Court Opinion

ID: 6316700
Source: CourtListenerOpinion
Date Created: 2022-02-23 15:11:17.101637+00
Date Added: 2024-06-11T09:00:31.782181
License: Public Domain

[J-68-2021]
                      IN THE SUPREME COURT OF PENNSYLVANIA
                                 WESTERN DISTRICT

     BAER, C.J., SAYLOR, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

    ROBERT ARLET,                                  :   No. 12 WAP 2021
                                                   :
                       Appellant                   :   Appeal from the Order of the
                                                   :   Commonwealth Court entered July
                                                   :   29, 2020 at No. 1722 CD 2018,
                 v.                                :   affirming the Order of the Workers'
                                                   :   Compensation Appeal Board
                                                   :   entered December 4, 2018 at No.
    WORKERS' COMPENSATION APPEAL                   :   A17-0526.
    BOARD (COMMONWEALTH OF                         :
    PENNSYLVANIA, DEPARTMENT OF                    :   ARGUED: October 26, 2021
    LABOR AND INDUSTRY, BUREAU OF                  :
    WORKERS' COMPENSATION),                        :
                                                   :
                       Appellees                   :

                                          OPINION

JUSTICE MUNDY                                              DECIDED: FEBRUARY 23, 2022
         In this appeal by permission, we consider the right of an insurer to subrogation

under the Workers’ Compensation Act (WCA).1 More specifically, we consider, as a

matter of first impression for this Court, the limitations of the general equitable prohibition

of an insurer seeking subrogation from its insured.

                      FACTUAL AND PROCEDURAL BACKGROUND

         On March 9, 2011, during the course and scope of his employment as a shipwright,

Robert Arlet (Claimant) slipped and fell on an icy sidewalk on the premises of his

1   Act of June 2, 1915, P.L. 736, No. 338, as amended, 77 P.S. § 1, et seq.
employer, Flagship Niagara League (Employer), sustaining injuries.2        Employer had

obtained a Commercial Hull Policy from Acadia Insurance Company (Insurer).3 Through

the policy, Insurer provided coverage for damages caused by the Brig Niagara and for

Jones Act4 protection and indemnity coverage for the “seventeen (17) crewmembers” of

the Brig Niagara. Cover Letter for Commercial Hull Policy: CHA028883411; Reproduced

Record at 45a.5 Employer had also at some point obtained workers’ compensation

insurance from the State Workers’ Insurance Fund (SWIF).6

2 Employer is a non-profit associate organization of the Pennsylvania Historical and
Museum Corporation. It is responsible for maintaining and operating the U.S. Brig
Niagara and its homeport, the Erie Maritime Museum.
3 Claimant, as Appellant, acts on behalf of Insurer pursuant to a power of attorney and
fee agreement of record, which granted “unto my said attorneys complete power and
authority” over the conduct of his case. Notes of Testimony, 11-16-2016, Claimant Exhibit
C-03; see Arlet v. Workers’ Compensation Appeal Board, 237 A.3d 615, 617 n.1 (Pa.
Cmwlth. 2020). Herein, we refer to Appellant’s arguments as Insurer’s and refer to Mr.
Arlet as Claimant.
4 The Jones Act refers to Section 33 of the Merchant Marine Act of 1920, 46 U.S.C.A.
§ 30104 (formerly cited as App. U.S.C.A. § 688), which provides enhanced protection to
workers exposed to the perils of the sea. Chandris, Inc. v. Latsis, 515 U.S. 347, 354
(1995). It provides a “seaman” the ability to sue his employer for negligence and to
recover for injuries sustained in the course of his employment. Id. at 355-56. Once an
individual is found to be covered by federal maritime law, the state workers’ compensation
law is preempted. Hill v. Workmen’s Comp. Appeal Bd. (Spirit of Phila.), 703 A.2d 74, 78-
80 (Pa. Cmwlth. 1997).
5 The policy language refers to “members of the crew” and the parties use the terms
“crewmember” and “members of the crew” synonymously.
6 Certain funds paid by employers pursuant to the WCA, are directed to SWIF, which
“provide[s] insurance coverage to subscribing employers as an alternative to contracts of
insurance with private commercial carriers.” Key Handling Sys., Inc. v. Workers’ Comp.
Appeal Bd. (Jenkins), 729 A.2d 109, 112-13 (Pa. Cmwlth. 1999); see also Section 1504
of the WCA, 77 P.S. § 2604.

