IN THE COMMONWEALTH COURT OF PENNSYLVANIA Garri Aminov, : Petitioner : : v. : : Workers' Compensation : Appeal Board (Herman E. Ewell), : No. 311 C.D. 2013 Respondent : Submitted: June 7, 2013 BEFORE: HONORABLE BERNARD L. McGINLEY, Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge OPINION NOT REPORTED MEMORANDUM OPINION BY JUDGE McGINLEY FILED: July 15, 2013 Garri Aminov (Claimant) seeks review of an order of the Workers Compensation Appeal Board (Board) which affirmed the decision of the Workers Compensation Judge (WCJ) that granted the Review Offset Petition filed by Herman E. Ewell, Inc. (Employer), and allowed Employer and its insurance carrier, Phoenix Insurance Company (Phoenix), to subrogate Claimant s third party recovery against Employer s underinsured motorist policy (UIM). Claimant sustained a work-related injury in a motor vehicle accident on May 9, 2005, for which Phoenix paid $230,908.44 in indemnity and medical expenses. Claimant then recovered $45,000.00 in a Release Agreement with Okan Ceylan Trucking, Erkan Akkaya, and Liberty Mutual Insurance Company, an amount less than the workers compensation carrier s total lien. Claimant s attorney forwarded $23,194.38 to Phoenix for its subrogation interest via a Third
Party Settlement Agreement dated November 2, 2010. Reproduced Record (R.R.) at 23a-25a. Claimant subsequently asserted a claim against Employer s UIM and obtained a recovery in excess of Phoenix s outstanding lien. 1 Employer and Phoenix filed a Review Offset petition, seeking $185,908.44 in benefits paid to Claimant (less attorney fees incurred in the UIM suit) on the grounds that Phoenix had a subrogation interest in Claimant s settlement. Before the WCJ, Employer submitted into evidence correspondence leading to the executed Third Party Settlement Agreement, and a copy of the Third Party Settlement Agreement itself. 2 On May 30, 2012, the WCJ granted Employer and Phoenix s petition and found that Phoenix and Employer did not waive its subrogation interest in Claimant s underinsured motorist claim. Specifically, the WCJ found: 6. Claimant contends that Defendant [Employer] has waived its subrogation lien, arguing that Defendant s evidence as it relates to the recovery of funds from the third party case with Defendants, Okan Ceylan Trucking, Erkan Akkaya and Liberty Mutual Insurance Company, evidences the same. 7. The evidence in this matter does not explicitly waive Phoenix s right to recover from future third party claims. On the contrary, Claimant was put on notice that Phoenix intended 1 Claimant agrees that he made a recovery against Employer s UIM, but has not disclosed the amount. 2 The disputed language in the Third Party Settlement Agreement reads: Claimant s 3 rd party recovery was $45,000.00. The amount available for satisfaction of the subrogation lien is $23,194.38. Defendant/Carrier [Employer] will accept $23,194.38 in full satisfaction of their subrogation lien. Third Party Settlement Agreement at 3; R.R. at 25a. 2
to recover from future claims. The letter to Claimant s Counsel dated September 29, 2010 explicitly states: receipt of this partial lien recovery does not waive our [sic] rights to further potential recovery in the pending UIM claim. This language is not equivocal. [3] [Emphasis in Original.] Decision of WCJ, May 30, 2012, Findings of Fact Nos. 6-7 at 1-2; R.R. at 29a-30a. Claimant appealed to the Board. On February 13, 2013, the Board affirmed and stated that Section 319 of the Workers Compensation Act (Act) 4, 77 P.S. 671, mandated that an employer is automatically subrogated to an employee s rights against third parties for compensable work injuries. Upon review, we affirm. Section 319 establishes that an employer is subrogated to an employee s rights against third parties for compensable injuries, and the statute indicates that it is automatic. Claimant does not challenge the fact that he obtained a recovery against an underinsured motorist policy. Claimant contends that the full satisfaction language in the Third Party Settlement Agreement constitutes a waiver of Defendant s right to any and all other subrogation and supersedes the adjuster s letter preserving the carrier s right to subrogation against his pending motorist claim. (Citation omitted.) Board Opinion (Opinion), February 13, 2013, at 4; R.R. at 38a. 3 Correspondence from Carol H. Price (insurance adjustor for Travelers Insurance) and Bruce H. Mac Knight, Jr. Esq., September 29, 2010, at 1; R.R. at 21a. 4 Act of June 2, 1915, P.L. 736, as amended. 3
