Employers may seek reimbursement of Claimant Attorney Fees assessed for an Unreasonable Contest

Employers and Insurers may recover Claimant Attorney Fees assessed for an Unreasonable Contest, when reversing that award on appeal

The Workers’ Compensation Act allows a Worker Compensation Judge (WCJ) to award claimant attorney fees where there is an unreasonable contest of a petition. (See: § 440). The WCJ must make a finding as to the amount and the length of time for which such counsel fee is payable based upon the complexity of the factual and legal issues involved, the skill required, the duration of the proceedings and the  time and effort required and actually expended. (See: § 440(b)). 

In cases where a Workers’ Compensation Judge  awards  claimant attorney fees for an unreasonable contest and the Employer/ Insurer is successful on appeal to reverse that award - there was no clear legal precedent to require the claimant attorney to refund the unreasonable contest attorney fees, to which they were no longer entitled.

A recent decision of the Commonwealth Court of Pennsylvania has determined that the Employer and Insurer may request a WCJ order directing the claimant counsel to refund unreasonable contest fees, where Employer is successful on appeal to reverse that award. See: County of Allegheny v. WCAB (Parker) No. 82 C.D. 2016 and No. 112 C.D. 2016 filed on December 20, 2016.

Factual and Procedural History

In the underlying litigation, in 2007 the Employer filed a petition for suspension of total disability benefits payable for a 1993 shoulder injury. The Employer argued that claimant was offered and refused a job within his work restrictions. Employer also argued that claimant had voluntarily withdrawn from the work force. 

In 2008, the Workers’ Compensation Judge granted employer suspension petition, finding that claimant, who was 80 years old at the time, had failed to follow through in good faith on a job referral within his physical limitations from his shoulder injury. He had completely withdrawn from the work force as a result of his age and medical conditions unrelated to his work related shoulder injury.

Claimant appealed the WCJ 2008 order of suspension. On appeal,  the Workers’ Compensation Appeal Board (WCAB) 2009 decision reversed the suspension order on the basis that Employer was barred by the legal doctrine of collateral estoppel from requesting a 2007 suspension as an earlier 2004 WCJ decision had denied a prior suspension petition.  To add insult to injury, the WCAB held that claimant was entitled to unreasonable contest attorney fees and remanded the case for the WCJ to determine the amount of those fees. [Employer petitioned for review to the Commonwealth Court, but the petition was deemed premature due to the remand nature of the WCAB order].

On remand, as directed, the WCJ 2009 decision awarded claimant attorney fees for the litigation of the 2007 suspension petition. On Claimant and Employer cross-appeals back to the WCAB, the 2011 Appeal Board decision modified that WCJ order and directed the payment of additional counsel fees for the work performed in the claimant’s appeal from the 2008 WCJ suspension decision, in addition to the counsel fees for litigation of the 2007 suspension petition.

Employer filed a Petition for Review of the WCAB 2011 decision to the Commonwealth Court. Employer argued that the WCAB reversal of the 2008 WCJ suspension order was erroneous as a matter of law. The direction for assessment of unreasonable contest attorney fees for litigation of the 2007 suspension petition was erroneous as a matter of law. The assessment of additional counsel fees regarding claimant’s appeal from the WCJ 2008 suspension order was erroneous as a matter of law.

In the Employer appeal to the Commonwealth Court from the WCAB 2011 order, the Employer requested a supersedeas of compensation payments to claimant, including payment of attorney fees. The applications for supersedeas were denied by the Appeal Board and by the Commonwealth Court.  On this basis, employer issued payments, including claimant unreasonable contest attorney fees of $14,750.00.

In 2012 the Commonwealth Court reversed the WCAB 2009 and 2011 decisions. The Court ruled that the Employer’s 2007 suspension petition was not barred by the legal doctrine of collateral estoppel as the 2007 factual and legal issues were not identical to the issues presented in the 2004 WCJ decision. On this basis, the WCAB erred as a matter of law in reversing the suspension of claimant’s benefits directed by the WCJ 2008 decision. Claimant filed an Application for Allowance of Appeal to the Supreme Court of Pennsylvania, which was denied.

After the denial of claimant’s petition for allowance of appeal, Employer filed an application for supersedeas fund reimbursement with the Bureau. Employer requested: reimbursement of the compensation paid to claimant; attorney fees paid under the contingent fee agreement; the $14,750.00 paid in unreasonable contest attorney fees. The Bureau approved a limited reimbursement for the compensation paid to claimant and the contingent attorney fee agreement. The Bureau properly denied the employers reimbursement requests for the $14,750.00 in unreasonable contest fees, as such fees were not reimbursable under §443 of the Act.

As reimbursement was not available from the supersedeas fund, Employer filed the petition which is the subject of this appeal, seeking an order from the WCJ to direct claimant counsel to refund the $14,750 unreasonable contest attorney fees. 

The WCJ denied Employer’s petition, as there was no clear legal precedent for such an order requiring the return of unreasonable contest attorney fees.

The WCJ also denied claimant’s request for the imposition that additional unreasonable contest fees for the litigation of the employer petition, as this petition was filed in good faith, in regards to an unsettled legal issue.

The WCAB affirmed the WCJ decision.

Employer appealed to the Commonwealth Court.

The Commonwealth Court reversed.

The decisions of the WCJ and WCAB erroneously concluded that Employer could not recover the award of unreasonable contest attorney fees - which were required to be paid by the underlying WCJ & WCAB orders – where Employer was successful to reverse that decision on appeal.

Commonwealth Court reasoning

The Commonwealth Court relied upon its prior decision in Barrett v. WCAB (Sunoco Inc.)(Pa. Cmwlth. 2010) which held that an employer and insurer may request the reimbursement of litigation costs which were awarded and paid, where that award is later reversed on appeal. In Barrett the court concluded that allowing claimant counsel to retain the legal costs to which he is no longer entitled, would result in an unjust enrichment. As the employer cannot recover the legal cost awards from the supersedeas fund, the employer would be deprived of any meaningful appeal form an erroneous cost award.

The reimbursement of legal costs would not impose a hardship on the claimant, as the recovery was sought directly from claimant’s counsel not from the claimant. In review of its prior decision in Barrett, the court referenced two unreported decisions which reached similar results. See: Daniels v. WCAB (Giancarli Constr. Co.) and Lewis-Briggs v. WCAB (DPW).

Although, the prior decision in Barrett involved litigation costs, the court believed the reasoning in Barrett is equally applicable to the unreasonable contest attorney fee issue. Where the employer has been erroneously ordered to pay litigation costs, the WCJ can order claimant’s counsel to refund that overpayment. The decision in Barrett compels the conclusion that the employer is entitled to an order requiring claimant counsel to refund the $14,750.00 in fees that were erroneously awarded.

Each factor in Barrett was present in the instant case. The Commonwealth Court reasoned that the award of litigation costs and the award of unreasonable contest attorney fees are both pursuant to §440 of the Act. The § 440 language includes unreasonable contest attorney fees as one of the types of costs incurred in litigation.

Both costs are payments in addition to the award of compensation to the claimant. To order a refund involves no payment of compensation benefits and denying a refund would result in unjust enrichment.

