Cities and municipalities may recover benefits paid under the Pennsylvania Heart & Lung Act (HLA) through subrogation of an employee's tort recovery. In City of Wilkes-Barre v. Robert P. Sheils, Jr., the U.S. Court of Appeals for the Third Circuit upheld the common-law right of subrogation to recover such costs from police and fire personnel who obtain a tort recovery from a motor vehicle accident.

Vehicle accidents are a common cause of injuries for police officers and firefighters, and the amount of benefits paid under the HLA can be exorbitant, so this is a significant decision for all Pennsylvania public employers, especially in these tough economic times. The Pennsylvania League of Cities and Municipalities, represented by Ballard Spahr, filed a brief amicus curiae on behalf of the City of Wilkes-Barre.

The case highlights the need for municipalities to aggressively manage HLA leave so that they cannot only seek a faster return to work for an injured officer, but also be ready to put the officer and his or her legal counsel on notice of the city's subrogation lien so that it can be protected and satisfied from any third-party recovery or settlement.

The April 23, 2009, ruling reversed the district court's determination that Section 1720 of Pennsylvania's Motor Vehicle Financial Responsibility Law (MVFRL) barred Wilkes-Barre from asserting a right of subrogation against a $495,000 settlement paid to a police officer injured in the line of duty. The city sought to recover $425,945.69 in HLA payments to the officer.

Officer George Cole was severely injured in 1996 when a vehicle struck his police cruiser. He did not return to work for nine years, during which the city paid him HLA benefits. While the personal injury action was pending, Cole filed for bankruptcy, and Robert P. Sheils, Jr., was appointed trustee for his bankruptcy estate. In 2005, a settlement was approved in the personal injury action, but in 2004, Wilkes-Barre asserted an equitable right to subrogation under the HLA in the bankruptcy court proceeding.

The bankruptcy court denied the city's subrogation lien, relying in part on an immunity provision found in the Pennsylvania Workers' Compensation Act (WCA). The U.S. District Court for the Middle District of Pennsylvania affirmed. The District Court noted but did not discuss the immunity issue. Instead, the District Court found the right to subrogation to simply not exist based on an interpretation of Section 1720 of the MVFRL. The City then appealed to the U.S. Court of Appeals for the Third Circuit. The case presented the novel question of whether a partial repeal of Section 1720 of the MVFRL in 1993 that expressly lifted a bar against subrogating benefits paid under the WCA also applied to HLA benefits.

The Third Circuit vacated and remanded the District Court's decision based on a thorough analysis of Section 1720 of the MVFRL. The Court concluded that Section 1720 did not bar Wilkes Barre from asserting an equitable right of subrogation against the police officer's tort recovery, reasoned that Pennsylvania courts equate HLA and workers compensation benefits. The court also affirmed the rationale for the right of subrogation, which prevents double recovery for the same injury by the claimant and ensures that the innocent employer in the end pays nothing.

If you have any questions regarding this decision, please contact any member of the firm's Labor, Employment and Immigration Group.

Copyright © 2009 by Ballard Spahr LLP.
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