In re: GEORGE W. COLE v. ROBERT P. SHEILS, Jr., Trustee On Appeal from the United States District Court for…

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 08-1412
_____________
In re: GEORGE W. COLE,
Debtor
CITY OF WILKES-BARRE,
Appellant
v.
ROBERT P. SHEILS, Jr., Trustee
On Appeal from the United States District Court
for the Middle District of Pennsylvania
District Court No. 07-cv-1238
District Judge: The Honorable James M. Munley
Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
April 14, 2009
Before: MCKEE, SMITH, Circuit Judges

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* The Honorable Richard G. Stearns, District Judge for
the United States District Court of Massachusetts, sitting by
designation.
and STEARNS, District Judge*
(Filed: April 23, 2009)
Thomas J. MacNeely
Rosenn, Jenkins & Greenwald
15 South Franklin Street
Wilkes-Barre, PA 18711
Counsel for Appellant
Paul M. Perlstein
P.O. Box 834
Doylestown, PA 18901
Robert P. Sheils, Jr.
Jill M. Spott
Sheils Law Associates
108 North Abington Road
Clarks Summit, PA 18411
Counsel for Appellee
Alexandra Bak-Boychuk
John P. McLaughlin
Ballard, Spahr, Andrews & Ingersoll
1735 Market Street
51st Floor
Philadelphia, PA 19103
Counsel for Amicus Appellant

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1 75 Pa. Cons. Stat. Ann. § 1720.
3
OPINION
SMITH, Circuit Judge.
Under the Pennsylvania Heart & Lung Act (HLA), the
City of Wilkes-Barre (City) was obligated to pay police officer
George Cole wages and medical expenses during the period that
Cole was unable to work after being severely injured in the line
of duty. Cole subsequently brought a personal injury action
against the third parties responsible for his injuries. The City
then sought to recover its HLA payments by asserting a right of
subrogation against the settlement Cole won in his personal
injury action. Presently, the City appeals from a determination
by the United States District Court for the Middle District of
Pennsylvania that Section 1720 of the Motor Vehicle Financial
Responsibility Law (MVFRL)1 bars the City from asserting a
right of subrogation against Cole’s settlement proceeds. We will
vacate the District Court’s judgment and remand the case to the
District Court for further consideration consistent with this
opinion.
I.

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4
Cole was severely injured in 1996 when a Luzerne
County vehicle struck his police cruiser. He was unable to return
to work for nine years. During those nine years, the City paid
Cole HLA benefits totaling $425,945.69. Meanwhile, Cole also
sued Luzerne County for the injuries he had suffered. While
Cole’s personal injury action was pending, he filed a voluntary
petition for Chapter 7 bankruptcy. Robert Sheils, Jr., the
appellee, was appointed trustee for Cole’s bankruptcy estate. In
2005, the United States Bankruptcy Court for the Middle
District of Pennsylvania approved a settlement of Cole’s
personal injury action according to which the trustee received
$495,000.
In 2004, however, the City asserted a common-law right
of subrogation to recover its HLA payments from Cole’s
personal injury settlement. The Bankruptcy Court rejected the
City’s claim. That Court concluded that Cole was immune from
subrogation pursuant to 77 Pa. Stat. Ann. § 501 and granted the
trustee’s motion for summary judgment.
The City appealed the Bankruptcy Court’s decision to the
District Court under 28 U.S.C. § 158. The District Court noted
that it did not necessarily disagree with the Bankruptcy Court’s
reasoning but denied the City’s appeal on a separate ground: the
District Court determined that the City’s right of subrogation
was barred by Section 1720 of the MVFRL. The City now
appeals from that determination.