The court reasoned that the lack of any other remedy to the employer is the same for the unreasonable contest attorney fees as it is for other litigation costs. The supersedeas fund reimbursement is limited to “payments of compensation”. Only indemnity wage loss benefits and medical expense reimbursements can be recovered by the employer from the supersedeas fund following a successful appeal. There is no recourse from the supersedeas fund for unreasonable contest attorney fees or other litigation costs.

The court rejected the claimant and amicus curiae arguments that unreasonable contest attorney fees should be treated differently from other litigation costs. The court noted claimant compensation payments were over $106,000 for a period when his benefits should have been suspended. Claimant counsel received a 20% contingent attorney fee payment and claimant received over $84,000.00. The employer’s petition for reimbursement of the $14,750 of unreasonable contest fees does not request or require claimant or claimant counsel to return any of the compensation benefits paid following the supersedeas denial.

The court rejected arguments that allowing retention of improperly awarded unreasonable contest attorney fees was necessary or appropriate for the protection of claimant’s rights to obtain compensation, to which they are entitled. “An order to return fees erroneously awarded for unsuccessful litigation does not reduce (claimant) counsel’s ability to recover unreasonable contest attorney fees for successful claimants who are entitled fees nor does it reduce the amount of the fees received where unreasonable contest attorney fees are validly awarded.” (Slip opinion at p.10).

The court distinguished claimant argument which referenced that  claimant’s counsel are entitled to retain the 20% contingent attorney fees despite the fact the claimants may  ultimately be unsuccessful in litigation. These fees have a difference origin. They are paid out of claimant’s compensation. They are subject to reimbursement by the supersedeas fund, where unreasonable contest attorney fees are not.

Employer did not waive its right to seek a refund of unreasonable contest attorney fees in the 2011 appeal to the Court from the WCAB decision. Employer was not required to obtain an order from the Commonwealth Court before filing a petition to the WCJ for a refund of unreasonable contest attorney fees. “Until this Court reversed the Board’s 2009 decision on September 18, 2012, Employer had no basis for filing a petition for refund”. (Slip opinion p. 12).

President Judge Mary Hannah Leavitt joined in this opinion.

Judge Cosgrove wrote a dissenting opinion. The decision in Barrett – to refund deposition costs paid to claimant counsel – does not provide sufficient support for the reasoning to allow refund of unreasonable contest attorney fees.  

PRACTICE POINTERS:

1. Review ALL litigation files where an adverse decision is REVERSED on appeal.

•           If supersedeas was denied, prepare an application for reimbursement to the Bureau.       
•      If litigation costs were paid to claimant counsel – request a refund.     
•           If unreasonable contest attorney fees were paid – request a refund.

2. If claimant counsel will not voluntarily issue a refund – file a Petition to Review 

    Compensation with the Bureau.

QUERY: Does this new decision change one’s assessment of the necessity to file an appeal of an                 unreasonable contest finding?

In the past, one may have assessed the case and decided to forgo an appeal of the underlying claim issues - 

However, it may now be cost-effective to file an appeal of the unreasonable contest determination – as a refund is available.

WCJ may reject unrebutted IRE medical expert opinion testimony

The Impairment Rating Evaluation (IRE) remedy allows the Employer and Insurer to attempt to limit liability for future wage loss benefits based upon a medical expert examination and opinion of impairment.

There are specific requirements to pursue the IRE remedy. The injured worker must receive 104 weeks of total disability payments. The Employer must file a request with the Bureau. The Bureau  assigns the request to a designated prequalified medical expert. An examination is conducted if the injured worker has reached maximum medical improvement.  

If the impairment rating is less than 50% based upon the AMA Guides to the Evaluation of Permanent Impairment (and the IRE request was made within 60days of the 104th week) the disability status of the worker "automatically" converts from total disability to partial disability of a duration of 500 weeks.

 If the IRE request is made more than 60 days after the 104th week, a petition to modify status must be filed and the traditional administrative adjudicatory process follows. 

In many cases, the only medical evidence introduced is the report of the IRE physician. In the absence of contrary medical evidence, the IRE petition is often granted.

What about the cases where the IRE physician opinions are unconvincing?

What are the employee legal arguments and remedies?

IA Construction Corporation v. WCAB (Rhodes) a decision of the Supreme Court of Pennsylvania authored by Chief Justice Saylor on May 25, 2016 addressed the validity of a workers compensation judge decision  to reject the opinion testimony of an IRE physician in the absence of contrary medical evidence.

Factual and Procedural Background 

Rhodes was injured in 2005 in a work-related motor vehicle accident. A WCJ granted a claim in 2007 for disability from  a traumatic brain injury with neck and back injuries. 

Several years later, Employer filed an IRE request and the Bureau assigned M. Bud Lateef MD a board certified specialist in Physical Medicine and Rehabilitation to conduct an evaluation. He assigned a 34% impairment based upon physical evaluation and application of the AMA Guides.  (6th Edition AMA Guides). 

Employer filed a petition to modify the employee disability status. Dr. Lateef testified he examined employee and confirmed 3 primary diagnoses: traumatic brain injury; cervical disc herniation; gait dysfunction from a spinal condition. Dr. Lateef assigned a discrete impairment rating to each diagnosis. Employee had reached maximum medical improvement. 

In the litigation of the Employer petition Employee did not testify. No medical testimony was presented on behalf of Employee. 

The Workers Compensation Judge denied the Employer modification petition and rejected the impairment rating of Dr. Lateef. The WCJ expressed a concern he "lumped " an array of discrete injuries, which were previously recognized in the WCJ claim petition decision,  into 3 categories. 

She believed his  cognitive injury assessment  was limited. Dr. Lateef was not a specialist in neurology. For these reasons the WCJ was unpersuaded by his opinion of the degree of impairment present. 

 A divided  WCAB affirmed the WCJ denial of the Employer petition, on the basis that the WCJ determines the credibility and weight assigned to the medical evidence. 

The Commonwealth Court reversed the WCJ denial of the IRE modification request.
The Court reasoned that Dr. Lateef met the statutory requirements for qualifications of physicians to conduct an IRE evaluation. He followed the methodology to conduct an impairment rating evaluation. The Court believed the WCJ lacked the authority to reject the medical expert opinion testimony on the basis that cognitive impairment was outside his area of medical specialty. This type of ruling would impose a standard in excess of those set forth in the statute.

Also the Court noted the WCJ findings must be based upon substantial evidence. For the WCJ to find the IRE is insufficient, there must be evidence in support of that finding. Here Employee produced no evidence. The WCJ did not reference any section of the AMA Guides in support of the conclusion that Dr. Lateef inappropriately grouped the injuries or erroneously calculated the impairment rating.

Supreme Court Decision reverses and reinstates WCJ rejection of medical evidence and denial of Employer Modification petition.
The Supreme Court reviews a number of critical points in the impairment rating evaluation procedure and remedy. As the Protz decision is pending the Court's consideration, regarding the constitutionality of the application of "subsequent" Editions of the AMA Guides (after the 4th Edition which was in effect at the time of the 1996 amendment), perhaps this section of the Workers' Compensation has gained the attention of the Court.

Here the Court considers the term "credibility" in its broadest sense, as a measure of the persuasiveness of the testimony. (as the medical witness testified via deposition, the WCJ did not assess his demeanor). The Court cites the often-recited principle that the WCJ is the fact finder and exclusive arbiter of credibility and evidentiary weight.