                                     [J-68-2021] - 2
       Insurer paid benefits to Claimant under its Commercial Hull Policy’s “maintenance

and cure” provision, which “concerns the vessel owner’s obligation to provide food,

lodging, and medical services to a seaman injured while serving the ship.” Lewis v. Lewis

& Clark Maritime, Inc., 531 U.S. 438, 441 (2001). Specifically, Insurer paid Claimant

maintenance of $50.00 per day for 92 days plus $42,133.36 in medical expenses. On

February 8, 2013, Claimant filed a claim for workers’ compensation benefits effective

March 9, 2011. Employer filed an answer asserting Claimant’s remedy was exclusively

governed by the Jones Act, and furthermore that Claimant had fully recovered from his

injury by May 12, 2011. Employer also filed to join SWIF as an additional insurer in the

event the WCA was deemed to supply the applicable exclusive remedy, and Employer

was found to be liable thereunder. SWIF filed an answer denying coverage, alleging

Employer’s policy was lapsed at the time of Claimant’s injury. Thereafter, Claimant filed

an Uninsured Employers Guaranty Fund (UEGF) claim petition, asserting the fund’s

liability in the event he prevailed, and Employer was deemed uncovered by SWIF and

failed to pay.7 UEGF filed an answer, denying the principal allegations in the petition.

       The Workers’ Compensation Judge (WCJ) bifurcated the proceedings to first

address whether Claimant was a “seaman” for the purposes of the Jones Act. If so,

recovery through the WCA would be pre-empted, but Claimant could, pursuant to the

Jones Act, sue Employer for negligence, which recovery had already been effected

7 The Legislature created the UEGF, via legislation amending the WCA, “for the exclusive
purpose of paying to any claimant or his dependents workers’ compensation benefits due
and payable ... and any costs specifically associated therewith where the employer liable
for the payments failed to insure or self-insure its workers’ compensation liability ... at the
time the injuries took place.” 77 P.S. § 2702(c). The enactment, which created the fund,
also provides that if an injured worker’s claim “is not voluntarily accepted as compensable,
the employee may file a claim petition naming both the employer and the fund as
defendants.” 77 P.S. § 2704.

                                       [J-68-2021] - 3
through the above noted payments by insurer. Following testimony and argument, the

WCJ ruled that Claimant was a “seaman” covered exclusively under the Jones Act and

therefore ineligible for workers’ compensation benefits. The WCJ reasoned that the term

“member of the crew” as used in the Commercial Hull Policy, and the term “seaman” as

used in the Jones Act, were synonymous.          Claimant appealed, and the Workers’

Compensation Appeals Board (WCAB) reversed that determination. It reasoned that, as

a land-based employee, Claimant did not meet the definition of seaman under the Jones

Act and was, therefore, entitled to pursue his workers’ compensation claim.8

      On remand, the WCJ awarded Claimant total disability benefits at a weekly rate of

$411.75 from March 8, 2011 to August 19, 2011. The WCJ determined that, because

Employer had not maintained a state workers’ compensation insurance policy at the time

of Claimant’s injury, it would be responsible for payment of the amount of the award that

exceeded the benefits paid under the Commercial Hull Policy, being net uncompensated

wage loss of $5,046.71. Additionally, the WCJ held that Insurer was not entitled to

subrogation because it had correctly paid Claimant under its Commercial Hull Policy, and

that, if Employer failed to pay, UEGF must pay the benefits, with leave to pursue

8 Somewhat prescient of the instant issue the WCAB noted the following respecting
Insurer’s payments under the Commercial Hull Policy:

