Thompson v. Workers' Compensation Appeal Board6/21/2002
This case is before us on remand from our Supreme Court. We are now called upon to address an issue which we did not reach during our initial consideration of the case, to wit, whether an employer which has paid workers' compensation benefits has subrogation rights in a third party tort recovery even though the employee and tortfeasor have designated the settlement funds as solely attributable to pain and suffering. The history of this case has been set forth at length by Justice Castille in the opinion of the court, Thompson v. Workers' Comp. Appeal Bd. (USF&G;Co. and Craig Welding Equip. Rental), 566 Pa. 420, 420-26, 781 A.2d 1146, 1146-1150 (2001), and will be repeated here only in brief outline.
In August of 1988, John L. Thompson sustained serious injuries to his skull, jaw, ribs and teeth when the tip-boom of an Omni 60 aerial platform collapsed. As a result of this accident, employer, Craig Welding & Equipment
Rental, and its insurance carrier, USF&G; paid Thompson workers' compensation in the amount of $8,673.68 and medical benefits in the amount of $97,070.95, for a total of $105,744.63. Thompson and his wife, Rose M. Thompson, filed a product liability action in October 1988 against the manufacturers, suppliers and owners of the platform. Between the time of the accident and the filing of suit, employer conducted an inspection and tear-down of the Omni 60, which uncovered problems with bolts designed to connect the tip boom to the platform. Present at the inspection were representatives of USF&G; the manufacturer and Mr. Thompson. After the inspection, William Craig, owner of Craig Welding, took possession of the bolts. Unfortunately, by the time of trial he had inadvertently lost them.
On November 18, 1993, the third day of trial, the product liability defendants filed a motion in limine, requesting that Thompson be precluded from presenting evidence of any medical or indemnity benefits paid by USF&G; as a sanction for Craig's inability to produce the bolts at trial. USF&G;and employer were not parties to the product liability action; however, at the request of common pleas, they were present when the motion in limine was argued and granted. The same day, Thompson and his wife entered into a settlement agreement in the product liability action whereby third-party defendants Doering Equipment, Inc. and Pettibone Corporation, each contributed $150,000, for a total of $300,000. The parties structured the settlement in a way that was obviously intended to defeat employer's subrogation right. Specifically, $200,000 was apportioned to Thompson and designated as compensation for pain and suffering, and $100,000 was apportioned to Rose M. Thompson for loss of consortium. On February 2, 1994, common pleas entered an order, approving the settlement, including the parties' designation and allocation of the settlement funds.
In April of 1994, employer and USF&G;filed a petition to suspend compensation to Thompson and to enforce their subrogation lien pursuant to Section 319 of the Workers' Compensation Act (Act). The Workers' Compensation Judge (WCJ) granted the petition. The Workers' Compensation Appeal Board (Board) affirmed. We reversed, concluding that employer and USF&G;were barred from enforcing their statutory subrogation right on "equitable grounds," due to the spoliation of evidence. The Supreme Court reversed our decision, holding that an employer's subrogation right under Section 319 is absolute, and not subject to ad hoc equitable exceptions. Thompson, 566 Pa. at 430-33, 781 A.2d at 1152-54 (citing Winfree v. Philadelphia Electric Co., 520 Pa. 392, 554 A.2d 485 (1989)). The court remanded the matter to us with direc
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