Pennsylvania does not apply an uncontradicted medical evidence rule in workers compensation cases. The decision below did not explain why there should be a departure from this long standing rule in our "traditional administrative process".

The substantial evidence rule does not apply to situations where the prevailing party did not present any evidence. Rather the focus is upon the weight afforded the evidence presented by the party with the burden of proof.

The Court agreed with the Employer's arguments that the WCJ explanations for her rejection of Dr. Lateef's opinions were unconvincing. There was no explanation how Dr. Lateef "lumping" of the medical conditions were inconsistent with the AMA Guides. However, the Court noted specific points where the medical evidence was lacking.

A WCJ may validly accord less weight to the underdeveloped out-of-specialty medical opinion testimony of the degree of impairment associated with a work-related traumatic brain injury, in the traditional administrative process.

PRACTICE POINTERS

1.   In IRE litigation, Employers and Insurers must consider the available avenues of attack of the IRE medical expert. It may be necessary to supplement the IRE report with an IME medical expert to buttress the weak points regarding diagnosis of conditions, assessment of MMI status, or application of the AMA Guides.

2. It is recommended to consider medical expert deposition testimony to explain, amplify and support the conclusions in the IRE report.

3.  As the WCJ will assess the "credibility" of the IRE medical evidence, we should consider supplementation of the evidentiary record with medical records of treatment, diagnostic test results and consultations which support the logic and reasoning of the IRE medical expert.

Workers' Compensation Insurer Reimbursement of Trauma Care - When 100% does not equal 100%

Workers' Compensation Insurer Reimbursement of Trauma Care.

The Pennsylvania Workers' Compensation Act requires the payment of reasonable and necessary medical expenses which are causally related to a compensable work injury.  In 1993, the Act was amended to allow reimbursement of medical expenses within a "fee cap" schedule based upon the Medicare reimbursement mechanism.  The Act was amended to provide for a utilization review procedure, whereby the Employer/Insurer could challenge the "reasonableness and necessity" of the medical treatment.  The 1993 amendments also allowed review of the timeliness or amount of the medical expense reimbursement via a medical fee review procedure. 

Medical fee disputes may arise in the context of treatment provided at an acute care facility to an injured worker with an immediate life-threatening or urgent injury.  These medical expenses are reimbursed at 100% of the usual and customary charge for these services, as they are not subject to reduction in amount by the medical fee cap provisions. 

Geisinger Health System and Geisinger Clinic v. Bureau of Workers' Compensation Fee Review Hearing Office (SWIF) is a reported decision of a panel of the Commonwealth Court authored by Senior Judge Pellegrini on April 21, 2016.  This decision examined the rate of reimbursement for treatment of a work-related injury at a trauma center for an acute, life-threatening or urgent injury. 

 Factual and Procedural Background

The facts in Geisinger were not disputed.  The employee was injured at work when a wooden board broke and lodged near his eye.  There is no dispute that the medical treatment was at a level one trauma center for life-threatening or urgent injuries.  The Provider submitted HCFA-1500 claim forms for payment of medical treatment by the Insurer.  Provider sought payment for services rendered in a level one trauma center at its usual and customary charges, i.e. its actual charges. 

The Insurer responded with an explanation of benefits letter (EOB) which recognized that treatment was provided at a level one trauma center for an immediately life-threatening or urgent injury; however, the EOB further stated that payment would be made: "as such usual, customary and reasonable rates for this geographic area have been utilized as the reimbursement methodology". 

Provider filed applications for Fee Review pursuant to Section 306(f.1) of the Act.  Provider sought reimbursement based upon its actual charges.  The Insurer did not reduce these charges to the medical fee cap schedule, rather insurer provided reimbursement based upon a usual and customary database at the 85^th percentile.  

Medical Fee Review Section Administrative Review

After Provider filed the Application for Fee Review with the Bureau of Workers' Compensation, the Medical Fee Review Section circulated an administrative decision which concluded that the Insurer owed the provider an additional amount of reimbursement.  The Medical Fee Review section found the treatment met the criteria for reimbursement at an acute care or trauma facility.  Reimbursement was to be made at 100% of the actual charges of a provider. 

Insurer filed a request for hearing for review of the Medical Fee Review Section administrative decision.  At this hearing, Insurer submitted the testimony of the re-pricing manager of its third-party vendor.  The re-pricing manager testified regarding her familiarity with the Workers' Compensation Act and the Medical Cost Containment regulations.  She explained that in review of trauma cases, rather than applying the workers' compensation claim Medical Fee Cap Schedule, she applies the usual and customary information at the 85^th percentile.  This information is obtained from the FAIR Health database.  

The re-pricing manager testified that she utilized this definition of "usual and customary charge" based upon the 2011 Statement of Purpose of Adoption of Usual and Customary Charge Reference posted by the Pennsylvania Department of Labor & Industry, such that effective November 1, 2010, fee review applications would be resolved by the Department utilizing the 85^th percentile of the MDR (Market Data Retrieval) database, published by Ingenix to determine the usual and customary charges defined by 34 Pa. § Section 127.3.

 Hearing Officer Determination

The Hearing Officer found the testimony of the re-pricing manager to be credible, in its entirety.  The Hearing Officer reversed the medical fee review determination.  The Hearing Officer determined Insurer properly reimbursed Provider at 100% of the usual and customary charge for services in that geographic region for the services rendered to the injured worker. 

The Hearing Officer determination was based upon the conclusion that the insurer's payment to the provider should be based upon "100% of the usual and customary charge" as defined in 34 Pa. § Section 127.3 rather than 100% of the provider's actual charge.  The definition of "usual and customary charge" at 34 Pa. Code § 127.3 was "the charge most often made by providers of similar training, experience and licensure for a specific treatment, accommodation, product or service in the geographic area or the treatment, accommodation, product or services provided." 

The Hearing Officer further explained this determination by noting that Section 306(f.1)(10) of the Act clearly states that services rendered in the trauma center shall be paid at the usual and customary rate, not at the provider's usual and customary charge or at the provider's actual charge.  Regulations Section 127.128(a) and (b) reference the term "the usual and customary rate".  Admittedly, Regulations Section 127.128(c) references "the provider's usual and customary charge".  

The Hearing Officer reasoned that the language "the usual and customary charge" appears in three sections.  There is a separate definition for "actual charge".  This led the Hearing Officer to conclude that the purpose of the regulations was to ensure proper reimbursement at 100% of the usual and customary charge for the specific treatment rendered in the geographic area where that specific treatment was provided.  It is also the purpose of the regulation so as to prevent providers from charging excessive fees for treatment and services rendered to injured workers.

Commonwealth Court Appeal of Provider

Provider appealed the determination of the Hearing Officer to the Commonwealth Court.  The Court reviewed the decision and reasoning of the hearing officer and affirmed this decision. 

The Court rejected Provider's argument that it is entitled to be reimbursed for immediately life threatening or urgent injuries at a level I trauma center at 100% of their usual and customary charge, i.e. their actual charge. 

The Court reasoned that the trauma center exception in Section 306(f.1)(10) of the Act states that acute care provided in a trauma or burn center to injured workers with life-threatening or urgent injuries is reimbursed at "the usual and customary charge".  The term "usual and customary charge" appears in several portions of the statute and regulations.  The Court specifically referenced 306(f.1)(3)(i) and 34 Pa. Code § 102.

