The Workers Compensation Supersedeas Fund Reimbursement Game: Robbing Peter To Pay Peter

Transcription

1 OCTOBER, 2007 The Workers Compensation Supersedeas Fund Reimbursement Game: Robbing Peter To Pay Peter By PERRY D. MERLO 1 Lancaster County Member of the Pennsylvania Bar TABLE OF CONTENTS Page INTRODUCTION SUPERSEDEAS STATISTICS LEGAL DIVISION CHALLENGES TO REQUESTS FOR SUPERSEDEAS CONSERVATION OF THE FUND CONCLUSION INTRODUCTION The Pennsylvania Workers Compensation Act provides an avenue for reimbursement to a Defendant/Employer for monies paid to a Claimant during the course of litigation which, after the course of litigation, it is determined that the Claimant was ultimately not entitled to the same. The reimbursement of these monies is made from a Supersedeas Fund 2 which is funded in its entirety by mandatory contributions made by Insurers/Employers who conduct business in the Commonwealth of Pennsylvania. Claimants are never required to repay these monies back to employers regardless of the outcome of litigation. Over the past several years, the Fund has paid more reimbursement monies out than it has taken in. In response thereto, the Legal Division of the Bureau of Workers Compensation has been increasing its challenge of legitimate requests for Supersedeas Reimbursement. This article explores the underfunding of the Fund, the Bureau s reaction to the same, and suggestions for revising the Fund. SUPERSEDEAS STATISTICS Good morning folks, welcome to the Supersedeas game, and what a show we have 1 Mr. Merlo is a Partner in the Philadelphia based law firm of Post & Schell, P.C. residing in its Lancaster office. He limits his practice to the area of Workers Compensation P.S. 999(a). for you today! Our contestants, the employer and the claimant, will each try to win the $100,000 prize made possible by our sponsor, the employer. If the Claimant wins or loses, he gets to keep the $100,000. If the employer wins, he gets to pay himself the prize money but only if he successfully makes it through a gauntlet of paperwork and Bureau attorneys. In the fiscal year 2004/2005, the Pennsylvania Bureau of Workers Compensation assessed Insurers/Employers doing business in Pennsylvania the sum of $18,914, These moneys are known as the Supersedeas Fund. The largest assessment was made against American International Group (AIG) in the amount of $1,948, In contrast to this funding, for the same fiscal year of 2004/2005, the Fund paid out over $21,000,000 in the processing of 933 claims for Supersedeas reimbursement. 5 Of these claims, 105 of the same were challenged by the Legal Division of the Workers Compensation Bureau. 6 In response to this underfunding of the Fund, in the fiscal year 2005/2006, the Fund assessed Insurers/ Employers doing business within the Commonwealth of Pennsylvania, the sum of $22,212, In the same year, 124 Petitions for Supersedeas Reimbursement were chal- 3 Pennsylvania Workers Compensation and Industry, page 8. 4 Listing of Supersedeas Assessment Amounts, 2004, Department of Labor and Industry. 5 Pennsylvania Workers Compensation and Industry, page 9. 6 Id. at page Pennsylvania Workers Compensation and 2005/06, Pennsylvania Department of Labor & Industry, page

2 180 PENNSYLVANIA BAR ASSOCIATION QUARTERLY lenged by the Legal Division of the Workers Compensation Bureau. 8 It is obviously a serious problem for the Fund to be paying out more money than it is collecting and for approximately 10% of all Requests for Supersedeas Reimbursement to be challenged by the Legal Division of the Workers Compensation Bureau. The concept of Supersedeas reimbursement was established in Section 443 of the Pennsylvania Workers Compensation Act which provides that, If, in any case in which a supersedeas has been requested and denied under the provisions of section 413 or section 430, payments of compensation are made as a result thereof and upon the final outcome of the proceedings, it is determined that such compensation was not, in fact, payable, the insurer who has made such payments shall be reimbursed therefore. Application for reimbursement shall be made to the department on forms prescribed by the department and furnished by the insurer. Application may be assigned to a workers compensation referee for a hearing and determination of eligibility for reimbursement pursuant to this Act Attorneys who have practiced workers compensation law for a period of time in Pennsylvania are aware that Employers/ Insurers are permitted to request Supersedeas, that is, permitted to request that a Judge enter an Order allowing the Employer/Insurer to stop paying wage loss benefits to Claimant during the pendency of a Defendant filed petition (a Termination, Suspension or Modification Petition). The law does not provide that an Employer/Insurer can stop paying medical benefits during the litigation of a Termination Petition even if a Defendant has proof from a physician that the Claimant has fully recovered from the subject work injury. 