement which provided an initial lump-sum payment sufficient to pay the attorney’s fees but not to pay the lien. The Supreme Court affirmed in Pennsylvania Manufacturer’s Association Insurance Co. v. Wolfe, 534 Pa. 68, 626 A.2d 522 (1993), that the attorney in the third-party action has priority over the lienholder. However, under the terms of this settlement no money was available to pay the lien despite the provisions of section 319, thus making delay inevitable.
I have attempted to fashion an equitable resolution between conflicting valid claims. I strongly urge counsel and parties in future third-party tort actions that are subject to worker’s compensation subrogation rights to provide for payment of the accrued lien at the time of settlement because the language in Section 319 expressly provides for immediate reimbursement to the employer of the accrued lien at the time of recovery or settlement in the tort action.
*663Accordingly, I would vacate and remand with instructions to enter an order consistent with the foregoing.
FRIEDMAN, J., joins in this dissent.

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