Pa. Supreme Court: Workers’ Comp Payments Recoupable from Malpractice Suit Proceeds

The Pennsylvania Supreme Court issued a ruling stating that insurers can recoup workers’ compensation payments from malpractice suit proceeds made to injured employees who sue their lawyers for mishandling their personal injury cases.

In WILLIAM R. POOLE, JR., v. WORKERS’ COMPENSATION APPEAL BOARD (WAREHOUSE CLUB, INC.) (J-21-2002, 11/20/02), the plaintiff slipped and fell on ice in front of his employer, Warehouse Club. He received workers’ comp benefits for the injury. He later sued his lawyer, claiming that the lawyer failed to file a timely complaint against the owner of the property. The lawyer settled. Warehouse Club claimed that it was entitled to be reimbursed out of the proceeds of the malpractice settlement.

The employee argued that there was no right to reimbursement as the malpractice claim had no causal relationship to the workplace injury.

The court, however, said that in a legal malpractice case, “the employee must demonstrate not merely an injury as a result of the malfeasance of his previous counsel, but also the malfeasance of the original tortfeasor which resulted in the underlying injury. Thus, an employer may rely upon the employee’s legal malpractice action to demonstrate that the compensable injury is caused by the third party…

“Furthermore, we find that this result is mandated by the underlying rationale of subrogation in the context of the [state] workers’ compensation act,” the court said. “The employee is made whole for his injury while not receiving a double benefit. The employer is not compelled to make compensation payments for the negligence of a third party. Finally, while the underlying tortfeasor may have escaped liability due to the statute of limitations and the action of employee’s previous counsel, the legal malpractice action places this liability on the proper party.”