Monday, March 11, 2013

WC Credit for Private Disability Insurance Benefits

An Employer may be entitled to a credit against the work comp liability, for payments made to an injured employee through an employer-funded benefit plan.
A 3 part test will determine if the credit is available against the work comp liability.

Frank v. WCAB (Marathon PT Inc), No. 1705 C.D. 2012, an unreported memorandum opinion of the Commonwealth Court of Pennsylvania, authored by Judge Cohn-Jubelirer on March 4, 2013 addressed this issue.

Factual & Procedural History

Employee was the president and owner of a subchapter S corporation, through which he performed professional services as a physical therapist.
2004 Employee had a left knee surgery, a total knee replacement procedure.
March 2008 Injury, Employee had a left knee contusion, sprain & strain. NCP issued.
July 2008 surgery due to breakdown of knee apparatus and progressive degeneration of knee.
September 2008 Employee return to work.
November 2008 Employee stop work and close business due to knee pain and instability.

Employer Termination Petition filed.
Employee Review petition filed.
Review Petition to add reconstructive knee surgery to NCP description of contusion, sprain & strain.

In addition to WC total disability benefits, Employee received $7,050 per month from disability insurance policy, which premiums were paid by Employer Corporation.

WC Insurer was unaware of disability insurance payments until July 2009 hearing regarding Termination and Review petitions.
Employer accountant testify regarding subchapter S corporation taxation of disability insurance premiums.

WCJ found WC Insurer was entitled to a credit for concurrent disability insurance benefits as the premiums were paid by the Employer Corporation.
WCJ granted Employer Termination petition.
WCJ ordered Employee to reimburse WC insurer for the amount of concurrent benefits paid in past... as there were could be no "future credit" as there were no future benefits payable after the termination order.
Employee appealed the Credit/Re-Payment issue.
[ no appeal re termination or denial of review injury description]

Commonwealth Court Decision

AFFIRMED Credit/ Re-Payment order.

Employee argued relief is limited to a subrogation claim by the Disability insurer, payment to the WC insurer is not allowed by Act.
Court says credit is allowed where Employer makes payments in lieu of compensation  for a work injury. See: Kuhn v. WCAB (Leader Nursing Centers Inc.) (Pa. Cmwlth. 1986).

Section 319 subrogation could apply to the Disability insurer, however they did not seek subrogation, so credit is appropriate.
An Employer may be entitled to a credit for employer-funded benefit payments to inured workers where those payments were made in lieu of work comp
where the employer has already paid compensation that is due and a credit will avoid a double recovery.

A credit is not available is the worker is required to deplete exhaustible benefits, to which he would be entitled for a non-work illness, suck as sick leave.

Here the private disability policy premium was paid by the Subchapter S corporation.
All 3 criteria for a credit were met:
1st The employer purchased the insurance policy,
2nd Payments were for a disability arising in the employment,
3rd The payments were not wages for employment.
[See: Humphrey v. WCAB (Supermarket Service) (Pa. Cmwlth. 1986).]

A credit is due as to the WC Insurer for all periods during which claimant received disability policy benefits. As the WC Insurer paid claimant, claimant must re-pay the WC insurer. Claimant has no right to a double recovery. WC insurer remedy was not limited to a supersedeas fund reimbursement request, remedy was re-payment!

Practice Pointers:
1. Question claimant regarding the receipt of any insurance benefits during work related disability, then investigate whether a credit is available. It may not be readily apparent at the outset that a credit is available.
2. Use the LIBC 750, 756 & 760 forms to collect information from injured workers regarding any benefit payments.
3. Do so, even after the initial investigation and/or litigation of a claim.

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