May a Maritime Liability Insurer Subrogate Against its Insured? Is Subrogation the Correct Remedy?
Arlet v. Workers' Comp. Appeal Bd., 270 A.3d 434; 2022 Pa. LEXIS 183 **; 2022 WL 529350 (Pa. 2022)
Robert Arlet, a shipwright employed by Flagship Niagara League (FNL) was injured when he slipped and fell on ice on the employer’s premises.1 The employer maintained a policy of Commercial Hull Insurance through Acadia Insurance Company (Acadia) which also included Jones Act coverage for the 17 crewmembers. Acadia paid maintenance for 92 days at $50 per day and cure in the amount of $42,133.36.2 Arlet also filed a claim for worker’s compensation benefits under the Pennsylvania Workers’ Compensation Act.3 The ALJ held the claimant was a seaman and barred from recovering workers’ compensation benefits.4 This was reversed by the compensation appeal board which remanded the case to the ALJ who then determined the claimant’s rate and term of compensation benefits.5
The insurer also asserted that it could subrogate against its insured, FNL, for the payments it wrongfully made under its policy to the employee. The ALJ and appeals board rejected the subrogation claim.6 Acadia then sought review in the Commonwealth Court which affirmed the appeals board and held that under Pennsylvania law an insurer cannot subrogate against its insured.7
The insurer took a writ to the Pennsylvania Supreme Court on the legal issue whether an insurer which mistakenly paid under its policy of insurance is subrogated to the rights of the injured employee to recover sums mistakenly paid under its policy of insurance.8 The Court explained the origin of the equitable remedy of subrogation and the jurisprudence supporting the general rule that an insurer may not subrogate against its insured.9 However, courts have recognized the “’no-coverage exception’” to the rule.10
Acadia, which insured for Jones Act risks, paid voluntarily until the employee’s status could be determined as a matter of law.11 The “no-coverage” exception applies to this case. Thus, the decision of the lower court was reversed.12
Was the Court correct? Barring negligence of the insurer, such as failure to exercise due diligence to determine the status of the employee, the insurer’s claim is not one of subrogation. Rather, it is a claim for restitution, payment of a thing not due. Articles 2301 and 2302 of the Louisiana Civil Code cover this situation. Under common law, the principle of unjust enrichment applies. Though the Pennsylvania Supreme Court reached the correct result, its legal basis is flawed.
1 Arlet asserted that he was injured on the U.S. BRIG NIAGRA. 237 A.3d 615, 617; 2020 Pa. Commw. LEXIS 612 **; 2019 AMC 3000; 2020 WL 4342288 (Pa. Commonwealth Court, 2020).
2 270 A.3d 434, 436-437 (Pa. 2022).
3 270 A.3d at 237.
4 Id. at 238.
5 Id. The ALJ credited the amount Acadia paid and held the employer responsible for the difference amounting to $5,046.71 as the employer had allowed its compensation policy to lapse. (270 A.3d at 237).
6 Id. at 238.
7 Id. at 239.
8 270 A.3d at 442.
9 Id. at 442-443.
10 Id.
11 Id. at 444.
12 Id.