10 Workers compensation practitioners in Pennsylvania also know that the chance that certain Workers Compensation Judges will grant a Defendant s Request for Supersedeas during the pendency of litigation is slim to none. In fact, some requests for Supersedeas are summarily denied and there is no avenue in the Act which provides that the Employer can look to the unjustly enriched employee, at the end of litigation, for reimbursement. This, in 8 Id. at page P.S. 999, Section 443(a), Pennsylvania Workers Compensation Act P.S. 774; M.D.S. Laboratories v. Workmen s Compensation Appeal Board, (Munchinski), 125 Pa. Cmwlth. 460, 558 A.2d 148 (1989). turn, places a tremendous burden upon the Workers Compensation Supersedeas Fund to reimburse employers for monies which Claimants were ultimately not entitled. In response, the Supersedeas Fund has become rapidly depleted. The reason that Supersedeas is denied in the vast majority of cases is because some Workers Compensation Judges do not take a Request for Supersedeas relief seriously. Even where Defendant is the only party to present evidence at the first hearing at which time Supersedeas is requested, Supersedeas has still been denied. Even where the Defendant s evidence is much stronger than the Claimant s evidence that Claimant continues to suffer from a work injury, Supersedeas has been routinely denied. The result is to provide a Claimant with several months or several years of workers compensation benefits that the Claimant is not ultimately entitled to and, as well, as set forth above, the ultimate result is to burden the Supersedeas Fund beyond its capacity to reimburse the Employers who are legitimately entitled to Supersedeas reimbursement. LEGAL DIVISION CHALLANEGES TO REQUESTS FOR REIMBURSEMENT In the face of reimbursements exceeding the amount of money the workers compensation Supersedeas Fund collects, the Legal Division of the Workers Compensation Bureau has been increasingly challenging legitimate Requests for Supersedeas reimbursement. Two cases on point are Mark v. Workers Compensation Appeal Board 11 and Bureau of Workers Compensation v. Workers Compensation Appeal Board (Consolidated Freightways, Inc.) Pa. Cmwlth., 894 A.2d 229 (2006). 12 Pa. Cmwlth., 876 A.2d 1065 (2005). 13 In Consolidated Freightways, the Legal Division of the Bureau challenged an employer s Request for Supersedeas Reimbursement where a Claimant s right to reinstatement of benefits was ultimately reversed by the Board. Specifically, the facts in Consolidated Freightways involved a claimant requesting reinstatement of benefits in An Order requiring reimbursement for a period of time been January 1994 and May 1995 was ultimately awarded against the employer by the Worker s Compensation Judge. On appeal to the Board, a Request for Supersedeas was made by the Employer, which was denied. As a result, the employer paid accrued benefits to the claimant. The Commonwealth Court ultimately reversed the award in The employer then sought reimbursement of the $55,000 it had paid to the claimant pursuant to the denial of its request for Supersedeas concerning the monies owed to the claimant between January and May of 2005.

3 THE WORKERS COMPENSATION SUPERSEDEAS FUND REIMBURSEMENT GAME 181 In these cases, the Commonwealth Court made it absolutely clear to the Legal Division of the Workers Compensation Bureau that it was not to challenge Request for Supersedeas Reimbursement on employee/claimant filed petitions which are initially granted in favor of the claimant and ultimately reversed and, in the interim, the claimant receives benefits that it was not entitled to where the employer requests Supersedeas before it paid those benefits. The Legal Division s current modus operandi is to now challenge the payment of medical bills made by an employer subsequent to a Request for Supersedeas which is denied, those medical bills being paid, and the employer s underlying petition ultimately being granted by the Judge. Such is the case of Ressler v. Metals Industries. 14 The Legal Both the judge and the Board granted the employer s request for Supersedeas Reimbursement, yet the Legal Division of the Workers Compensation Bureau continued to challenge the same even before the Commonwealth Court. The Legal Division argued that Since the reinstated benefits that the Employer paid to the Claimant were attributable to a period of disability that pre-dated Employer s Petition for Supersedeas... the Employer was not entitled to reimbursement. In affirming the Board s Order allowing Supersedeas reimbursement, the Commonwealth Court held that: We find that Employer complied with the Act. The Employer requested Supersedeas on November 21, 2001, which was denied by the Board. The Employer made its request in the context of a proceeding on Claimant s Reinstatement Petition, which is one of the several types of proceedings contemplated by Section 413 of the Act. Following the Board s Denial of Supersedeas, Employer continued making payments to Claimant for closed period from January 12, 1994 through May 1, It was ultimately determined by this Court that Claimant was not, in fact, entitled to those benefits..... Employer is entitled to recover all of the wrongly reinstated benefits paid to the Claimant (after