             Rather, it is our understanding that when a party’s entitlement
             to certain benefits is ultimately established by litigation, any
             benefits which were previously received by the party absent
             any litigation, the receipt of which is legally inconsistent with
             the ultimate award of benefits, are subject to being
             reimbursed to the original payor. See, e.g, Lucev v. WCAB
             (VY-CAL Plastics), 732 A.2d 1201 (Pa. 1999) (holding that a
             person who has paid another an excessive amount of money
             because of an erroneous belief induced by a mistake of fact
             that the sum paid was necessary for the discharge of a duty
             is entitled to restitution of the excess).

Decision of the Workers’ Compensation Appeal Board, 2/23/16, at 11.

                                     [J-68-2021] - 4
reimbursement from Employer. See Olin Corp. (Plastics Div.) v. WCAB, 324 A.2d 813

(Pa. Cmwlth. 1974) (recognizing subrogation is the right of a party who has made

payment toward an obligation, which should have been paid by another, to be indemnified

by the other.) Claimant and UEGF each appealed to the WCAB.

      UEGF argued that Claimant was a “seaman” with his sole remedy available under

the Jones Act. Having previously ruled on the question, the WCAB declined to revisit the

issue. For his part, Claimant argued that the WCJ erred in ruling that Insurer correctly

paid benefits under the Commercial Hull Policy and was ineligible for subrogation. The

WCAB disagreed. It reviewed the terms of the Commercial Hull Policy and noted that the

policy did not employ the same terminology present in the Jones Act. Specifically, by

using the term “member of the crew” rather than “seaman” the policy at best created an

ambiguity as to whether the terms were synonymous or not, and that any ambiguities

must be resolved in favor of the insured. Thus, the WCAB held that, although Claimant

was not a “seaman” under the Jones Act, he was a “member of the crew” under the

Commercial Hull Policy, meaning that Insurer had correctly paid proceeds to Claimant

under the policy. Therefore, the WCAB concluded Section 319 of the WCA, see infra

note 10, precluded Insurer from seeking subrogation, and it affirmed the WCJ. Claimant

sought review in the Commonwealth Court and Employer intervened.

      Claimant argued that “the law of the case” doctrine should apply to preclude the

WCAB’s order from deviating from its previous determination that Claimant was not a

“seaman.”   Because the terms “seaman” and “crewmember” are interchangeable,

Claimant contended, the WCAB’s decision is at odds with its earlier ruling. Employer

responded that the WCAB did not reverse its earlier ruling, which had not specifically

construed the “member of the crew” language of the Commercial Hull Policy. Accordingly,

“the law of the case” doctrine would not apply. The court declined to invoke the law of

                                    [J-68-2021] - 5
the case doctrine absent any authority indicating the doctrine is applicable to proceedings

completely within the workers’ compensation system.

       Claimant next argued the WCAB’s decision was not supported by substantial

evidence because, inasmuch as his employment duties did not qualify him as a “seaman”

under the Jones Act, he could not then be deemed a “crewmember.” Employer countered

that the terms are not the same, and the use of the term “crewmember” in the Commercial

Hull Policy and not “seaman” must be deemed purposeful.

      The Commonwealth Court reviewed pertinent case law construing the term

“seaman” in the Jones Act as a mixed question of law and fact and concluded the terms

“seaman” and “crewmember”- or “member of the crew” - are interchangeable. Arlet v.

Workers’ Compensation Appeal Board, 237 A.3d 615, 622-623 (Pa. Cmwlth. 2020) (citing

Chandris, Inc. v. Latsis, 515 U.S. 347 (1995); Foulk v. Donjon Marine Co., Inc., 144 F.3d

252 (3rd Cir. 1998); and Hill v. Workmen’s Compensation Appeal Bd. (Spirit of Phila.), 703

A.2d 74 (Pa. Cmwlth. 1997). Thus, the court held that because “the remedies under [the

WCA and the Jones Act] are exclusive, the WCAB erred in concluding that Claimant was

entitled to Jones Act maintenance and cure benefits and workers’ compensation benefits

for the same injury.” Id. at 623. The court did not disturb the WCAB’s underlying

determination that Claimant was not a seaman for the purposes of the Jones Act.