In addition, the Board held that Phoenix and Employer did not waive their subrogation rights through the initial Third Party Settlement Agreement, and relied in part on correspondence between the parties over the terms of the Third Party Settlement Agreement after determining that the intention of the parties was not clear from its four corners. Specifically, the Board stated: There is no question that the language Claimant relies upon is contained in the Third Party Settlement Agreement. However, to the extent he argues that this constitutes a written waiver of Defendant s [Employer s] right to subrogate against an outstanding underinsured motorist claim, we agree with Defendant [Employer] that the only third party recovery referenced in the Third Party Settlement Agreement is the $45,000.00 recovery (against Okan Cylan, Cylan Trucking, Erkan Akkaya and Liberty Mutual Insurance Company). Further, attached to the Third Party Settlement Agreement is a Release which indicates that The Release is not intended to be a release of any claims Claimant may have for future underinsured motorist benefits. That paragraph appears right above the signature line on which Claimant placed his signature, evidencing his understanding of the document. And notably, before Claimant sent his reimbursement check to the carrier on November 2, 2010, the carrier s adjuster had again advised his counsel that it was not waiving its rights against potential recovery in any underinsured motorist claim. We are guided by the principle that although subrogation is an equitable doctrine, Anderson v. WCAB (Borough of Greenville), 442 Pa. 11, 273 A. 2d 512 (1971), when the legislature adopted subrogation as a statutory matter in the Act, it provided for no equitable exceptions that would eliminate an employer s right. Thompson. [Thompson v. WCAB (USF&G Co.), 566 Pa. 420, 781 A.2d 1146 (2001).] The statutory right to subrogation is generally absolute and can be abrogated only by choice. Thompson, 566 Pa. at 429, 781 A.2d at 1151-52 (citing Winfree v. Philadelphia Elec. Co., 520 Pa. 392, 554 A.2d 4
485 (1989)). We agree with the WCJ that the documents summarized evidence that defendant sought to preserve its subrogation rights in the event of an underinsured motorist recovery. Given everything, we see no error in the WCJ s determination that the evidence of record does not, contrary to Claimant s contention, establish that the carrier explicitly waived its right to recover against future third party claims. Opinion at 5-6; R.R. at 39a-40a. Claimant contends 5 that the Board erroneously interpreted the Third Party Settlement Agreement and improperly relied on correspondence dated September 29, 2010, not the terms of the Agreement itself. Consequently, Claimant argues that the fully executed Agreement between the parties shows that Phoenix intended to waive any further right to any and all subrogation. Section 319 of the Act, 77 P.S. 671 6, establishes that an employer is automatically subrogated to an employee s rights against third parties for compensable injuries. The purpose of subrogation is threefold: it prevents double 5 This Court s review is limited in workers compensation proceedings to a determination of whether constitutional rights have been violated, an error of law has been committed, or any findings of fact are not supported by substantial evidence. Philadelphia Newspapers, Inc. v. Workers Compensation Appeal Board (Guarancino), 554 Pa. 203, 675 A.2d 1213 (1996). 6 Section 319 of the Act, states: Where the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the rights of the employe [sic] against such third party to the extent of the compensation payable under this article by the employer; reasonable attorney s fees and other proper disbursements incurred in obtaining a recovery. 5
recovery for the same injury, it relieves the employer of liability occasioned by the negligence of a third party, and it prevents a third party from escaping liability for his or her negligence. Gorman v. Workers Compensation Appeal Board, 952 A.2d 748 (Pa. Cmwlth. 2008) (citing Kidd-Parker v. Workers Compensation Appeal Board (Philadelphia School District), 907 A.2d 33 (Pa. Cmwlth. 2006)). Furthermore, the Court has held that the employer s subrogation rights are statutorily absolute and may only be waived by choice. Thompson, 566 Pa. at 429, 781 A.2d at 1152 (citing Winfree v. Philadelphia Electric Company, 520 Pa. 392, 554 A. 2d 485 (1989)). Claimant is not challenging the fact that he obtained a recovery on an underinsured motorist provision, but asserts that Employer and Phoenix waived their rights to subrogation through the separate and distinct Third Party Settlement Agreement executed November 2, 2010. In Gorman, this Court was confronted with whether an employer construction company (Kirkwood) waived its right to future subrogation in a Compromise and Release Agreement, which settled the initial workers compensation claim with the injured employee William Gorman (Gorman). Gorman, 952 A.2d at 749. 