Pennsylvania Supreme Court holds that claimant’s dram shop claim arose out of maintenance or use of a motor vehicle; therefore, employer was precluded from subrogating its payment of Heart and Lung Act benefits against claimant’s settlement of the claim.
In this case, the claimant, a police officer, sustained multiple injuries when his patrol car was struck by an intoxicated driver’s vehicle. The employer accepted liability for the injuries. However, the employer paid Heart and Lung Act benefits to the claimant, who signed over his workers’ compensation wage loss benefits to his employer, as required by the Heart and Lung Act. The claimant filed a civil action against the third-party tortfeasors—the driver for negligence and the tavern owners for violations of the Dram Shop Act (selling/furnishing liquor to the driver while he was visibly intoxicated). The claimant and his wife then settled their claims against both parties.
The employer filed a modification petition seeking subrogation from the third-party recovery made from the tavern owners. A Workers’ Compensation Judge granted the petition. The Workers’ Compensation Appeal Board (Appeal Board) affirmed, but remanded to determine the method by which the employer would be permitted to recover its subrogation lien.
On remand, the Workers’ Compensation Judge again granted the petition, finding that, because the third-party settlement exceeded the lien amount, the employer was entitled to an appropriate grace period against future payments of medical and wage loss benefits, subject to pro-rata payment of fees and costs, until the balance of the claimant’s recovery was exhausted.
The claimant appealed to the Appeal Board, taking the position that the employer was not entitled to subrogate against the third-party recovery from the tavern owners because the recovery arose out of the use of a motor vehicle. The Appeal Board denied the appeal and affirmed the judge’s decision, noting that the claimant’s theory of recovery against the driver was under the Motor Vehicle Financial Responsibility Law (MVFRL) and the recovery from the tavern owners was under the Dram Shop Act. The claimant appealed to the Commonwealth Court, which affirmed the judge and the Appeal Board.
On appeal, the Pennsylvania Supreme Court considered the issue of whether an employer that pays Heart and Lung Act benefits is entitled to subrogation for a claim in which the employee was injured and asserts motor vehicle negligence and Dram Shop Act-based claims. The court noted that Section 1720 of the MVFRL precludes an employer from subrogating its payment of Heart and Lung Act benefits against a claimant’s third-party recovery in an action arising out of the maintenance or use of a motor vehicle. The court noted that in enacting Section 1720, however, the General Assembly did not use the words “arising under” the MVFRL but, rather, “arising out of.” The court, therefore, held that, based on a clear and unambiguous interpretation of Section 1720 of the MVFRL to the facts of this case, the action through which the claimant asserted his Dram Shop Act claims against the tavern owners arose out of the maintenance or use of a motor vehicle. The court said that the lawsuit, as a whole, filed against both the driver and tavern owners constituted the “action” for purposes of Section 1720. Further, the action originated from the motor vehicle collision. Accordingly, the court held that Section 1720 clearly and unambiguously precludes an employer from subrogating its payment of Heart and Lung Act benefits against a claimant’s third-party settlement of his Dram Shop Act claims with tavern owners because such an action arises out of the maintenance or use of a motor vehicle.
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