the date it requested Supersedeas). The Commonwealth Court further held that the Employer had no reason to request a Supersedeas before October 30, 2001; there was simply no Order to supersede. Employer thereafter prevailed in its appeal of the Board s reinstatement of benefits to the Claimant and, thus, is entitled to reimbursement from the Supersedeas Fund. It is irrelevant that the period of time attributable to Claimant s alleged reoccurring disability predated Employer s Supersedeas Request. It is hard to conceive of a reinstatement proceeding where that will not be the case, and the Bureau s position ignores that reality. The Legislature did not intend to foreclose Employers and their Insurers from reimbursement for benefits that have been wrongly reinstated, but such would be the inevitable result of the impossible procedural standard asserted by the Bureau. 14 Specifically, in Ressler (Bureau claim # , Deeley, J., March 21, 2007) claimant suffered a 1995 injury to his shoulder. The employer subsequently filed petition to terminate the claimant s benefits on July 19, 2004 alleging the claimant fully recovered Division is using the exact same argument in this case as previously used in the Consolidated Freightways and Mark cases which was strongly rebuffed by the Commonwealth Court. In the Ressler, as in Consolidated Freightways from the subject work injury as of March 16, In conjunction with its termination petition filed on July 19, 2004, the employer also requested that Supersedeas be granted, which was denied by the Workers Compensation Judge by Order dated August 30, The Workers Compensation Judge ultimately granted the employer s termination petition effective March 16, 2004 by Order dated June 28, On June 1, 2004, the claimant underwent medical services at the Hershey Medical Center which resulted in a bill in excess of $35,000 which was ultimately presented to the employer for payment on October 12, 2004, and which was ultimately paid by the employer on January 24, Bureau has taken the position that because the bill in question was incurred by the claimant prior to the date of the Request for Supersedeas, Supersedeas reimbursement is not appropriate. The employer has taken the position, which was ultimately adopted by the Workers Compensation Judge during proceedings concerning the Legal Division s challenge of the Request for Supersedeas, that Supersedeas reimbursement is appropriate because the employer did not become responsible for payment of the bill until after the request for Supersedeas concerning the pending termination petition was made and denied by the Workers Compensation Judge in the underlying proceeding. The employer argued, similarly to the employer in the Consolidated Freightways case, that it had no control over when the medical bill in this case was presented to it and, thus, the fact that the services in question were incurred by the claimant prior to the date Supersedeas was requested was irrelevant. The triggering date for responsibility upon an employer to pay a medical bill is 30 days subsequent to its receipt of the same on the appropriate health insurance claim forms with the appropriate medical records concerning the medical treatment. In his decision, the Workers Compensation Judge, in ruling in favor of the employer, stated that To this Judge, Consolidated Freightways shows that the purpose of the Supersedeas Fund is to correct judicial errors viewed retrospectively. In a Defendant filed petition, a Judge could have ordered a Supersedeas granted as of the date of the filing.... Thus, when the Defendant eventually prevails, they recover back to the original time as in Consolidated Freightways because viewed retrospectively, they were ordered to pay and the Order was incorrect. Here, the service was before the Request for Supersedeas. However, it appears to me that the Fund did not properly apply the law. In order for a medical bill to be reimbursed, there are elements that must be met. The bill must be submitted and there has to be proper documentation or the carrier is not liable. It is not the date of service that causes the compensation to be due. It is the date on the bill which is properly presented. This (bill) was due on the date the bill was (presented to the Employer). The payment then was proper because the Supersedeas was denied. In fact, no Supersedeas can be