7 Gorman and Kirkwood entered into a Compromise and 7 In Kirkwood s first action seeking subrogation, the WCJ set aside the Compromise and Release Agreement under the mutual mistake doctrine concerning the existence of a potential subrogation lien. Gorman, 952 A.2d at 750. The WCJ found that Kirkwood was entitled to a credit based upon the amount paid pursuant to the Compromise and Release Agreement and that Kirkwood could enforce a subrogation lien against the funds Gorman received in his third party action. Both parties appealed to the Board. The Board noted that the Compromise and Release Agreement could not be set aside on the basis of mutual mistake because the mistake was not in existence when the parties entered into the agreement. The Board also determined that Kirkwood did not waive its right to subrogation because it was not aware of the possibility of a third party action until after the Compromise and Release Agreement was approved. The Board vacated the WCJ s ruling to set aside the agreement and (Footnote continued on next page ) 6
Release Agreement (approved by the WCJ) where Gorman received a lump sum payment from Kirkwood for his injuries. Id. One of the terms of the agreement asked is there a lien or potential lien for subrogation under Section 319? which was marked No. Id. at 749. Kirkwood later sought a subrogation credit from Gorman s recovery in a subsequent third party suit, a suit initiated after the signing of the Compromise and Release Agreement. Id. Gorman argued that because the executed Compromise and Release Agreement indicated there was no lien or potential lien for subrogation, the employer waived its right to collect. Ruling in favor of Kirkwood, this Court determined that the record failed to establish the employer released its subrogation rights. Id. at 752. The Supreme Court has held that an employer s subrogation rights may only be abrogated by choice. Id., citing Winfree, 520 Pa. 397, 554 A.2d at 487. By signing the Compromise and Release Agreement without noting that there was a potential lien for subrogation, Kirkwood did not indicate that it was giving up any rights to a future claim, but merely stated it did not believe such a claim existed at the time the Compromise and Release Agreement was signed. Gorman, 952 A.2d at 752. The Court held that Kirkwood could not have bargained away its subrogation rights as part of the Compromise and Release Agreement because neither party contemplated a third party settlement at the time of the signing. Id. (continued ) remanded to the WCJ for additional findings of fact and conclusions of law. Id. On remand, the WCJ found that Kirkwood was entitled to be reimbursed in the amount of $71,191.00. Id. Gorman appealed to the Board which affirmed. Id. 7
The disputed language in the present matter arises from the Third Party Settlement Agreement and reads: Claimant s 3 rd party recovery was $45,000.00. The amount available for satisfaction of the subrogation lien is $23,194.38. Defendant/Carrier [Employer] will accept $23,194.38 in full satisfaction of their [sic] subrogation lien. Third Party Settlement Agreement at 3; R.R. at 25a. Third Party Settlements are considered binding as any other executed agreement, and if Employer waived its rights to future recovery, Claimant would be entitled to the benefit of the bargain. Gorman, 952 A.2d at 752. One of the fundamental tenants of contract interpretation is to effectuate the intention of the parties. Crawford v. Workers Compensation Appeal Board (Centerville Clinics), 958 A.2d 1075, 1083 (Pa. Cmwlth. 2008) (citing Amerikohl Mining, Inc. v. Mount Pleasant Township, 727 A.2d 1179, 1182 (Pa.Cmwlth. 1999)). The intent of the parties to a written contract is presumed to be contained within the contract itself, and when the words are clear and unambiguous, the intent is to be found only in the express language of the agreement. Id. (quoting Krizovensky v. Krizovensky, 624 A.2d 638, 642 (Pa. Super. 1993)). The Court has defined clear contractual terms as terms that are capable of only one reasonable interpretation. Krizovensky, 624 A.2d at 642. However, [w]here the contract terms are ambiguous and susceptible of more than one reasonable interpretation the court [sic] is free to receive extrinsic evidence, i.e., parol evidence, to resolve the ambiguity. Id. at 642. Despite the assertions of both the Claimant and the Employer, the language of the agreement does not lend itself to only one reasonable 8