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2 Act of June 28, 1935, P.L. 477, as amended, 53 Pa. Stat.
Ann. §§ 637, 638. Section 637 of the HLA states:
(a) Any member of the State Police force . . . who
5
II.
We have jurisdiction pursuant to 28 U.S.C. § 158(d). We
review the District Court’s legal conclusions de novo and its
findings of fact for clear error. Citicorp Venture Capital, Ltd. v.
Committee of Creditors Holding Unsecured Claims, 323 F.3d
228, 232 (3d Cir. 2003). When applying substantive
Pennsylvania law, we must defer to decisions of the
Pennsylvania Supreme Court. Where the Pennsylvania Supreme
Court has not directly addressed an issue, we must predict how
that Court would rule. See Travelers Indem. Co. of Ill. v.
DiBartolo, 131 F.3d 343, 348 (3d Cir. 1997).
III.
A.
Before addressing the District Court’s determination that
§ 1720 of the MVFRL bars the City from asserting a right of
subrogation to recover HLA payments, we briefly review the
relevant law. The HLA provides lost wages and medical benefits
to certain public employees, such as police officers and
firefighters, who face significant risks in the ordinary course of
their professions.2 Cunningham v. Pa. State Police, 507 A.2d 40,

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is injured in the performance of his duties . . . and
by reason thereof is temporarily incapacitated
from performing his duties shall be paid by the
Commonwealth of Pennsylvania if a member of
the State Police force, by which he is employed,
his full rate of salary . . . until the disability
arising therefrom has ceased. All medical and
hospital bills, incurred in connection with any
such injury, shall be paid by the Commonwealth
of Pennsylvania . . . . During the time salary for
temporary incapacity shall be paid by the
Commonwealth of Pennsylvania . . . any
workmen’s compensation received or collected by
any such employee for such period shall be turned
over to the Commonwealth of Pennsylvania . . .
and paid into the treasury thereof, and if such
payment shall not be so made by the employee the
amount so due the Commonwealth of
Pennsylvania . . . shall be deducted from any
salary then or thereafter becoming due and owing
. . . .
6
43 (Pa. 1986) (“The [HLA] was created to ensure that, if these
employees were injured or otherwise disabled in the course of
carrying out their hazardous duties, they would be guaranteed
continued full income until their return to duty.”). HLA benefits
are thus similar to workers’ compensation wage and medical

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3 Act of June 2, 1915, P.L. 736, as amended, 77 Pa. Stat.
Ann. §§ 1–1031.
4 75 Pa. Cons. Stat. Ann. §§ 1720, 1722.
7
benefits under the Workers’ Compensation Act (WCA),3 except
that the HLA guarantees qualifying employees their full income,
instead of a fraction of their income, until they return to duty.
Also, whereas the WCA provides employers with a statutory
right of subrogation to recover WCA payments from an
employee’s tort recovery, 77 Pa. Stat. Ann. § 671, the HLA does
not. Fulmer v. Commonwealth of Pa., 647 A.2d 616, 619 (Pa.
Commw. Ct. 1994). Nevertheless, the Pennsylvania Supreme
Court has recognized an equitable right of subrogation by which
a state entity may recover wages and medical benefits paid to a
police officer injured in the line of duty. See Topelski v.
Universal South Side Autos, Inc., 180 A.2d 414 (1962); see also
Phila. v. Phila. Rapid Transit Co., 10 A.2d 434 (1940).
In 1984, however, the Pennsylvania legislature enacted
the MVFRL. Sections 1720 and 1722 of the MVFRL apply to
actions “arising out of the maintenance or use of a motor
vehicle.”4 Section 1720 initially barred an employer’s right of
subrogation to recover workers’ compensation payments, and
Section 1722 barred an injured employee’s right to seek
workers’ compensation payments in an action against the party
that caused the injuries. Specifically, Section 1720 provided:
In actions arising out of the maintenance or use of

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8
a motor vehicle, there shall be no right of
subrogation or reimbursement from a claimant’s
tort recovery with respect to workers’
compensation benefits, benefits available under
section 1711 (relating to required benefits), 1712
(relating to availability of benefits) or 1715
(relating to availability of adequate limits) or
benefits paid or payable by a program, group
contract or other arrangement whether primary or
excess under section 1719 (relating to
coordination of benefits).
75 Pa. Cons. Stat. Ann. § 1720 (subrogation). Section 1722
provided:
In any action for damages against a tortfeasor, or
in any uninsured or underinsured motorist
proceeding, arising out of the maintenance or use
of a motor vehicle, a person who is eligible to
receive benefits under the coverages set forth in
this subchapter, or workers’ compensation, or any
program, group contract or other arrangement for
payment of benefits as defined in section 1719
(relating to coordination of benefits) shall be
precluded from recovering the amount of benefits
paid or payable under this subchapter, or workers’
compensation, or any program, group contract or
other arrangement for payment of benefits as
defined in section 1719.
75 Pa. Cons. Stat. Ann. § 1722 (preclusion of recovering