The term "usual and customary charge" is defined at Section 109 of the Act "usual and customary charge means the charge most often made by providers or of similar training, experience and licensure for a specific treatment, accommodation, product or service in the geographic area where the treatment, accommodation, product or service is provided.  (76 P.S. § 29).  The Court noted Section 127.3 of the Medical Cost Containment Regulations reflects the same terminology. 

In review of the statutory construction and interpretation of the language, the Court noted that one must take into consideration the context of the language.  The Court noted that one provision, Regulation 127.128(c) utilized the definition of usual and customary charge which was synonymous with the provider's actual charge.  However, the Court noted that when a regulation is at variance with the language of the statute, the regulation is ineffective to change the statute's meaning.  Under the Rules of Statutory Construction, a defined term is to be applied unless a different meaning can be ascribed to the word or phrase because of its context.

In this case, the Court found that there was nothing in the language of Section 306(f.1)(10) of the Act that indicates that the "usual and customary charge" language is different from the definition at Section 109 of the Act, where that term is defined as "the charge most often made by providers of similar training, experience …". 

The Court affirmed the Hearing Officer determination that "the usual and customary charge" is not the equivalent of "the actual charge" of a provider. 

This decision is significant in that it clarifies that the treatment at a trauma center for acute or life-threatening care is not reimbursed at 100% of the actual charge submitted by the provider.  The correct method of reimbursement is to utilize the 85^th percentile of the usual and customary database.  As a practical matter, this clarification of the required reimbursement rates for acute care may result in significant savings,  where significant treatment has been provided. 

PRACTICE POINTERS:

1. All Workers' Compensation Insurers must utilize an experienced individual (or vendor) to perform the medical expense review and re-pricing in all cases, including acute care provided at the trauma center for life-threatening or urgent injury.

2. It is essential that a timely review is performed (within 30 days of the medical statement) and any request for a review by the Medical Fee Review Section is properly filed.

3. Properly prepare the Explanation of Benefits (EOB) letter to the Provider consistent with Regulation 127.209.  When stating the reasons for changing the Provider's codes or reimbursement, provide a detailed written explanation.

4. Confirm that the Provider has properly and timely filed an Application for Fee Review.  The application must be filed no more than 30 days following notification of a disputed treatment or 90 days following the original billing date of the treatment, which is the subject of the fee dispute, whichever is later.

5. A Provider or Insurer has the right to contest an adverse administrative decision from the Medical Fee Review Section.  The contest of the administrative decision and request for hearing must be filed within 30 days of the date of the decision in the fee review.

6. Appeal of the Hearing Officer Medical Fee Review Determination is made to the Commonwealth Court.  An appeal must be filed within 30 days of the mailing of the Hearing Officer determination.   

Assessing Liability for "Separate" Disability- beyond the "Loss of Use" Injury

Assessing Disability beyond the Loss of Use Injury.

A work injury which results in a permanent bodily loss of use for all practical intents and purposes is compensated pursuant to the schedule of benefit durations enumerated at Section 306(c).

If the work injury includes disability beyond the loss of use, the injured employee is entitled to total disability benefits of an indeterminate duration, pursuant to Section 306 (a) ... to be followed by the payment of specific loss benefits.

The interaction of section 306(a) benefits (for total or partial disability) and 306(c) benefits (loss of use) is sometimes referred to as a "shield versus sword" situation. In certain circumstances the Employer desires the limitation of benefits to a specific loss schedule, rather than liability for total disability of an indeterminate duration. Conversely, the Employee may seek specific loss benefits where they have returned to work.

A recent appellate case demonstrates a number of legal concepts may interact when the scope of the "injury" and the extent of "disability" are contested...

Lindemuth v. WCAB (Strishock Coal Co.) a published panel decision of the Commonwealth Court of Pennsylvania authored by Judge Cohn-Jubelirer on February 24, 2016, analyzed the interrelated legal issues of: (1) an employee's entitlement to review/modify specific loss benefits to total disability benefit status, and (2) the application of the legal doctrine of collateral estoppel - to preclude Employee/Employer arguments regarding the extent/description of the work injury.

The lengthy litigation was reviewed in a comprehensive 28 page decision.
For our discussion, we will focus upon:

•  the Employee arguments to expand the loss of use status to a total disability status;                  
•   the Employer arguments that Employee's remedies were limited by the prior litigation result.

Factual and Procedural Background

Employee was injured in a 2005 battery explosion. Chemicals, battery acid and shrapnel resulted in injuries to the right eye, left eye and face. Total disability benefits were voluntarily commenced via Notice of Compensation Payable. The accepted work injury was described as: "right and left eyes, face ... shrapnel and chemical injuries to eyes and face"

Employee filed a Claim petition in 2006 to assert his additional entitlement to loss of use benefits for the right eye, 80% loss of use of the left eye and facial scarring. (eligibility for facial scarring is also addressed in the Section 306(c) Loss of Use provisions).

Employer filed a Review petition of Employee total disability status, arguing that the work injury was limited to the loss of use of the right eye and that employee did not suffer any disability separate from the specific loss of the right eye, so as to be entitled to a total disability benefit status.

 2009 WCJ decision

Employee proved he sustained a loss of use of the right eye.
Employee failed to prove there was disability separate and apart from the disability associated with that loss of use of the right eye.
Employee failed to prove there was a loss of use of the left eye or any related residual injury or disability.

Employee successfully established that the work injury resulted in headaches, which required medical treatment, but these headaches did not result in any disability separate and apart from the right eye loss of use.

Employee successfully established the development of a post traumatic stress disorder and an adjustment disorder, but these additional injury descriptions did not result in any additional disability separate and apart from the right eye loss of use.

This 2009 WCJ decision was affirmed by the WCAB and Commonwealth Court.

Employee filed the instant petitions in April 2011.
(before the 2012 Commonwealth Court decision).
Claimant petitions were filed for: Review Medical Treatment; Modify Compensation; Review Compensation; Review Pension Benefit Offset; Reinstate Compensation.

Same WCJ presided.
What did employee want?
Reinstatement of Total Disability benefits (unlimited duration) due to increased frequency, duration and intensity of head pain caused by the work injury. ( in other words, headaches as an additional disability separate and apart from disability usually normally associated with the loss of use of the right eye.

2013 WCJ decision

The original October 2005 work injury did not worsen since the time of the 2009 WCJ decision.
There was no proof of a "disability separate and apart " from the 2009 injury description.
The injury was not amended to include a trigeminal nerve injury.

Employee subjective reports of increased frequency and intensity of headaches were not causally related to the work injury. (The prescribed narcotic medication was not related).
There was no worsening of condition so as to create a disability separate and apart, from the loss of use of the right eye.
[Employee evidence was credible only in regards to an unappealed UR petition issue].

WCJ found Employee and his medical expert, Dr. Kratz not credible regarding a worsening of his condition. WCJ noted, Employee treating physician Dr. Wirth was not aware of any worsening of headaches. Dr. Wirth believed there was just a continuation of symptoms.

Drs. Kratz and Wirth medical opinions were based solely on Employee's subjective reports, they never observed increasing, severe headaches. WCJ resolved conflicting medical evidence, as there was a documented difference regarding the dosage of medications [a point pertinent to a "worsening argument].
However, Kratz did not find any difference on physical examination despite assertions of increasing headaches and worsening of Employee condition. WCJ's observations of Employee, from time of prior litigation to present, were said to reflect no indication of any significant change, although Employee did appear subdued.