interpretation. As Claimant contends, in full satisfaction of their subrogation lien (Third Party Settlement Agreement at 3; R.R. at 25a), could reasonably be interpreted to mean Employer s entire subrogation lien over Claimant. Brief for Petitioner at 12. However as Employer points out, one of the first lines of the document states the parties herein have agreed to the following distribution of proceeds from Liberty Mutual, third party (Third Party Settlement Agreement at 3; R.R. at 25a), which obviously lends weight to the claim that the agreement s scope is limited to the Liberty Mutual recovery exclusively. In addition, there is no statement in the agreement outside the full satisfaction language that indicates an explicit waiver of Employer s future rights. Exclusively examining the contract itself, the full satisfaction clause could be reasonably interpreted to mean either full satisfaction of the entire lien against Claimant, or full satisfaction of Employer s lien over the Liberty Mutual disbursement. Since the Third Party Settlement Agreement was capable of multiple reasonable interpretations, it was appropriate for the Board to examine all evidence contained in the record to determine the intentions of the parties at the signing of the agreement. The evidence on record lends strong weight to the fact that Employer did not intend to waive its right to recover from future third party claims. 8 In a letter dated September 29, 2010, the workers compensation adjustor sent Claimant s attorney calculations for the subrogation interest and requested 8 Claimant asserts that the WCJ and the Board erred when it determined the September 29, 2010, letter trumped the terms of the executed Third Party Settlement Agreement, however this is not a fair reading of the Board s and WCJ s holdings. The Board turned to the September 29, 2010, letter as evidence of the intentions of the parties to the Third Party Settlement Agreement, and to interpret the disputed language. 9
$23,194.38. R.R. at 21a. The last line of this letter reads: Receipt of this partial lien recovery does not waive our rights to further potential recovery in the pending UIM claim. Id. In a reply letter from November 2, 2010, Claimant s attorney forwarded the requested amount to the insurance adjustor along with the fully executed Third Party Settlement Agreement, without protest to the UIM language in the previous letter. 9 This correspondence corroborates Employer s assertions about additional elements of the agreement itself, including the limiting language over the Liberty Mutual disbursement and the fact that a waiver is not explicitly mentioned in the document. Claimant s argument largely rests on interpreting the phrase in full satisfaction of their subrogation lien to mean any and all future liens Employer may have against Claimant, instead of only fully satisfying the subrogation lien that involved the Liberty Mutual disbursement. This Court agrees with the Board s determination that the documents in evidence do not indicate that Employer intended to waive any future subrogation rights involving third party claims. In Gorman, this Court held: [T]he evidence of record fails to establish that [Kirkwood] released or waived its subrogation rights. Both parties agree that a third party action was not contemplated at the time of the C&R [Compromise and Release Agreement]. As such, Employer could not have bargained away its subrogation rights as part of the settlement agreement. The fact that [Kirkwood] stated in the C&R that there was no lien or potential lien for 9 Claimant suggested that there were additional negotiations with the workers compensation carrier that evidenced the Employer waived its subrogation right. However, no evidence of such negotiations is on the record. Petitioner s Brief at 12. 10
subrogation does not indicate a waiver of a right to subrogation. Rather, it merely indicates [Kirkwood s] belief that a lien or potential lien did not exist. Gorman, 952 A.2d at 752. Gorman held that claiming one did not believe any future liens existed was not enough to waive the employer s future subrogation rights. In the present matter, Employer and Phoenix not only knew of the ongoing UIM suit, but made several assertions that showed they intended to preserve the future claim. Given the evidence of the record, the Board committed no error of law and all findings of fact were supported by substantial evidence. Accordingly, this Court affirms. BERNARD L. McGINLEY, Judge 11
IN THE COMMONWEALTH COURT OF PENNSYLVANIA Garri Aminov, : Petitioner : : v. : : Workers' Compensation : Appeal Board (Herman E. Ewell), : No. 311 C.D. 2013 Respondent : O R D E R AND NOW, this 15th day of July, 2013, the order of the Workers Compensation Appeals Board dated February 13, 2013 in the above captioned matter is hereby AFFIRMED. BERNARD L. McGINLEY, Judge