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Henkels & McCoy, Inc. v. Workers' Compensation Appeal Board

April 15, 2009


The opinion of the court was delivered by: Judge Smith-ribner

Submitted: February 6, 2009



Henkels & McCoy (Employer) and its workers' compensation Insurer Liberty Mutual Insurance Company (Insurer) (together, Petitioners), petition for review of the order of the Workers' Compensation Appeal Board (Board) affirming the Workers' Compensation Judge's (WCJ) decision to limit reimbursement from the Supersedeas Fund (Fund) to Petitioners under the Workers' Compensation Act (Act), Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1-1041.4, 2501-2708. They contend that the WCJ erred as a matter of law in denying reimbursement for the payment of retroactive benefits paid to Richard Barner (Claimant).

Claimant suffered a fractured left foot on February 19, 2001 during the course of his employment as an over-the-road truck driver for Employer, which commenced total disability payments by way of a notice of compensation payable. Claimant returned to work on September 11, 2001 at no loss of earnings. Insurer suspended benefits as of that date, believing that Claimant signed a supplemental agreement. On March 8, 2005, Claimant filed a petition for penalties alleging that Petitioners illegally suspended benefits and that he had been laid off by Employer. Unable to locate a signed supplemental agreement, Insurer voluntarily resumed weekly benefits on April 12, 2005. Thereafter, Insurer learned that Claimant had been fired on September 13, 2001 for failing a mandatory drug test. On June 30, 2005, Petitioners filed a petition to suspend benefits as of September 11, 2001 and a request for supersedeas based on Claimant's return to work at no loss in earnings and on his discharge for cause. WCJ Mullen declined to consolidate the petitions and supersedeas was denied July 15, 2005. On August 23 Insurer paid benefits from September 13, 2001 through April 12, 2005, when benefits were reinstated.

On September 20, 2005, WCJ Mullen granted the penalty petition and imposed a 50 percent penalty along with attorney's fees for unreasonable contest. Petitioners appealed to the Board and requested supersedeas as to the penalties and attorney's fees. The Board remanded the penalty petition for the WCJ to amend it to a petition for a compromise and release.*fn1 By decision and order circulated on August 18, 2006, WCJ Mullen granted the suspension petition as of September 11, 2001, noting that Claimant had returned to work at wages greater or equal to his pre-injury wage and that he had been discharged September 13, 2001 for violating Employer's drug policies. Petitioners sought reimbursement from the Fund in the amount of $95,453.64, representing all disability payments made to Claimant from the date of the request for supersedeas on June 30, 2005 through the granting of the suspension petition on August 18, 2006.*fn2 This sum included retroactive payments made on August 23, 2005 to cover the period of benefits due from September 13, 2001 through April 12, 2005. The Bureau of Workers' Compensation offered reimbursement of $26,248.59 to Insurer, including benefits paid from the date of its request until suspension was granted but excluding the retroactive payments.

The matter was brought before WCJ Bloom who found that Employer had stopped paying benefits to Claimant without filing a supplemental agreement or a petition for suspension/termination and did not resume paying benefits until ordered to do so by WCJ Mullen. WCJ Bloom then concluded that under Robb, Leonard & Mulvihill v. Workers' Compensation Appeal Board (Hooper), 746 A.2d 1175 (Pa. Cmwlth. 2000), "retroactive payments made after [Petitioners were] found to be in violation of the Act are not reimbursable from the Fund." WCJ's Decision at 3. WCJ Bloom noted that in Hooper the employer unilaterally stopped benefits after the claimant retired and that the employer initially was ordered to repay benefits retroactively. Thereafter, its petition to modify/suspend was granted and reimbursement was approved for all benefits paid. On appeal, however, the Board and the Court held that the employer was not entitled to reimbursement for the period during which benefits had been unilaterally halted because it would encourage conduct that violated the Act.

