In What Circumstances Employers Do Not Have the Right to Subrogation ?

In Thompson v. Workers' Compensation Appeal Board (USF&G Company), 566 Pa. 420, 781 A.2d 1146 (2001), the Supreme Court analyzed an employer's right to subrogation in light of equitable principles. The Supreme Court concluded that an employer's right to subrogation is generally absolute, unless the employer engages in deliberate, bad faith conduct. The Supreme Court wrote as follows: The statute is clear and unambiguous. It is written in mandatory terms and, by its terms, admits of no express exceptions, equitable or otherwise. Furthermore, it does more than confer a 'right' of subrogation upon the employer; rather, subrogation is automatic. Id. at 428, 781 A.2d at 1151. The Supreme Court further explained as follows: This Court cannot ignore the fact that the subrogation right at issue here does not derive from common law judicial authority but, rather, is expressly granted by the Workers' Compensation Act. When the General Assembly adopted subrogation as a statutory matter in the workers' compensation context, it provided for no equitable exceptions that would eliminate the employer's subrogation right. Rather, the General Assembly determined that the employer was entitled to subrogation whenever an employee's injuries, for which the employer paid compensation, were caused by a third party and the employee received a recovery for the compensable injuries from that third party. It is not difficult to see why the General Assembly might reach such a conclusion. The Workers' Compensation Act balances competing interests. The Act obliges subscribing employers to provide compensation to injured employees, regardless of fault, either through insurance or self-insurance. In exchange, employers are vested with two important rights: the exclusivity of the remedy of worker's compensation and the concomitant immunity from suit by an injured employee; and the absolute right of subrogation respecting recovery from third-party tortfeasors who bear responsibility for the employee's compensable injuries. This leads to the conclusion that an employer who complies with its responsibilities under the Workers' Compensation Act should not be deprived of one of the corresponding statutory benefits based upon a court's ad hoc evaluation of other perceived 'equities.' Had the General Assembly intended to introduce such uncertainty into an otherwise balanced and certain scheme of relative responsibility, it could have done so expressly or by use of less certain language. The General Assembly already having weighed the equities, it would be inappropriate for this Court to approve of ad hoc equitable exceptions to subrogation. Id. at 431-32, 781 A.2d at 1153. The Supreme Court noted that "there may be circumstances where an employer undertakes in deliberate bad faith to subvert a third party suit brought by its employee" and that such circumstances "may require a different calculus." Id. at 433, 781 A.2d at 1154. The Supreme Court stated that nothing in its opinion should be "construed as suggesting that subrogation would be appropriate in the face of deliberate, bad faith conduct on the part of the employer." Id., 781 A.2d at 1154.