Notwithstanding its determination that Claimant’s exclusive remedy lay with the WCA, the

court affirmed the WCAB on the alternative grounds that “it is well settled that an insurer

cannot subrogate against its own insured.” Id. (citing Keystone Paper Converters, Inc. v.

Neemar, Inc., 562 F. Supp. 1046, 1048 (E.D. Pa. 1983); Employers of Wausau v. Purex

Corp., 476 F. Supp. 140, 142 (E.D. Pa. 1979); and Remy v. Michael D’s Carpet Outlets,

571 A.2d 446, 447 (Pa. Super. 1990)).

                                  ISSUE ON APPEAL

                                     [J-68-2021] - 6
       Claimant sought allowance of appeal, and we granted allocator to consider the

following question.

              Did the Commonwealth Court of Pennsylvania err as a matter
              of law in its July 29, 2020 Opinion and Order when it affirmed
              the Workers’ Compensation Appeal Board’s finding that
              Acadia [Insurance Company] did not have a right to
              subrogation for benefits paid to [Claimant] under a Jones Act
              policy of insurance, despite the Commonwealth Court’s initial
              holding in this case that [Claimant] was not a seaman and/or
              crewmember entitled to the benefits which [Insurer] should not
              have paid him?
Arlet v. Workers’ Compensation Appeal Board, 255 A.3d 190, (Table) (Pa. 2021) (order

granting allowance of appeal).

       It is as well to note at the outset those issues that are not encompassed within the

question accepted for review. As related in the factual and procedural history of this case,

several determinations were made by the lower tribunals regarding whether Claimant’s

employment qualified him as a seaman under the Jones Act, and whether the Commercial

Hull Policy was exclusively a Jones Act policy or provided additional coverage. Portions

of the parties’ briefs are devoted to defending or disputing the correctness of those

holdings, but we note procedurally those issues are not before us and merely establish

the law of the case, culminating in the critical determinations that a crewmember and

seaman are synonymous for the purpose of the Jones Act and that both the Jones Act

and workers’ compensation law provide exclusive remedies.           For our review of the

narrower issue of the right of Insurer to seek subrogation against Employer, we accept

that state of the case without revisiting the merits of those foundational determinations.9

9 For example, in Section III-A of its brief, Flagship Niagara League argues the ambiguity
of the policy language and questions the interchangeability of the terms “seaman” and
“crewmember” to urge the position that the Commercial Hull Policy was not exclusively a
Jones Act Policy. Additionally, in section C of its brief, the Bureau of Workers’
Compensation argues Insurer is estopped from seeking subrogation based on its
voluntary payment under the policy. These issues are not presently before us.

                                      [J-68-2021] - 7
                                 PARTIES’ ARGUMENTS

       Insurer submits that the authority relied upon by the Commonwealth Court in

applying the general equitable prohibition against an insurer seeking subrogation against

its insured involves factual circumstances that are materially distinct from the instant case,

namely that the subrogation sought in this case is for payments made on a risk against

which Insurer did not insure. The Commonwealth Court cited two United States District

Court cases and a Pennsylvania Superior Court Case to support its general proposition

that an insurer cannot subrogate against its insured, to wit, Keystone Paper Converters,

Inc., supra; Employers of Wausau, supra; and Remy v. Michael D's Carpet Outlets, supra.

However, Insurer points out the insurers in those cases sought subrogation for sums paid

on risks for which they provided coverage. In Keystone, the insurer sought recovery from

its own insured for payment it made on a covered risk. The Keystone court specifically

held; “To permit the insurer to sue its own insured for liability covered by the insurance

policy would violate ... sound public policy. Such action, if permitted would (1) allow the

insurer to expend premiums collected from its insured to secure a judgment against the

same insured on a risk insured against.” Keystone, 562 F. Supp at 1050-1051 (internal

citations omitted) (emphasis supplied). Similarly, in Employers of Wausau, the insurer

sought subrogation from its insured for payment it made on a covered risk in an

automobile policy.

