The opinion of the court was delivered by: Judge Simpson
Submitted: September 25, 2009
BEFORE: HONORABLE BERNARD L. McGINLEY, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE JOSEPH F. McCLOSKEY, Senior Judge.
The novel issue in this acrimonious workers' compensation appeal is whether an employer engages in an unreasonable contest where it files a penalty petition against a claimant.
In particular, Elizabeth Yespelkis (Claimant) petitions for review of an order of the Workers' Compensation Appeal Board (Board) affirming as modified an order of a Workers' Compensation Judge (WCJ). Pulmonology Associates, Inc. (Employer) filed a petition for penalties against Claimant alleging a violation of the WCJ's 2007 decision granting Employer reimbursement of its accrued subrogation lien against Claimant's third party recovery. The WCJ found no statutory basis for Employer's petition but denied Claimant's request for attorney fees. Claimant appeals. We reverse and remand for the reconsideration of unreasonable contest attorney fees.
In January, 2003, Claimant sustained a work injury when she slipped and fell on property owned by Paoli Memorial Hospital (Hospital). Claimant began receiving workers' compensation benefits as a result of her fall.
While receiving workers' compensation benefits, Claimant and her then husband initiated a civil action against Hospital. Claimant's husband raised a loss of consortium claim. In July, 2006, Claimant and her husband settled the personal injury suit against the Hospital for $575,000. Apparently, the settlement did not apportion the proceeds between Claimant's cause of action and that of her husband. Because Claimant and her husband were divorcing, the settlement proceeds were placed into escrow pending equitable distribution of the marital estate. As of October 3, 2006, Employer had an accrued lien of $109,908.23 against Claimant's personal injury settlement.
In March, 2007, the WCJ found Employer entitled to reimbursement of its accrued subrogation lien and a credit against future compensation "when Claimant's third party action is released to her for payment." (WCJ's 2007 Order). Original Record (O.R.), Employer's Ex. 1 (WCJ's Dec., 3/17/07, at 2) (emphasis added). The WCJ's 2007 Order also required Claimant's counsel to provide Employer with information necessary to calculate its accrued lien and future credit against Claimant's workers' compensation benefits. Id. Neither party appealed.
Nine months later, in December, 2007, Employer filed the instant penalty petition against Claimant. In its petition, Employer alleged Claimant's counsel violated the WCJ's 2007 Order by failing to provide Employer with the information necessary to calculate its lien and future credit. Employer also alleged Claimant violated the WCJ's Order by failing to complete the third party agreement. O.R., Item 1.
At hearing, counsel placed their positions on the record and offered several exhibits into evidence. Employer offered the WCJ's 2007 Order in support of its penalty petition. Employer's counsel maintained Claimant failed to reimburse Employer in violation of the WCJ's 2007 Order. However, the WCJ reminded the parties that Claimant's compliance with his 2007 Order was wholly dependent on release of the third party settlement as part of equitable distribution of the marital estate. The WCJ, however, lacked jurisdiction over the divorce proceedings.
For his part, Claimant's counsel challenged Employer's right to file a penalty petition. Concomitantly, Claimant's counsel sought unreasonable contest attorney fees. See O.R., Claimant's Exs. 3 (Affidavit of Counsel) and 4 (Fee Agreement).
The WCJ denied Employer's penalty petition. However, he found the information Employer sought was reasonable given the status of other pending petitions. The WCJ therefore denied Claimant's request for unreasonable contest attorney fees. On Claimant's appeal, the Board modified the WCJ's order to award Claimant litigation costs but otherwise affirmed.
In this appeal,*fn1 Claimant seeks unreasonable contest attorney fees. She assigns error in the WCJ's conclusion Employer's penalty petition was reasonable. She asserts the mere filing of a penalty petition was unreasonable as a matter of law. In the alternative, Claimant maintains Employer failed to meet its burden of proof on the penalty petition to establish a reasonable contest. Notably, no party raises an issue about the penalty petition itself; therefore, we view the decision on the merits of the penalty petition as final.
Where a claimant succeeds in a litigated case, she is entitled to reasonable attorney fees pursuant to Section 440 of the Workers' Compensation Act (Act)*fn2 unless the employer meets its burden of establishing facts sufficient to prove a reasonable basis for its contest. Hansen v. Workers' Comp. Appeal Bd. (Stout Road Assocs.), 957 A.2d 372 (Pa. Cmwlth. 2008). The issue of whether an employer's contest was reasonable is a legal conclusion based on the WCJ's findings of fact. Id. The reasonableness of an employer's contest depends on whether the contest was prompted to resolve a genuinely disputed issue or merely to ...