WCJ Bloom rejected any reliance on Mark v. Workers' Compensation Appeal Board (McCurdy), 894 A.2d 229 (Pa. Cmwlth. 2006), because that case did not involve supersedeas sought pursuant to Section 413 of the Act.*fn3 The Court held there that retroactive payments can be reimbursed in some situations. The WCJ noted that the Court in McCurdy made it clear that it did not overrule Section 413 cases where reimbursement was denied after an improper cessation of benefits. The WCJ found in favor of the Bureau; the Board agreed that Hooper precludes reimbursement of retroactive payments in Section 413 cases and explained:

Here, at the time that [Employer] discharged Claimant, there was no signed supplemental agreement in effect suspending benefits. Moreover, [Petitioners] did not file a suspension petition until Claimant initiated penalty litigation much later. Regardless of any alleged good-faith mistakes, [Petitioners] ceased payment without authorization, in violation of the Act. . This violation exists regardless of the fact that compensation was ultimately determined to be not payable. (Citation omitted.)

Board Decision at 9, R.R. at 43a. The Board determined that Insurer's lump-sum payment was not attributable to a denial of supersedeas under Section 443(a), 77 P.S. §999(a), but rather to the wrongful cessation of benefits before the litigation.*fn4

Petitioners argue that WCJ Bloom and the Board erred in applying Hooper to the facts of this case to deny reimbursement. They cite McCurdy and Bureau of Workers' Compensation v. Workers' Compensation Appeal Board (Consolidated Freightways), 876 A.2d 1069 (Pa. Cmwlth. 2005), as evidencing that this Court has retreated from its broad holding in Hooper and now allows reimbursement for retroactive payments when benefits have been wrongly reinstated. Petitioners note that in Hooper the employer made retroactive payment only after being ordered to do so by the WCJ and also admitted that penalties had been properly assessed against it. Insurer in this case made the payment of its own volition after supersedeas was denied but prior to the decision granting the penalty petition. Petitioners have never admitted that penalties were properly assessed; they filed an appeal of the WCJ's decision and have never paid either the penalties or the attorney's fees. Insurer ceased benefit payments because of its good-faith belief that a supplemental agreement was signed when Claimant returned to work on September 11, 2001 with no loss of earnings. Also, Petitioners maintain that Claimant wrongfully obtained benefits from a blameless insurance carrier and that the legislature did not intend for an employer to be foreclosed from recovering benefits paid to a claimant in this situation.

The Bureau reiterates that it is statutorily charged with maintenance and conservation of the Fund pursuant to Section 443(b) of the Act, 77 P.S. §999(b). The Fund was created to enable insurers to recoup certain benefits paid after denial of supersedeas that ultimately are held not payable. Citing Bureau of Workers' Compensation v. Workmen's Compensation Appeal Board (Liberty Mutual Ins. Co.), 538 A.2d 587 (Pa. Cmwlth. 1988), the Bureau lists the prerequisites that must be met before reimbursement may be granted. Those prerequisites are as follows: (1) supersedeas must have been requested; (2) the request for supersedeas must have been denied; (3) the request must have been made in a proceeding under Section 413 of the Act; (4) payments were continued because of the order denying supersedeas; and (5) in the final outcome of the proceedings it is determined that compensation was not, in fact, payable.

The Bureau submits that Hooper is directly on point and that the WCJ and Board correctly denied reimbursement for the lump-sum payment attributable to a time period during which Petitioners unlawfully halted benefits in violation of the Act. Petitioners attempt to distinguish Hooper by claiming they acted in good faith, but the employer in Hooper also felt justified in stopping benefits and the Court denied reimbursement after concluding that subjective belief of the employer was irrelevant because "[t]he Act does not give the employer the right of self-help, i.e., the right to ignore the requirements of the Act .." Hooper, 746 A.2d at 1182. The Bureau points out that no evidence was offered and no finding was made by the WCJ on the issue of Insurer's good faith. In any event, the Bureau endorses the conclusion stated in Hooper that to grant reimbursement under such circumstances could encourage employers and their insurers to cease benefits without following the proper procedures.

Lastly, the Bureau offers that Petitioners' reliance upon Consolidated Freightways and McCurdy is misplaced as they were cases filed under Section 430 of the Act rather than Section 413 and distinguished between Section 430 cases where the obligation to pay had arisen during the litigation and Section 413 cases where the employer was obligated to pay but had unilaterally stopped. The Court agrees with the Bureau that Consolidated Freightways and McCurdy are not controlling. In McCurdy the employer contested the claim petition and appealed the award of benefits, and it was only after supersedeas was denied that the employer was obligated to make a retroactive payment of benefits. In Consolidated Freightways liability for benefits had been suspended through a signed supplemental agreement and the ...

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