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Absolute Right to Subrogation Not So Absolute

February 15, 2017

 

In Serrano v WCAB (Ametek, Inc.) which was decided on February 13, 2017 the Commonwealth Court injected an ugly twist into the adages that subrogation is absolute, that an employer is entitled to subrogation where the injury is caused in whole or in part by a third party and that a claimant is not entitled to craft a third-party settlement award in a manner that limits an employer’s subrogation rights.

 

In Serrano, Claimant sustained burn injuries his “torso, shoulder, arms and legs.”  He also sustained injuries to his “hands, neck, face, head, trachea, larynx and lungs” when a container of metal powders exploded creating a flash fire.

 

Claimant sued Aramark Uniform and Career Apparel, Inc. which had provided flame-resistant coveralls which claimant was wearing at the time of the explosion.  Claimant settled for $2.7 million.  The employer sought to enforce its right to subrogation.  Claimant successfully argued that only some of his injuries were caused by the allegedly defective coveralls.  The burns to his face were caused when an air-supplied face shield and hood melted onto his face and the injuries to his hands were caused when his work gloves melted.  Neither the gloves nor the hood were manufactured by Aramark.  Claimant’s argument was that where there are multiple injuries but the tort recovery covers only some of those injuries, subrogation is limited and the employer can only recover for compensation paid for those injuries which were caused, in part, by the third party tortfeasor.

 

The Court agreed with Claimant and held that only those injuries and medical expenses attributable to the coveralls were subrogable.  Claimant conceded that it was not possible to prorate the medical expenses to specific body parts, but that two-thirds of the burned areas were covered by the coveralls.

 

Initially and significantly, it was originally thought that the coveralls accumulated a static electrical charge that caused the explosion and this “would have made Aramark liable for all of claimant’s injuries,” but this theory was later abandoned as further testing contradicted this theory.

 

When the third party claim was settled, Aramark refused to admit liability for the injuries to the lungs and esophagus as they were caused by the inhalation of hot air and the coveralls were not intended to prevent such injuries.

 

In the litigation regarding subrogation before the WCJ, the employer did not introduce any evidence that the burns to Claimant’s body not covered by the coveralls were caused, in any way, by Aramark’s negligence.

 

The WCJ allowed subrogation for all wage loss and for all medical benefits except for treatment to the hands, neck, face, head, trachea, larynx and lungs.  Likewise, the employer was not entitled to subrogation for the specific loss (disfigurement) of the Claimant’s neck, face and head.  On appeal, the Board reversed and allowed full subrogation since the injury was caused “in whole or in part” by the negligence of Aramark.  After a remand and another appeal to the Board, the Claimant appealed to Commonwealth Court.

 

The Court analyzed several old medical malpractice cases where subrogation was disallowed because the employer failed to prove the impact of the malpractice on the work injury – namely that the employer had to pay any benefits by reason of the medical malpractice.  The Court rejected the employer’s argument that the multiple injuries sustained all occurred in one single incident and therefore the employer should be entitled to subrogate for all amounts paid. Instead, the Court remanded the case for an apportionment of Employer’s subrogation rights to a percentage of the total.

 

The holding in Serrano applies only where there are multiple injuries which arise from multiple causes and therefore probably has limited applicability.  The lesson, however, is that litigation in these situations is complex and involves more than just proving what was paid in medical and indemnity. 

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