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5 The District Court also cited City of Pittsburgh v.
Workers’ Compensation Appeal Board (Williams), 810 A.2d
760, 762 n.5 (Pa. Commw. Ct. 2002) (holding that the
9
required benefits).
But Sections 1720 and 1722 were repealed in 1993 to the
extent they relate to workers’ compensation payments (the 1993
Repeal). 75 Pa. Cons. Stat. Ann. § 1720 (“75 Pa. Cons. Stat.
Ann. § 1720 is repealed insofar as it relates to workers’
compensation payments or other benefits under the Workers’
Compensation Act, pursuant to 1993, July 2, P.L. 190, No. 44,
§ 25(b)”); 75 Pa. Cons. Stat. Ann. § 1722 (same as to Section
1722). Thus, Section 1722 no longer deprives a plaintiff of the
right to plead in a tort action against the party that caused the
injuries, the amount of benefits paid or payable to him, and
Section 1720 no longer deprives an employer of a right of
subrogation to seek recovery of WCA payments. Sections 1720
and 1722, and their partial repeals in 1993, do not mention HLA
benefits, however. Therefore, Pennsylvania case law must guide
the determination of whether Section 1720 bars an employer’s
right of subrogation to recover HLA payments.
B.
The District Court relied on Fulmer, 647 A.2d 616, to
conclude that Section 1720 barred the City from asserting a right
of subrogation against Cole’s personal injury settlement.5 In

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Pittsburgh Police Department did not illegally terminate an
officer’s HLA benefits and that the Police Department was
entitled to a subrogation interest against the officer’s third-party
settlement), to support its reasoning. But City of Pittsburgh
provides only a conclusory note referring to Fulmer and its
holding does not depend on that note.
10
1987, Fulmer, a state trooper, was seriously injured in an
automobile accident. Two years later, he instituted a personal
injury action against the driver who struck his cruiser. In the
meantime, the State Police had paid Fulmer HLA benefits; they
then sought to assert a right of subrogation against Fulmer’s
personal injury action recovery.
The Commonwealth Court explained that “[b]enefits
received under the [HLA] effectively replace workmen’s
compensation benefits for those employees covered [by the
HLA].” Id. at 619. In view of this identity between WCA and
HLA payments, the Commonwealth Court decided that the
catch-all clause of Section 1720 (“or benefits paid or payable by
a program, group contract or other arrangement”) extended to
HLA payments and that Section 1720 barred the State Police
from asserting a right of subrogation against Fulmer’s personal
injury proceeds. Id. at 620. The Court also expressed concern for
the equities of the case. It observed that allowing a right of
subrogation would prevent Fulmer from being fully
compensated for his injury because Section 1722 barred him
from seeking his wage and medical benefits in a personal injury
action. Id. Consequently, subrogation, in conjunction with the

