Wickert: Pennsylvania's Comp Future Credit Applies to Indemnity and Medical Benefits

Friday, December 16, 2016 | 0

What we once commonly knew to be true is, well, still true.

Gary L. Wickert

The Commonwealth Court of Pennsylvania (the state appellate court that hears appeals from the Workers’ Compensation Appeals Board (W.C.A.B.) has just issued a decision as to whether an employer’s future credit rights under § 319 of the Pennsylvania Workers’ Compensation Act extend beyond indemnity payments and also reach the payment of medical bills. Although the court admits that this issue has already been decided, it notes that new arguments are being raised by plaintiffs’ attorneys in reliance on recent Supreme Court decisions.

In Whitmoyer v. W.C.A.B. (Mountain Country Meats), 2016 WL 7009181 (Pa. Commw. 2016), Craig Whitmoyer sustained a work-related amputation of his right arm. His employer, Mountain Country Meats (Selective Insurance Co.), entered into a supplemental agreement that confined the injury to the specific loss of the amputation of the right upper extremity at the distal forearm.

The agreement stated that Whitmoyer was entitled to a 20-week healing period and 370 weeks of specific loss benefits at $237.50 per week after May 22, 1993. The supplemental agreement also stated that the 20-week healing period expired on May 21, 1993.

Compensation was paid from Jan. 2, 1993, through May 21, 1993, for 20 weeks at a rate of $158.33 per week, for a total of $3,166.60, which includes both the waiting period and the healing period. In December 1994, Whitmoyer agreed to a lump sum settlement of $69,994.64, but the employer remained responsible for medical expenses only.

In 1999, Whitmoyer settled a third-party action for $300,000 from Holymatic Corp. and Dantro Associates. We are not specifically told that torts were committed by these entities, but we assume they manufactured defective equipment that contributed to the injury in some way.

Whitmoyer and his employer entered into a third-party settlement agreement allowing the employer subrogation reimbursement of $81,627.87 ($110,583.73 less $28,955.86 for the employer’s pro-rata share of attorneys’ fees). The agreement stated that the “balance of the recovery shall constitute a fund for credit against future workers’ compensation payable,” subject to reimbursement for litigation expenses at the rate of 37% on credit used up. Therefore, the employer was liable to the employee for 37% of future medical expenses up to the balance of recovery.

On May 26, 1999, Whitmoyer sent a letter enclosing $81,627.87 to Selective. Whitmoyer’s attorney advised Selective at that time that no credit could be applied to future medical bills and that under § 319, the credit applies only to “future installments of compensation,” and “future medical expenses do not constitute ‘installments of compensation’.”

Selective did not respond to the letter or contest the plaintiffs’ attorney’s interpretation of §319. As of February 2013, Selective had paid $206,670.88 in medical expenses and had not been reimbursed by Whitmoyer. The employer filed a modification petition, and the W.C.A.B. and Whitmoyer’s attorney argued that § 319 applied only to indemnity benefits, not medical benefits.

The W.C.A.B. determined that the future credit applied to both medical and indemnity benefits, and rejected Whitmoyer’s argument that Selective was equitably estopped from applying the future credit to medical expenses because it never contested Whitmoyer’s May 26, 1999, assertion to the contrary.

Whitmoyer appealed to the Commonwealth Court. By law, the Commonwealth Court’s review is limited to determining whether the W.C.A.B.’s findings of fact were supported by substantial evidence, whether an error of law was committed, or whether constitutional rights were violated.

On appeal, the court held that the phrase “installments of compensation” in § 319 encompasses medical expenses, in addition to indemnity benefits. The court noted that, while “compensation” as mentioned in the act does not always mean both wage loss and medical benefits, in this situation the court felt that the term encompassed both.

The court immediately noted that the argument being made by the injured worker “… conflicts with the rationale set forth above, that an employer, innocent of negligence, is entitled to a subrogation credit up to the full amount of a claimant’s recovery.”

This decision was not unanimous. It should be noted that there was a strong dissent by Justice Leavitt, joined by Justices McCullough and Cosgrove. The dissenters noted that the majority opinion disregards the significance of the term “installments,” which is not consistent with medical benefits. Further, when the initial reimbursement was sent to the workers’ compensation insurance carrier, mention was made in the cover letter that, “Future medical expenses does not constitute ‘installments of compensation’.”

The insurance carrier failed to respond to this letter and continued to pay medical benefits for 13 years before instituting this litigation. The final opinion was very close, a 4-3 decision. This may indicate that, unless the legislature acts to clarify their sloppy drafting, this issue may arise again when the court has a different makeup.

Gary Wickert is a partner with the Matthiesen, Wickert & Lehrer law firm in Hartford, Wisconsin. This blog post is reprinted with permission.