              Purex is the named insured in the policy; Purex paid the
              premiums for the coverage; and Purex had contracted with
              American Stevedoring to carry such insurance in connection
              with the operation of the vehicles. If Employers recovered in
              this subrogation action against Purex, it would be
              reimbursed for the loss which Purex paid it premiums to
              cover. To permit subrogation in this case would be a direct
              violation of the well-recognized rule of law that, in the absence
              of a clear and unequivocal understanding to the contrary, an
              insurer is not entitled to subrogation from its named insured.

                                       [J-68-2021] - 8
Employers of Wausau, 476 F.Supp. at 143 (emphasis supplied). The court in Remy

recited Keystone and Wausau’s general principle that an insurer cannot recover through

subrogation against its own insured in a case where it had been raised as a defense, but

the court determined the party to whom the insurer made payment and from whom it

sought subrogation was not, as had been alleged, an implied co-insured. Accordingly,

the court held the bar against subrogation from an insured for a covered risk did not apply.

         By contrast, what this case presents is Insurer seeking subrogation for payment

on a risk it did not insure against. The lower tribunals’ determinations established that

Claimant was not a member of the crew, that the term “crewmember” is interchangeable

with the term “seaman” for Jones Act interpretation and application, and the Jones Act

and WCA remedies are mutually exclusive. Therefore, Claimant is entitled to benefits

under the WCA but not under the Jones Act. Insurer notes that the Commonwealth Court

has recognized a statutory right of subrogation by non-responsible insurance companies

pursuant to Section 319 of the Workers’ Compensation Act.10 See Olin Corp, supra.

10   The Act provides as follows.

                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, his 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 in 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, his personal
                representative, his estate or his dependents, and shall be

                                       [J-68-2021] - 9
       Employer argues that the Commonwealth Court did not determine that Insurer

should not have paid Claimant and that Insurer is seeking subrogation for payment made

on a risk it covered. However, Employer supports its position by revisiting the use of the

terms “member of the Crew” and “seaman” in the policy and Jones Act.              Employer

reasserts the holding of the WCAB, which the Commonwealth Court reversed, that the

Commercial Hull Policy was more than a Jones Act policy based upon its use of the term

“members of the crew.” As noted above, this issue was settled to the contrary and is the

law of the case for the purpose of this appeal.    Employer also argues that the right of

subrogation set forth in Section 319 requires reasonable diligence and that Insurer failed

to affirmatively act in a reasonable time. Employers Brief at 24 (citing Independence Blue

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

2003)).11

              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 resulting 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 the employer or insurance
              company 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.

77 P.S. § 671 (emphasis supplied).
11As noted earlier, the WCAB, argues issues that would come to the fore in the event the
Commonwealth Court’s decision regarding Insurer’s right to seek subrogation is reversed.
These include the distinct status of the UEGF vis-à-vis Employer relative to any
subrogation claim, the role sovereign immunity may have on such a claim, and whether
Insurer’s voluntary actions in this matter should result in it being estopped from asserting

                                     [J-68-2021] - 10
                                         Analysis

      Subrogation has its roots in equity and was envisioned as a means to place the

ultimate burden of a debt on the primarily responsible party. Prof’l Flooring Co., Inc. v.

Buhsar Corp., 152 A.3d 292, 301 (Pa. Super. 2016), appeal denied, 170 A.3d 1036 (Pa.

2017). We have described a typical scenario of how subrogation arises in an insurance

context as follows.