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11
Section 1722 bar, would have left Fulmer without full
compensation for his injuries—an inequitable result.
Since the 1993 Repeal, however, Section 1722 no longer
bars an employee from seeking to recover amounts
corresponding to WCA benefits in a personal injury action, and
a key rationale to Fulmer’s holding no longer exists. See id. at
618 n.3. (“[The 1993 Repeal] has no impact on [Fulmer’s] case.
. . . [W]e express no opinion on the effect of [the 1993 Repeal]
on the Heart and Lung Act in a case arising after the effective
date of [the 1993 Repeal].”). Nevertheless, Fulmer does provide
useful guidance insofar as it recognized the identity between
workers’ compensation and HLA benefits in the application of
Section 1720. Drawing on Fulmer, the Commonwealth Court
subsequently ruled on exactly the question presented in this
appeal. In Brown v. Rosenberger, 723 A.2d 745, 747 (Pa.
Commw. Ct. 1999), the Court determined that Sections 1720
and 1722 did not bar an employer’s right of subrogation or an
employee’s right to seek the amounts corresponding to HLA
payments in a personal injury action.
In Brown, a state trooper was injured when her police
cruiser was struck by another vehicle. After the accident, the
State Police paid her full salary and medical expenses as
required under the HLA. The State Police recovered 66 and 2/3's
of Brown’s salary from its workers’ compensation insurance
carrier and sought to recover the balance of her salary and
medical costs from the tortfeasor by right of subrogation.

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12
The trial court relied on Fulmer to equate HLA and
workers’ compensation benefits, observing that “the clear effect
of [Fulmer’s] holding was to treat Heart and Lung Act benefits
the same as workers’ compensation benefits for the purposes of
the prohibitions to subrogation and pleading as found in
Sections 1720 and 1722 of the [MVFRL].” Brown v.
Rosenberger, 40 Pa. D. & C.4th 432, 439 (Pa. Com. Pl. 1998).
Recognizing that the 1993 Repeal “reinstated the right of an
employer or benefit provider and plaintiff to seek subrogation
and to plead lost wages and medical benefits in any action
against a third-party tort-feasor in a motor vehicle case,” the trial
court determined that “the pre-[MVFRL] principle of equity and
unjust enrichment must again operate to allow recovery against
a third-party tort-feasor for all losses sustained, and must also
allow a benefit provider to be subrogated to any recovery of
benefits.” Id. The trial court concluded that Section 1720 did not
bar the State Police from asserting a right of subrogation:
[A]s a matter of law, the plaintiff may plead,
prove and recover those amounts paid to her
through the Heart and Lung Act, as well as those
amounts paid by the workers’ compensation
carrier. The Heart and Lung Act provider and the
workers’ compensation carrier shall have the right
of subrogation to any third-party tort-feasor.
Id. at 440. The Commonwealth Court endorsed this reasoning

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13
and conclusion to affirm the trial court’s judgment. Brown, 723
A.2d at 747 (“[W]e find that the issues presented to this Court
have been thoroughly reviewed and addressed in the opinion of
the [trial court]. Accordingly, we affirm on the basis of the trial
court’s opinion . . . .”).
We agree with Brown’s reasoning, which comports,
moreover, with the purpose of subrogation as stated in
Pennsylvania case law:
[T]he rationale for the right of subrogation is
threefold: to prevent double recovery for the same
injury by the claimant, to insure that the employer
is not compelled to make compensation payments
made necessary by the negligence of a third party,
and to prevent a third party from escaping liability
for his negligence . . . . [S]ubrogation is just,
because the party who caused the injury bears the
full burden; the employee is made ‘whole,’ but
does not recover more than what he requires to be
made whole; and the employer, innocent of
negligence, in the end pays nothing.
Hannigan v. Workers’ Comp. Appeal Bd. (O’Brien Ultra Serv.
Station), 860 A.2d 632, 634 (Pa. Commw. Ct. 2004) (internal
quotation marks and citation omitted). As Fulmer recognized,
HLA and WCA wage and medical benefits are similar for the
purposes of subrogation and pleading under Sections 1720 and
1722 of the MVFRL. The HLA and WCA both ensure that the
employees they cover receive lost wages and medical benefits

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14
after suffering an injury that prevents them from working for
some period of time. Where the employee may seek HLA
benefits from a third-party in a tort action, the purpose of
subrogation has as much pertinence for HLA benefits as it does
for WCA benefits. After reviewing Pennsylvania case law, we
conclude that Section 1722 does not bar Cole from pleading
HLA payments in his personal injury action, and Section 1720
does not bar the City from asserting an equitable right of
subrogation against Cole’s tort recovery.
Accordingly, we will vacate the District Court’s
judgment and remand the case to the District Court for further
consideration in accordance with this opinion.

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