Employer medical witness Dr. Richard Kasden was found credible. Employee's complaints were not consistent with a trigeminal nerve condition. (Medications for that condition was said to be ineffective).  Neurological examination and MRI scan of the brain did not show any objective evidence to support Employee's headache complaints.

WCAB Appeal by Employee

1. WCJ ruling that he did not have a trigeminal nerve injury AND no longer required headache treatment- was barred by the doctrine of collateral estoppel
2. WCJ findings were not supported by substantial evidence; the credibility determinations were insufficient.

WCAB concluded Employee was barred by the legal doctrine of collateral estoppel from raising the issue in the April 2011 petitions that he sustained a trigeminal nerve injury. The description of injury issue was fully litigated in 2009.
WCJ was not bound by his prior findings in the 2009 decision to now find a trigeminal nerve injury.
WCJ decision was supported by evidence.

[side issues: Employee appeal included an argument that WCJ erred in not awarding attorney fees and all litigation costs. WCAB upheld pro rata costs award, only costs on UR petition. A reasonable contest existed, no attorney fees were due. ]

Commonwealth Court Decision

General rule # 1. Injuries, including those that result in a loss of earnings, that normally flow from the specific loss injuries are considered compensated by the specific loss benefits. Citing: Sharon Steel (Pa. Cmwlth. 2002).

General Rule #2. If the injury suffered is separate and apart from a specific loss that results in a loss of earnings, a claimant may receive Section 306(a) total disability benefits or Section 306(b) partial disability benefits, in addition to the Section 306(c) specific loss benefits. Citing: Faulkner Cadillac (Pa. Cmwlth. 2003).

General Rule #3. A claimant seeking concurrent specific loss and disability benefits must prove that he/she has a disability separate and apart from that which normally follows a specific loss injury. Citing: Richardson (Pa. Cmwlth. 1997).

General Rule #4. If a claimant fails to prove a disability separate and apart from the loss of use, the disability benefits are considered suspended. However, in subsequent litigation, the WCJ has the authority (section 413(a)) to reinstate or modify Employee's benefit status, IF claimant proves his injury has worsened and results in a total disability.

I. Collateral Estoppel argument
Employee argued the WCAB erred in applying the collateral estoppel doctrine to conclude he was barred from arguing that his work injury included a trigeminal nerve injury.

Employee argued the WCAB erred by failing to conclude the WCJ was barred from finding his headaches were not causally related to his work injury, asserting the WCJ made a contrary finding in the 2009 decision.

The Court agreed.
In 2009 the WCJ found the work injury resulted in a trigeminal nerve injury. The 2013 decision was contrary. The doctrine of collateral estoppel would bind the WCJ to the 2009 finding. The Court reviewed the collateral estoppel argument criteria: The legal issue was the same; This issue was actually litigated; This issue was essential and material to the adjudication; The parties had a full and fair opportunity to litigate the issue in question. Citing: Stiles (Pa. Cmwlth. 2004).

However, this error by the WCJ is not relevant to the instant matter.

In the 2009 decision the WCJ found Employee suffered a trigeminal nerve injury as a result of his work injury. Yet in the 2009 decision Employee failed to proof there was disability, separate and apart from the specific loss of the right eye. Injury and disability are not synonymous in this instance.

In 2009 the WCJ found headaches were caused by the work injury but they did not constitute a disability, separate and apart from the specific loss.

In 2013 the issue the WCJ had to decide was whether the claimant suffered from a worsening of headaches, such that this (worsened) condition would now constitute a disability separate and apart from the specific loss. In 2013 the WCJ concluded that claimant failed to prove a change or worsening of his condition since the 2009 decision.

The 2009 litigation addressed the Employee request to include headaches as part of the work-related condition. The headaches were alleged to be caused by the 2005 trigeminal nerve injury.
That 2009 issue did not bind the WCJ on the 2013 issues ... as the 2013 issue was a different!
 In 2013 the WCJ was asked to consider the worsening of Employee's headaches as a separate disability. As these two issues are different, the doctrine of collateral estoppel did not apply, so as to restrict the WCJ in his 2013 conclusions.

II. Substantial Evidence Argument
Employee argued that substantial competent medical evidence did not support the findings authored by the WCJ in the 2013 decision.
The Court disagreed. There was substantial competent medical evidence (Dr. Kasden) to support the 2013 finding that Employee's headaches did not worsen, nor were the headaches disabling in nature. Conflicting evidence was presented in Claimant testimony, his wife's testimony and testimony of Drs. Katz and Wirths. However, it is well-established that the WCJ is free to accept the testimony of any witness, in whole or in part. This resolution of conflicting evidence by the WCJ is not an error of law, where there is supporting substantial evidence.

III. Reasoned Decision Argument
The WCJ must issue a reasoned decision as per the section 422(a) requirement that the decision "allows for adequate appellate review". In a case with conflicting evidence, the WCJ must adequately explain the reasons for rejecting or accepting competent evidence. Here, in the 2013 decision the WCJ provided adequate  reasons for crediting Dr. Kasden and for rejecting Employee evidence.

IV. Attorney Fee Argument
Claimant argued the WCJ should have awarded attorney fees payable by Employer, or at least a portion of the requested attorney fees, as he prevailed in the UR Determination Review petition. The Court rejected this argument. Here was not an unreasonable contest of the UR issue as Employer did not contest the UR issues. All of the remaining contested issues were decided in Employers favor. On this basis, it is correct to deny the imposition of attorney fees payable by Employer.

PRACTICE POINTERS:

1. The compensation of a specific loss may be advantageous to the Employer, in the circumstances where the injuries are considered to normally flow from the specific loss. However, where there is disability, that is separate and apart from the specific loss, a claimant may receive indemnity wage loss benefits for total disability, in addition to the subsequent payment of specific loss benefits.

2. A competent credible medical opinion is required to address the "separate and apart" question. Further, an experienced medical examiner is necessary to address and explain the basis for a conclusion that the disability is limited to a specific loss. A credible explanation to the WCJ will support the necessary findings. Typically the parties can muster competent medical expert opinions, in support of their conflicting legal arguments. In my opinion, the logic and detail of the medical expert explanation may be a decisive factor in the WCJ assessment of credibility and the weight to be assigned to that medical evidence.

3. Application of the legal doctrine of collateral estoppel (and its first cousin, res judicata) may be confusing. In the long-standing workers compensation case, with multiple successive petitions, a careful analysis of the issues presented is required. Another related legal argument, which may arise, is the argument for a waiver of issues which were not preserved through out the litigation. When a workers compensation case presents with multiple petitions and a series of decisions,it is incumbent upon the Defense Counsel to identify the fully litigated issues and to identify the viable, undecided factual and legal issues.

A Best Practice would require the careful assessment of the factual and legal issues presented at the time the subsequent petitions are filed.  This legal assessment is not in the category of the quick "what do you think" telephone call. The above case demonstrates the importance of these legal arguments in obtaining a successful litigation and appellate result.

PA Supreme Court to review Constitutionality of IRE procedure

The Supreme Court of Pennsylvania has granted the Petition for Allowance of Appeal filed on behalf of Mary Ann  Protz AND the Petition for Allowance of Appeal filed on behalf Derry Area School District.

