Defense Digest

Two Scoops: Superior Court Allows UM/UIM Claimants To Double Dip Workers' Compensation Benefits

Experienced attorneys and claims professionals who handle motor vehicle cases on a regular basis know that one of the things that is different about a motor vehicle case as opposed to a traditional personal injury case, such as a slip and fall, is that the plaintiff in a motor vehicle case is prevented from recovering expenses, such as medical bills and lost wages, that have been paid by other forms of insurance. The 1990 amendments to the Motor Vehicle Financial Responsibility Law (MVFRL), at section 1722, precluded the recovery of all collateral benefits from any source, including not only first party automobile benefits, but also health insurance benefits, disability benefits, and workers' compensation benefits.

In 1993, amendments were made to the MVFRL in what is commonly referred to as "Act 44." As a result of the amendments, plaintiffs who receive workers' compensation benefits may now plead, prove, and recover the amount of benefits paid by the workers' compensation carrier as part of their tort action. However, the workers' compensation carrier is then subrogated to the compensation claimant's/third party plaintiff's recovery.

Act 44 of 1993 affected sections 1720 and 1722 of the MVFRL. The purpose of the change was to assure that, if a workers' compensation carrier had a lien against the recovery that a plaintiff may make in a motor vehicle case, the plaintiff would be able to plead, prove, and recover the appropriate amounts of wage loss and medical expenses incurred so that he could satisfy the workers' compensation lien.

In essence, Act 44 shifted the cost of work-related motor vehicle accidents from the workers' compensation carrier to the insurer of the party at fault. In theory, the injured plaintiff is not helped or hurt by the Act 44 amendments because he is only recovering medical expenses and wage loss to protect the workers' compensation carrier's lien.

Presumably, the right of subrogation granted to workers' compensation carriers by the Act 44 amendments applied not only to traditional automobile tort actions but also in uninsured and underinsured motorists' claims as well. But in Standish v. American Mfrs. Mut. Ins. Co., 698 A.2d 599 (Pa. Super. 1997), the Pennsylvania Superior Court held that the right of subrogation granted to workers' compensation carriers does not apply to the proceeds of an injured worker's own personal uninsured motorists or underinsured motorists policy, reasoning that uninsured motorists and underinsured motorists benefits are received as a result of premiums paid exclusively by the claimant and are, therefore, different from proceeds obtained from a third-party and are not subject to subrogation.

Under the Act 44 amendments, the workers' compensation carrier's right of subrogation is what triggers the plaintiffs ability to recover medical benefits and wage loss benefits from the negligent party. Logically, one would infer that, if the workers' compensation carrier did not have a right of subrogation to a claimant's uninsured or underinsured motorists benefits, a claimant should not be able to claim medical expenses and lost wages in a UM or UIM arbitration. Otherwise, the claimant would be able to make a double recovery of benefits. A double recovery is in direct conflict with the primary goal of the MVFRL, which is to control the spiraling costs of automobile insurance in the Commonwealth of Pennsylvania.

However, in the recently decided Superior Court case of Ricks v. Nationwide Ins. Co., 2005 Pa. Super. 229, the court held that a claimant at UM arbitration was allowed to recover medical expenses and wage losses paid by the workers' compensation carrier, even though the workers' compensation carrier did not have a right of subrogation under the court's opinion in Standish.

In Ricks, the claimant was injured in a motor vehicle accident caused by an uninsured motorist during the course and scope of the claimant's employment. The claimant received workers' compensation benefits from his employer in excess of $160,000. He received a small amount of uninsured motorists proceeds from the insurer covering the vehicle he was driving at the time of the accident. He then sought uninsured motorists benefits from Nationwide, which provided coverage for his personal vehicle. Nationwide denied coverage, and the matter was referred to arbitration pursuant to the insurance policy.

At arbitration, Nationwide cited a provision in their policy that allowed a reduction of the uninsured motorist award by the amount of workers' compensation benefits received. The arbitrators agreed with Nationwide that the policy provision applied, and an order was entered prohibiting the claimant from recovering the amount of workers' compensation benefits that he had previously received. The arbitrators' decision was affirmed by the Trial Court.

The claimant then filed an appeal in the Superior Court. Nationwide argued that since there was no right of subrogation against the proceeds of the uninsured motorists policy, there should likewise be no right to plead, prove, and recover the amount of workers' compensation benefits in the uninsured motorists arbitration. Nationwide pointed to the Legislature's and the courts' coordination between § 1720 and § 1722, which worked in tandem to prohibit both subrogation and recovery before the Act 44 amendments, and then worked together to allow subrogation and recovery after the Act 44 amendments. Furthermore, Nationwide cited the language in its own policy, which called for the reduction of uninsured motorists benefits by the amount of workers' compensation benefits previously paid.

The court recognized that under its own prior case analysis, the claimant would not be required to reimburse his workers' compensation carrier out of the proceeds paid from his personal uninsured motorists policy. However, the court held that § 1722, as amended, provides that the claimant was not precluded from recovering the amount of benefits paid by his employer's workers' compensation carrier in the uninsured motorists arbitration proceeding and that the Board of Arbitrators erred by not allowing the claimant to plead, prove, and recover the amount paid by the workers' compensation carrier.

Furthermore, the Superior Court held that the Nationwide policy, which authorizes a set-off for benefits paid by the workers' compensation carrier in order to prevent "duplicate recovery," is inapplicable. The court held that since there is no right of subrogation, there is actually no "double recovery" of benefits under the law.

The panel of the Superior Court that decided Ricks did not perceive the recovery of workers' compensation benefits in uninsured motorists benefits for the same loss as "double dipping." However, it is clear the double recovery of benefits paid by a collateral source was not the intent of the Legislature when the MVFRL was drafted and was not the intent of the Legislature when the Act 44 amendments were adopted in 1993. With the Superior Court decision in Ricks, it is clear that a loophole has been left open in the MVFRL, which only the Legislature can close. Nationwide and other companies who have policy provisions which prohibit the double recovery of workers' compensation benefits and UM or UIM benefits will only find that their policy language will be held invalid under Ricks. It appears as if the appellate courts are not willing to close the loophole. Only legislative action to change the language of sections 1720 and 1722 will bring the double dipping in uninsured and underinsured motorists case to an end.

*Chris, an associate in our Harrisburg, PA office, can be reached at (717) 651-3509 or creeser@mdwcg.com.