Arlet v. Workers’ Comp. Appeal Bd. (Pa., Dep’t of Labor and Indus., Bureau of Workers’ Comp.)

The Pennsylvania Supreme Court considered as a matter of first impression the limitations of the general equitable prohibition of an insurer seeking subrogation from its insured. Here, an employee in the shipping industry was injured on the job. His employer had an insurance policy for Jones Act protections. The Jones Act is a federal law akin to workers’ compensation for workers exposed to the sea’s perils. And the insurer paid out the claim for the employee based on that Jones Act policy. But the lower courts ruled that the employee was land-based and not entitled to Jones Act coverage. The insurer had paid out on a claim not covered by its policy. And it wanted its money back. It instituted a subrogation action against the insured. But this called into question a long-standing rule that an insurer cannot seek subrogation from its insured. Here, the Supreme Court adopted the “no-coverage exception” from other jurisdictions whereby an insurer may seek subrogation from an insured where the injury or damage the insurer paid to cover turns out not to be covered by the policy. As a result, the insurer was allowed to pursue subrogation from the insured in this matter.

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