The two orders entered March 22, 2016 define the issues presented for review by the Court.


 "Whether the Commonwealth Court - after properly determining that Section 306(a.2) of the Workers' Compensation Act was unconstitutional - erred in remanding the case to the Workers' Compensation Judge with instructions to apply the Fourth Edition of the American Medical Association's Guides to the Evaluation of Permanent Impairment when neither Section 306(a.2) nor any other section of the Act ever references the Fourth Edition and its usage was not sanctioned by the Pennsylvania Legislature.


  "Does Section 306(a.2) of the Workers' Compensation Act unconstitutionally delegate the State Legislature's lawmaking authority in violation of Article ll, Section 1 of the Pennsylvania Constitution by incorporating the most recent edition of the AMA Guides to the Evaluation of Permanent Impairment?

The Court will issue a schedule for the submission of Petitioner and Respondent Briefs. We anticipate oral argument will be scheduled thereafter. Based upon past experience, the time frame for publication of a final opinion and order may range from a few months, up to several months.

If there is an "even" number of Justices, equally splitting on resolution of these issues, the underlying decision of the Commonwealth Court will be the final opinion in this matter.

Challenges to IRE Determinations and the Waiver Argument

It seems that the year 2016 will be the year of the IRE - Impairment Rating Evaluation.
... and Challenges to the IRE!

Although this employer remedy first appeared in the Pennsylvania workers' compensation world in 1996 via the Act 57 amendments, the constitutionality of the IRE procedure was challenged in 2015, in the Commonwealth Court decision reported at: Protz v WCAB (Derry School District). (Pa. Cmwlth. 2015)

Protz declared that the portion of the IRE procedures which require the application of the "most recent version" of the AMA Guides to Evaluation of Permanent Impairment, was an unconstitutional delegation of legislative authority. 

Importantly, the Court did not throw out the entire remedy (as requested by claimant attorneys) rather the Court remanded the case for application of the 4th Edition of the AMA Guides. The 4th Edition was the AMA Guides edition that was in place when the statute was enacted  in 1996. 

***

Applications for Allowance of Appeal to the Supreme Court of Pennsylvania in Protz were filed in October 2015 and are presently pending before the Court. 

***

What to do in the interim???

In open cases, not yet decided by a WCJ decision,  Employer attorneys recommend the preparation of an addendum IRE report which utilizes the existing evidence, to perform a calculation of impairment in accord with the 4th Edition Guides. 

In some currently litigated cases, Claimant's continue to challenge the IRE results. The basis for these challenges are varied. Below we review a challenge based upon the sufficiency and propriety of the medical exam. Previous challenges to IRE determinations include: MMI status; injury description completeness; necessity of future surgery;  medical evidence competency; correct application of the Guides tables.

In cases already the subject of a final WCJ decision, which are currently pending on appeal
 ... there may be a WAIVER issue. The claimant attorney may have omitted a challenge to the constitutionality of the Guides.

If the Claimant has not raised and preserved the Protz constitutionality argument...
it may have been waived!

***

Attorney Stephen J. Fireoved, of the Chartwell Law Offices, Valley Forge office, recently obtained a successful result before the Commonwealth Court on this waiver issue. He serves as our guest contributor, to provide his "in the trenches" perspective:

In an unreported memorandum decision of a panel of the Commonwealth Court, authored by Judge Brobson, the Court affirmed the Workers' Compensation Appeal Board, which upheld the WCJ Decision and Order granting a modification of claimant status from total disability to partial disability based on an IRE determination. 
See: Timcho v. WCAB ( City of Philadelphia), No. 756 CD 2015, filed January 27, 2016.

Commonwealth Court Ruling 

The Commonwealth Court noted in a footnote that since claimant did not raise the constitutionality argument per Protz, "we need not consider the impact of our decision in Protz on this matter". 

We believe this is significant ruling , as claimant subsequently filed a Reinstatement petition seeking reinstatement from partial disability status to total disability status based on Protz argument .  (The IRE physician used the 6th Edition of the AMA Guides and not the 4th Edition). Employer's position was that the Reinstatement Petition should be dismissed as claimant was obligated to raise that constitutional argument in the underlying litigation, which was the subject of the ___-- Commonwealth Court decision. In failing to initially raise this issue in the litigation of the  underlying IRE determination , claimant waived his constitutional claim and cannot "get a second bite at the apple" by filing a new Petition before the WCJ. 

 Background and Procedural History 

The case involved a work injury of 5/20/08 in the nature of "myocardial infarction". The City filed a Modification Petition based on an IRE performed by Lance Yarus, D.O., an orthopedic surgeon, not a cardiologist. This examining expert found that Claimant had reached MMI and assigned a whole body impairment of 32% using the 6th Edition of the AMA Guides. 

Claimant challenged the IRE and argued that Dr. Yarus failed to order objective tests to support his IRE. The WCJ found that objective tests were performed in 2009 by Dr. DePace and that Dr. Yarus did in fact review and consider those tests in conjunction with his determination that claimant had reached MMI by the date of his IRE. As Dr. Yarus found claimant Impairment Rating to be below fifty (50) percent, the WCJ modified claimant's benefits from TTD to TPD. 

Claimant appealed and the Commissioners of the Workers' Compensation Appeal Board affirmed the WCJ decision, concluding that the AMA Guides do not specifically require testing as part of the IRE process. The requirements for physicians conducting IREs are that: he/she is a Commonwealth-licensed physician;  certified by an American Board of Specialties;  active in clinical practice for at least twenty hours per week. 

Claimant filed a petition for review with the Commonwealth Court raising the sole question of whether the Board erred in affirming the WCJ's decision, as they believed Dr. Yarus did not comply with the Guides. Claimant argued that Section 4.3a of the Guides requires IRE physicians to order tests as part of the IRE process and that such tests must be conducted contemporaneously with an IRE. He contended that Dr. Yarus failed to comply with this provision because (1) he did not order such tests as part of the IRE process; and (2) he admitted that he did not personally assess Claimant's left ventricular function but, rather, relied on the 2009 report. Those tests had been performed relative to Claimant's heart attack and the treatment for his coronary condition. Claimant contended that the opinion of Dr. Yarus was not competent to support his impairment rating and that the Board erred in concluding that Dr. Yarus's opinion was sufficient to support the WCJ's decision to grant the modification petition.

 Commonwealth Court Reasoning

The Commonwealth Court disagreed with Claimant's argument that the timing of the cardiac testing negated the reliability of such testing for the purpose of the IRE rating in this matter. The Court noted that the Guides state that physicians may render an impairment rating generally 3 to 6 months following treatment for a work related condition. The Act does not prohibit the use of tests that were taken within the first 104 weeks following a work injury. 

In this case, Claimant had a catheterization procedure and stents implanted in 2008. Dr. DePace determined in 2009 that claimant's left ventricular function was intact. The evaluation of Dr. DePace occurred more than 3 to 6 months after Claimant's 2008 injury and treatment for his myocardial infarction. This testing was appropriate 3 to 6 months after treatment occurred. The Guides place no other limitations on the performance of tests used to determine am impairment rating. Therefore Dr. Yarus's reliance upon the report of Dr. DePace and the testing performed in 2009 complied with Section 4.3a of the Guides. Finally, Dr. Yarus satisfied the statutory guides to be qualified as an IRE. As such, the Court affirmed the Board.

