Care Must Be Taken When Drafting Third Party Settlement Agreements to Avoid Confusion and Litigation Concerning Subrogation Rights
In Fortwangler v. WCAB (Quest Diagnostics et.al.), decided March 31, 2015, the Commonwealth Court was called upon to resolve a dispute that arose between the parties as to future credit against ongoing workers’ compensation benefits due in light of a third party recovery. Two-Third Party Settlement Agreements (SA) were considered by the Court. The first SA provided for payment of a lump sum to the employer slightly in excess of its net accrued lien and it expressly waived the employer’s right to subrogation against future benefits payable to employee. The Corrected SA provided for reimbursement to the employer of a higher net accrued lien, because additional bills had been paid, and went on to state that this payment was in full satisfaction of the employer’s right to subrogate against the third party settlement. The language omitted any reference to future subrogation rights.
When the employer asserted a credit against ongoing workers’ compensation benefits the employee filed a Petition for Review asserting that the employer had waived subrogation against future benefits under the Corrected SA. The Commonwealth Court held that the employer had not waived future subrogation rights. It found no explicit waiver of future subrogation rights in the Corrected SA and the employee’s credible understanding of the effect of the document was insufficient to overcome the language of the agreement. The Court also noted that there was no consideration given for the alleged employer waiver of future subrogation rights.
Comment: This case illustrates that a subrogation lien has two distinct aspects i.e. a past accrued lien and a right of subrogation against future disability and medical benefits. Both aspects of the subrogation lien must be explicitly addressed in a Third Party Settlement Agreement to avoid confusion and possible litigation.
What Should an Employer Do When There Is a Fee Dispute among the Employee’s Attorneys?
In Bierman v. WCAB (Philadelphia National Bank), decided April 1, 2015, a fee dispute arose between the employee’s former attorney, who the employee discharged when a settlement of her case was not finalized, and her new attorney, who did negotiate a settlement that was approved by a Workers’ Compensation Judge (WCJ).
The Commonwealth Court approved the decision of the WCJ as adequately balancing the right of the employee to her choice of attorney with both attorneys’ expectations of receiving reasonable legal fees. The WCJ had allowed the first attorney to continue to receive an ongoing fee deduction of 20 percent from a prior fee order approved earlier, even after he was discharged, until the settlement was approved by the WCJ. The new attorney was then allowed to receive 20 percent of the settlement sum. The Judge rejected the first attorney’s claim that the settlement fee should be prorated based upon a prior offer he procured during negotiations. On that point, the Court noted that the prior offer was rejected and was no longer “on the table” when new counsel was retained.
Comment: When there is a fee dispute among the employee’s counsel the employer should comply with any existing fee orders, however old, until otherwise instructed by the WCJ.
Common-Law Marriage Valid if Entered into Before January 24, 2005
The Pennsylvania legislators amended the Marriage Law and abolished common-law marriage as of January 24, 2005. The amendment, however, made it clear that common-law marriages entered into before January 24, 2005, were still valid. This controlled the outcome in the case of Elk Mountain Ski Resort, Inc, v. WCAB (Tietz, deceased), decided April 7, 2015, where the surviving spouse of the employee proved that she and her husband had entered into a common-law marriage in June 2004 that was valid despite the abolishing of such marriages on and after January 24, 2005, thereby making her eligible for workers’ compensation benefits.
The Workers’ Compensation Judge (WCJ) found that the spouse testified in a clear and convincing fashion that she and her husband exchanged present words of intent to form the relationship of husband and wife in a Native American ceremony and exchanged wedding bans, not part of the normal Native American tradition. In addition, she established that they lived together as husband and wife and held themselves out to the community as husband and wife, thus establishing cohabitation and reputation as a married couple. Although the last two elements solidify the presence of a marriage, in Pennsylvania once words of present intent are established by clear and convincing evidence nothing more is needed.
For more information, please contact Peter J. Weber at pweber@wglaw.com or 215.972.7901.