             Subrogation allows the subrogee [often an insurer] to step into
             the shoes of the subrogor [often the insured] to recover from
             the party that is primarily liable [often a third party tortfeasor]
             any amounts previously paid by the subrogee to the subrogor
             [instantly the amounts mistakenly paid under the Commercial
             Hull policy]. See e.g. Ario v. Reliance Insur. Co., 602 Pa. 490,
             980 A.2d 588, 594–95 (2009). As well-stated by the Superior
             Court,
                    [W]hen an individual who has been indemnified for a
                    loss subsequently recovers for the same loss from a
                    third party, equity compels that the indemnifying party
                    be restored that which he paid the injured party;
                    thereby placing the cost of the injury upon the party
                    causing the harm while preventing the injured party
                    from profiting a “double recovery” at the indemnifying
                    party’s expense.
             Allstate Ins. Co. v. Clarke, 364 Pa.Super. 196, 527 A.2d 1021,
             1024 (1987).
Jones v. Nationwide Property and Cas. Ins. Co., 32 A.3d 1261, 1270–71 (Pa. 2011).12

As arising in this case, the subrogee, Insurer (Acadia), steps into the shoes of the

subrogor, Claimant (Arlet), to recover its expenditures mistakenly paid to Arlet under the

Commercial Hull policy issued to Employer (Flagship Niagara). Insurer (Acadia) seeks

it is a non-responsible party. We do not address these arguments, as they exceed the
scope of the issue before us.
12This Court has noted that “[a]lthough originally a common law equitable doctrine,
subrogation today may arise by statute or by virtue of an express agreement between
parties, as well as through operation of common law equitable principles.” Thompson v.
Workers’ Compensation Appeal Board (USF&G Co. and Craig Welding & Equipment
Rental), 781 A.2d 1146, 1151 (Pa. 2001).

                                     [J-68-2021] - 11
through subrogation to receive any payments Employer, as the primarily responsible

party, is due to pay Claimant by virtue of Employer’s workers compensation obligation. It

is this scenario that implicates the general equitable rule recognized by the

Commonwealth Court that “[i]t is well settled that an insurer cannot subrogate against its

own insured.” Arlet, 237 A.3d at 623. The public policy supported by the general rule

speaks of conflict of interest, and of apportionment of risk among those assuming the

burden of such risk.

              The courts give various reasons for this rule. Some courts
              reason that in subrogation the insurer stands in the shoes of
              the insured and is not entitled to subrogation where the
              insured has no cause of action against a third party. Stafford
              Metal Works, Inc. v. Cook Paint & Varnish Co., 418 F.Supp.
              56 (N.D. Tex. 1976); Midwest Lumber Co. v. Dwight E. Nelson
              Construction Co., 188 Nev. 308, 196 N.W.2d 377 (1972).
              Other courts have pointed out that the insurer accepts the
              risks under the policy in exchange for premiums, and it is not
              equitable that it be compensated by the insured for a loss paid
              out under the policy. First National Bank of Columbus v.
              Hansen, 84 Wis.2d 422, 267 N.W.2d 367 (1978); Chenoweth
              Motor Co., Inc. v. Cotton, 2 Ohio Misc. 123, 207 N.E.2d 412
              (1965). Other courts have reasoned that it would be against
              public policy for the insurer to prevail in a subrogation action
              against its named insured. Stafford Metal Works, Inc. v. Cook
              Paint & Varnish Co., 418 F.Supp. 56 (N.D. Tex. 1976); Home
              Insurance Co. v. Pinski, 160 Mont. 219, 500 P.2d 945 (1972)
Employers of Wausau, 476 F.Supp. at 143.

              This rule serves two purposes: (1) it prevents the insurer from
              passing the loss back to its insured, an act that would avoid
              the coverage that the insured had purchased; and (2) it guards
              against conflicts of interest that might affect the insurer’s
              incentive to provide a vigorous defense for its insured.
Continental Divide Ins. Co. v. Western Skies Management, Inc., 107 P.3d 1145, 1148

(Colo. App. 2004). Insurer is correct that the instant case has a critical distinguishing fact

from the cases relied on by the Commonwealth Court in applying that general equitable

rule. Unlike the cases cited by the Commonwealth Court, instantly Insurer’s policy was

                                      [J-68-2021] - 12
found not to cover Claimant’s injury. Insurer, therefore had not contracted to assume the

risk of Claimant’s injury. This factual distinction highlights the limitation of the conflict of

interest and apportionment of risk rationale expressed to justify the general rule.

