New Commonwealth Court Case Highlights Issues With Subrogation in Workers’ Compensation Matters

The March 10, 2014 opinion by the Commonwealth Court in Young v. Workers’ Compensation Appeal Board (Chubb Corp. and Federal Insurance Co.) is noteworthy, not for a new or groundbreaking holding, but because the decision by Judge Cohn Jubelirer highlights how frequently the area of subrogation is misunderstood. It also highlights why it can be helpful for attorneys representing injured workers in their third party/pain and suffering claims to consult with an attorney who regular handles Pennsylvania workers’ compensation matters.

In Young, the Commonwealth Court affirmed that, when addressing subrogation claims, the Court will apply the law of the state through which the workers’ compensation benefits were paid. In this case, the Natasha Young was injured in a Delaware accident and received benefits under the Pennsylvania Workers’ Compensation Act. As such, the Court affirmed that Pennsylvania subrogation law would apply.

What is interesting is the fact that counsel claimed that dividing the third party proceeds into one-third shares (paying 1/3 to counsel, 1/3 to claimant and 1/3 to resolve the subrogation lien) was a “‘customary’ way of handling a WC lien.” This is simply not the case. In fact, the formula is far more complicated. In this case, however, this formula turned out to be more favorable to Ms. Young than the proper method, which would have resulted in Ms. Young receiving no money from the settlement (because the workers’ compensation lien was so large). Thus, counsel’s use of the “customary” method worked to help his client. That just isn’t always the case.

When we address subrogation liens for our clients, and when other attorneys ask us to address liens impacting their clients, we consider the statutory method and also propose alternatives, including — at times — the “customary” method.

Click here to read Young v. WCAB.

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