PRACTICE POINTERS:

1. Stephen Fireoved pursued an aggressive strategy. He responded to claimant arguments by reliance upon the statutory language. Although claimant may question the propriety of a non-cardiologist performing an IRE, the work comp statute requirements do not necessitate any particular specialty. We recommend requiring claimant attorney to identify and enumerate the specific challenges to the IRE by claimant at the time of the first hearing.
Know exactly what they are arguing!

2. For all cases pending before the WCAB, determine if the waiver argument applies to claimant
appeal. File a written motion to strike any argument which is not preserved and/or file an appellate brief documenting the waiver argument.

3. For petitions subsequent to an IRE determination,  note the limited circumstances under which one may "appeal" the IRE determination; the challenge must be based upon a determination that the claimant meets the threshold impairment rating of 50% of impairment. See: 306 (a.2) (4).

4. KEEP FILING IRE REQUESTS for Designation of a Physician to Perform an Impairment Rating Evaluation, LIBC-766. The IRE remedy is a significant method for Employers and Insurers to limit the duration of future indemnity wage loss benefit liability. The Commonwealth Court did not strike down the statute. The request for further appellate review by the Supreme Court of Pennsylvania remains pending.

Confirm that your IRE physician will utilize a 4th Edition and a 6th Edition calculation!

Employer Subrogation Recovery Available in Employee-Passenger Work-Related Accident

Employer Subrogation Remedy in Work-Related Motor Vehicle Accident

The Pennsylvania Workers Compensation Act allows an Employer and its Insurer to assert a right of subrogation against an Employee civil action recovery. The Employer has this right to recovery where it has paid workers' compensation benefits for an injury to its employee and that injury was caused by the acts (or omissions) of a third party. See: Section 319, 77 P.S. 671.

The phrase "the Employer subrogation right is absolute", is often repeated. Despite this absolute right, the Employer request for a subrogation payment is often met with challenge.

Limitations upon the rights of an Employer to assert a subrogation recovery do exist.
For example, a common limitation is that the Employer may not seek a subrogation recovery against any portion of the civil action recovery which is designated as a spousal claim arising from the work injury.

In the preceding blog post on January 11, 2016 we discussed the statutory limitation of the right of subrogation in a medical malpractice case. An Employer right of subrogation exists for any portion of the recovery designated for future wage loss or future medical expense reimbursements. The MCare statute specifically excludes Employer subrogation rights for any past payments of wage loss and medical benefits.

Originally, the Pennsylvania Motor Vehicle Financial Responsibility Act did not allow an Employer subrogation right against any employee Motor Vehicle Accident recovery. However, since 1993, The Workers' Compensation Act amendments changed this law, so that an Employer does have a right of subrogation where a third party causes the Employee to be injured in a work-related motor vehicle accident.

There are some limitations upon these Employer subrogation rights in Employee Motor Vehicle Accident case.

An Employer may not assert any subrogation lien against the employee's recovery from his/her personal insurance policy for uninsured or under-insured coverage. See: Standish v. American Manufacturers Insurance Co. (Pa. Super. 1997) and American Red Cross v. WCAB (Romano) (Pa. 2001).

Conversely, the Employer is entitled to subrogate against any Employee recovery from the Employer insurance policy for uninsured or under-insured coverage. See: City of Meadville v. WCAB (Kightlinger) (Pa. Cmwlth. 2002).

These appellate decisions provide guidance to handle subrogation issues in the instance of the Employee or the Employer insurance policy for uninsured or under-insured coverage.

QUERY: What about an uninsured or under-insured claim against the insurance policy purchased by a co-worker-driver, where the Employee is injured, in the scope of employment while riding as a passenger.

Karen Davis v. WCAB (PA Social Services Union) is a reported decision of a panel of the Commonwealth Court of Pennsylvania which directly addresses this issue.
No. 216 C.Cd. 2015, authored by Senior Judge Friedman on December 30, 2015.

Factual and Procedural Background

Employee was injured in a motor vehicle accident which occurred while she was in the course of her employment with PA Social Services Union. Employee was a passenger in a vehicle driven by a co-worker named Jarvie.The identity of the driver who hit Jarvie's vehicle is unknown.

Employer acknowledged this work injury and paid wage loss benefits with medical expenses to Employee in the total amount of $89,785.22.

Employee filed an uninsured claim with Allstate, the motor vehicle insurer of Jarvie, her co-worker.
Employer asserted its subrogation lien of $89,785.22.
Employee settled the Allstate uninsured motorist claim for $25,000.00.

Employer filed a Petition to assert its subrogation lien against the Employee settlement recovery in the Allstate uninsured motorist claim.

WCJ Decision

WCJ concluded that Employer was entitled to subrogate against Employee's uninsured motorist settlement with Allstate. WCJ reasoned the motor vehicle insurance policy that provided the uninsured motorist coverage was purchased by someone other than Employee. On this basis, a subrogation remedy was available to the Employer.
The WCAB affirmed this decision.

Employee Commonwealth Court Appeal

Employee argued that Employer is not entitled to a subrogation lien recovery where Employer did not pay for the uninsured motorist policy coverage.

The Commonwealth Court rejected Employee argument based upon its review of the Section 319 statutory language regarding subrogation rights.

Section 319 provides:

 " Where the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right of employe, ... against such third party to the extent of the compensation payable under this article by the employer ..."  . slip opinion page 3.

The Commonwealth Court reviewed the general parameters of subrogation rights, established in the prior appellate case decisions reported at Standish, American Red Cross and City of Meadville, mentioned above.

An additional decision was reviewed as support of the Employer right to subrogation in an uninsured motorist claim. In Hannigan v. WCAB (O'Brien Ultra Service Station) (Pa. Cmwlth. 2004), an employer was entitled to assert a subrogation lien against an employee recovery in an uninsured motorist claim from a customer's motor vehicle insurance policy. The employee was a mechanic and he was injured in an accident while driving a customer's vehicle. The negligent driver was uninsured.
The court reasoned that Employer was entitled to a subrogation recovery against the uninsured motorist benefit recovery, as those uninsured motorists benefits are paid in the place of adequate insurance of a negligent insured driver.

"Uninsured motorist benefits are intended to benefit, not only the insured, but also his relatives, passengers, lawful occupants and authorized drivers who are injured in the operation of the policy owner's vehicle. Thus, there is no difference between the policy holder and his beneficiaries".
Davis slip opinion page 6 citing Hannigan 860 A.2d at 640.

The Commonwealth Court has determined that an employer has a right to subrogation, not only where the employer has paid for the insurance policy, but also where a third party, such as a customer or co-worker has paid for the policy. Here, the Employee's co-worker paid for uninsured motorist coverage, therefore Employer was entitled to subrogate against the Employee's settlement.

Employee personally funded insurance policy benefits, continue to remain beyond the reach of the Employer subrogation lien recovery.

PRACTICE POINTERS;

1.   In your review of the work-related motor vehicle accident claim, investigate and identify each party and their respective insurers.

2.   Place each party on notice of the existence of the Employer statutory right to subrogation for any recovery arising from the work-related injury.