4 182 PENNSYLVANIA BAR ASSOCIATION QUARTERLY and Mark, the employer/defendant was not violating the law nor playing games with the system. In Consolidated Freightways, as in many other cases, the Employer cannot request a Supersedeas before there is an obligation to pay indemnity. In the Ressler case, an Employer could not request Supersedeas relief before it was presented with a medical bill. Thus, again, the Legal Division of the Bureau is scrambling to fight each and every request for Supersedeas reimbursement on any grounds available because of the enormous strain placed upon it by the unavailability of funds to reimburse legitimate requests for Supersedeas reimbursement. Obviously, there is a problem with this system that needs to be examined closely. CONSERVATION OF THE FUND Bureau should not challenge legitimate Requests for Supersedeas Reimbursement as set forth in the Consolidated Freightways and Ressler cases above. In the fiscal year 2004/2005, $55 million dollars was spent to administer the Workers Compensation Bureau. 15 In the fiscal year 2005/2006, $57,525, was paid by the citizens of the Commonwealth of Pennsylvania to fund the Workers Compensation Bureau. From those monies, attorney s salaries, secretarial salaries, support staff, etc. was used by the Bureau, and, specifically, the Legal Division of the Supersedeas Fund, to fight legitimate Requests for Supersedeas Reimbursement. In addition, the monies that the Legal Division awarded with regard to medical bills. Therefore, all the basic elements were met. This was an obligation that arose after the petition was filed and Supersedeas was denied. Bureau has appealed the Judge s Decision to the Workers Compensation Appeal Board arguing, again, that medical services for which reimbursement was requested were performed on June 1, 2004, before the termination was petition was filed and Supersedeas requested on July 19, 2004 and, thus, are not reimbursable. Thus, the Legal Division is again arguing that because the medical bill in question was incurred prior to the date the Termination Petition was filed and Supersedeas was requested, the employer is not entitled to reimbursement. 15 Pennsylvania Workers Compensation and Industry, page Pennsylvania Workers Compensation and Workplace Safety, Annual Report Fiscal year 2005/06, Pennsylvania Department of Labor & Industry, page 10. is fighting over are monies that the insurance carriers/employers doing business in the Commonwealth of Pennsylvania have financed in their entirety! The Bureau contributes absolutely none of its own monies to finance the Supersedeas Fund. Thus, what the Bureau is protecting is money that is already owed to the insurance carriers and employers. The only thing that the Bureau is charged with is the conservation of the Supersedeas Fund, however, conservation does not equate to unsupported challenges of requests for Supersedeas reimbursement. In the end, what is happening is that the Bureau is spending voluminous amounts of its own monies to challenge requests for Supersedeas; the insurance carriers and employers are spending enormous amounts of their own monies attempting to secure monies which they already paid into the Fund; and the court systems are being burdened by unnecessary litigation. The only parties not burdened by the Supersedeas Fund, but unfairly advantaged, are the Claimants themselves who have received monies which they are never required to repay even though they were never entitled to the same. Yet, the Fund is not reimbursed by Claimants in any regard, even Claimants who defraud the workers compensation system. Specifically, fines imposed against Claimants for defrauding the workers compensation system are not placed in the Supersedeas Fund nor are fines levied against Employers doing business in the Commonwealth of Pennsylvania without workers compensation insurance. As such, the workers compensation carriers and Employers who are legitimately doing business in the Commonwealth are unduly burdened by carrying the entire brunt of the fight for monies which are rightfully theirs. The pool of money used to supply the Fund could easily be increased if the above sources of fine monies were used to contribute to the Supersedeas Fund. Another source of money for the Fund would be available if undeserved Worker s Compensation monies were taxed. Currently, Workers Compensation benefits are non-taxable. However, Claimants who receive indemnity which they are ultimately not entitled really are not receiving Workers Compensation. They are receiving a windfall or a gift of money which should be taxed by the State as income. This tax money can then be used to replenish the dwindling coffers of the Supersedeas Fund. Ultimately, if the administration of the Fund is not changed, consideration of abolishing the same should be entertained. Alternatively the financing of the Fund, by claimants or through other sources should be considered if the Fund remains.

5 THE WORKERS COMPENSATION SUPERSEDEAS FUND REIMBURSEMENT GAME 183 CONCLUSION In conclusion, the Workers Compensation Supersedeas Fund is being unduly burdened because some Judges do not take requests for Supersedeas seriously. A large number of the requests for Supersedeas are summarily denied by some Judges which, in turn, causes requests for reimbursement of Supersedeas monies to be higher than the Fund should have the burden of supporting. The Legal Division of the Workers Compensation Bureau, in response to the increased requests for reimbursement, has been unduly challenging a large number of legitimate requests for Supersedeas reimbursement and these baseless challenges are not cost-effective because they unduly burden the insurance carriers and employers who paid into the Fund, require expenditure of additional money from the Bureau of Workers Compensation and, ultimately, the citizens of Commonwealth of Pennsylvania.