       Based on this distinction, other jurisdictions that apply the bar against an insurer

seeking subrogation against its insured have recognized what has sometimes been

termed a “no-coverage exception” to the rule. In Continental Divide Ins. Co., the Colorado

Court of Appeals, set forth several circumstances where an insurer could recover against

insured for payments made toward injuries not covered by the policy.

              An insurer may sue to recover payment made for bodily injury
              where a general liability policy excluded bodily injury to
              employees.

              An insurer may sue to recover payment made for damage
              caused by arson where a policy excluded intentional acts.

              An insurer may sue to recover payment made for damage
              caused by a subcontractor’s negligence where a general
              contractor’s policy covered subcontractors for property
              damage, but not liability.
Id. at 1148 (citations omitted)

       Similarly, a New York appellate court held “[b]ecause the bodily injury to an

employee exclusion in the general liability policy renders that policy inapplicable to the

loss, the antisubrogation rule does not apply.” Zahno v. Urquart, 625 N.Y.S.2d 111, 112–

13 (N.Y. App. Div. 1995). Citing like cases, the California Court of Appeal explained this

exception as follows:

              The rule illustrated by these cases prevents an insurer from
              equitably subrogating against an insured where the policy
              covers the insured for the particular loss or liability that the
              insurer seeks to impose on the insured. If the policy does not
              cover the insured for a particular loss or liability, however, the
              insurer does not assume responsibility to the insured for the
              loss or liability, and it would not be inequitable for the insurer
              to impose the loss or liability on the insured.

                                       [J-68-2021] - 13
Truck Ins. Exch. v. Cty. of L.A., 115 Cal. Rptr. 2d 179, 186–87 (Cal. Ct. App. 2002).

      As a matter of first impression for this Court, we conclude that the “no-coverage

exception” to the general equitable rule precluding an insurer from pursuing subrogation

against its insured comports with the purposes and public policy supporting the rule and

hereby adopt it as the law of this Commonwealth. For example, the conflict of interest

perceived to be present when an insurer seeks subrogation from an insured for a covered

loss is not implicated where the loss is found not to be covered. The concerns expressed,

as justification for precluding subrogation by an insurer against its insured, about

apportionment of risk among those assuming the burden of such risk is similarly inapt

where the insurer had not assumed any burden for the loss at issue.

      Applying the exception to the instant case, given the finding below that Insurer’s

Commercial Hull Policy, a Jones Act policy, does not cover Claimant, because Claimant

is not a “seaman” or crew member, and the finding that the WCA’s exclusive remedy

applies, Insurer is seeking subrogation for payment it made on a loss it did not cover. The

fact that Insurer voluntarily made timely payments under its policy pending a

determination of whether Claimant was in fact covered under the policy does not alter the

rationale of either the general rule or the no-coverage exception. Subrogation claims may

well be dependent on particular circumstances in their final analysis, but we conclude any

equitable rule precluding an insurer from seeking subrogation against its insured is best

tempered by the exception adopted herein today. Accordingly, we reverse that portion of

the Commonwealth Court’s decision affirming the WCAB on its stated alternate grounds,

and remand for further proceedings consistent with this decision.13

13 As noted earlier, Appellee Commonwealth of Pennsylvania, Department of Labor and
Industry, Bureau of Workers’ Compensation addressed in its brief more specialized
issues pertaining to whether the UEGF may be subject to subrogation, including
sovereign immunity. As a consequence of the Commonwealth Court’s decision, these
issues had not been reached below. Nothing in this decision should be construed as

                                     [J-68-2021] - 14
Chief Justice Baer and Justices Todd, Donohue, Dougherty and Wecht join the opinion.

Former Justice Saylor did not participate in the decision of this matter.

opining on the merits of those issues or as precluding them being raised in due course
on remand.

                                     [J-68-2021] - 15