3.   Promise to provide any documentation necessary to establish the subrogation lien figures.

4.   Request a copy of the pleadings filed in the civil action

5.   Monitor the civil claim arising from the work-related injury.

6.  Look beyond the "policy limits" to determine if there is any additional coverage available.

7.   Do not allow the plaintiff attorney to "represent" your subrogation lien.
This is an inherent conflict of interest. When limited settlement funds are available, guess who will be asked to compromise their recovery? (hint: it is not plaintiff).

 8.   Dissatisfied with the representations that your subrogation lien will be recognized before any settlement proceeds are distributed?
Petition to Intervene as a Use-Plaintiff. As a party to the civil action you will participate in any settlement conference discussions.

Work Comp Subrogation available in Medical Malpractice Case

Employer Subrogation Rights against Employee civil action recovery.

Section 319 of the Pennsylvania Workers' Compensation Act provides a right of subrogation to the Employer against a third party recovery by the injured worker.  The Employer may recover compensation payable, reduced by its pro rata share of the attorney fees and litigation costs which created the civil action recovery. (Section 319; 77 P.S. 671).

The Supreme Court of Pennsylvania has stated that the Employer right of subrogation is "absolute" and not subject to equitable exceptions.
See: Thompson v WCAB (USF&G) (Pa. 2001) and Brubacher Excavating Inc. V. WCAB (Bridges) (Pa. 2003).

However, the Employer right of subrogation is not without limitation.
There are limitations upon subrogation rights in specific circumstances
(this blog post is not a discussion of all of the possible limitations).

The MCARE Act (Medicare Care Availability and Reduction of Error Act) of 2002 limits the Employer right of subrogation against medical malpractice recovery of past medical expenses and past wage loss, paid before the time of the trial, in which the injured worker seeks a malpractice recovery.

Worker's Compensation practitioners have noted the expressed limitation of the Employer subrogation rights in the Medical Malpractice case. However, since 2002, there are limited published legal precedents on the issue of Employer subrogation rights for future medical expense and future wage loss in the Medical Malpractice case

Protz v WCAB (Derry Area School District, No. 402 C.D. 2015,  is a published decision of a panel of the Commonwealth Court authored by President Judge Pelligrini on January 6, 2016. This decision addresses the Employer Subrogation rights in Medical Malpractice cases.

[NOTE: another Commonwealth Court decision entered September 18, 2015 addressed the issues of IRE application of the AMA Guides, in litigation involving the same parties.]

Factual and Procedural Background

Employee sustained a work-related knee injury in April 2007. This injury was accepted as work-related and Employee received partial disability benefits as of January 2012, pursuant to an Impairment Rating evaluation.

Employee's work injury resulted in a total knee replacement surgical procedure. Due to surgical complications, additional surgery was necessary, Employee filed medical malpractice civil action against the surgeon and hospital . Employee medical expert evidence related the initial surgery to the work injury and further related the subsequent medical conditions and surgical repair. These claims were settled.

Employer filed a Petition to Review Compensation Benefits, seeking to subrogate the civil action recovery pursuant to Section 319.

WCJ Litigation & Decision

Employer submitted the medical malpractice complaints, the settle and discontinue praecipe and the settlement distribution sheet prepared by Employee counsel.

Employer submitted the Employee medical expert report which related the surgery and subsequent complications to the work injury. She would not have experienced these complications, but for the alleged medical malpractice.

Significantly, these documents reflected that all of the monies awarded were in regard to future medical expenses and lost wages. None of these settlement funds were designated to be set aside a payment for past medical bills or past wage loss.

WCJ Decision awarded Employer subrogation from the time of the settlement forward. WCJ noted Section 508 of MCARE Act precluded Employer from obtaining subrogation for past medical expenses and past wage loss paid before the time of trial. Section 508 did not preclude Employer from seeking subrogation with respect to future payments.

WCAB affirmed WCJ determination of subrogation rights.
Employee appealed to the Commonwealth Court.

Commonwealth Court Appeal

Employee did not dispute that Section 508 of the MCARE Act is silent regarding subrogation rights for future medical and wage loss awards in medical malpractice cases; BUT Employee argues this silence must be construed as a prohibition of subrogation, in accord with the plain language of Section 508 (c).

Examination of the statutory  language reflects Section 508 (c) precludes subrogation of Employee medical malpractice proceeds to the extent that those proceeds are "covered in subsection (a)".

Subsection (a) bars recovery of "past medical expenses or past lost earnings incurred to the time of trial", including those paid by an employer or worker's compensation insurer.

Subsection (a) does not address future medical expenses and/or future wage loss.

Conclusion: as future medical expenses and future wage loss are not covered in subsection (a), the subsection (c) prohibition against subrogation does not apply.

The Commonwealth Court concluded, this plain-meaning statutory interpretation is consistent with the purpose of subrogation insofar as it prevents employee double recovery. Also, it furthers the goal of ensuring that employer is not compelled to compensate employee for injuries caused by the negligence of a third party. slip opinion page 11. 

This interpretation of Section 508 of the MCARE Act is consistent with the presumption that the legislature does not intend to change existing law by omission or implication but only by an express provision. See: Fletcher v. Pennsylvania Property and Casualty Insurance Guaranty Association, (Pa. 2009).

PRACTICE POINTERS:

1. Do not become complaisant in your review of your subrogation rights.
Do not accept the "general rule" that there is no right of subrogation in medical malpractice cases.

Examine the civil action documents. What were the subjects of the employee civil complaint? What were the damages plead? What were the damages proven by medical evidence? What are the terms reflected in the settlement documents?

Note, in this case, Employer prevailed before the WCJ, as the terms of the civil action settlement documents described compensation for future medical expense and future wage loss. These are two subjects which are not precluded from subrogation by the MCARE statute.

Query: do we have a different result if the civil action settlement documents described the award as payment for past medical expense and past wage loss?

Can the employer "go beyond the terms" of the settlement agreement to establish that the award "includes" compensation for amounts beyond those past losses?

Caselaw generally suggests that one may be limited to challenge any description (or apportionment) of the settlement proceeds in a workers compensation petition. Participation in the civil litigation may be required.

2. There may be an attempt to limit the Employer subrogation in non-medical malpractice civil  litigation. In the litigation of civil liability of a third party for medical expense and wage loss damages to the injured worker, there may be an attempt to limit the Employer subrogation rights via description the award or settlement.

Frequently the Employee will attempt to describe a portion of the settlement proceeds as settlement of any spousal claim for loss of consortium. This portion of the settlement is not subject to the Employer subrogation rights.

Ongoing Employee attempts to "apportion" an amount of a civil action settlement to damages beyond the scope of the Employer subrogation rights may describe a portion of the award as attributed to a "pain and suffering" recovery. Often this argument will fail, for lack of documentation of this alleged apportionment. However, this argument continues.

3. BEST PRACTICE: place the injured employee and his/her legal counsel on notice of any possible rights of subrogation. Monitor the civil action to determine if there are any apportionment (description of recovery) issues. If so, it may be necessary to intervene in the civil action litigation, in order to preserve the Employer subrogation recovery.

IMO, an employer/insurer should not allow the employee legal counsel to "represent" their subrogation rights. There is an inherent conflict of interest in proceeding in this fashion. This conflict typically arises when there is a limited recovery available and/or limited settlement proposal. When faced with the task of dividing the limited recovery between employee and employer, counsel may request a reduction of the subrogation lien, in order to preserve a recovery to employee. Avoid this unnecessary problem.