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Commonwealth, Dep't of Labor & Industry v. Workers' Compensation Appeal Board

July 28, 2010

COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF LABOR & INDUSTRY, BUREAU OF WORKERS' COMPENSATION, PETITIONER
v.
WORKERS' COMPENSATION APPEAL BOARD (OLD REPUBLIC INSURANCE CO.), RESPONDENT



The opinion of the court was delivered by: Senior Judge Flaherty

Submitted: April 23, 2010

BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE JIM FLAHERTY, Senior Judge.

OPINION

The Department of Labor and Industry, Bureau of Workers' Compensation (Bureau) appeals from the decision of the Workers' Compensation Appeal Board (Board) affirming the order of the Workers' Compensation Judge (WCJ) granting an application for supersedeas fund reimbursement filed by the Delaware County IU and its insurer, Old Republic Insurance Company (collectively, Insurer), to recover the amount expended on attorney's fees and costs related to third-party litigation. For the reasons that follow, we affirm.

Janette Brandon (Claimant) sustained a work-related injury and began receiving benefits pursuant to a Notice of Compensation Payable. Insurer filed a Termination Petition on December 2, 2005 alleging that Claimant had fully recovered from her work injuries as of September 23, 2005 and was capable of returning to unrestricted work. Insurer also requested supersedeas. Insurer's request for supersedeas was denied on December 28, 2005. The Employer's Termination Petition was granted on January 3, 2007 whereupon Claimant's benefits were terminated as of September 23, 2005.

In the meantime, Claimant obtained a third-party settlement for her work injury of $175,000.00. Employer had an accrued lien of $68,849.36. The Employer's pro rata share of the cost of recovery in the third party settlement was $29,520.30. Consequently, Employer received a check in the amount of $39,329.06 for the amount of its net lien.

Insurer filed an application for supersedeas fund reimbursement with the Bureau seeking reimbursement for the indemnity benefits and medical expenses paid from the date its supersedeas request was denied through the date of the WCJ's final order. The Bureau denied the application concluding that Insurer already received full satisfaction of its lien upon payment from the third-party settlement.

On appeal, the WCJ concluded that Employer was entitled to supersedeas reimbursement in the amount of $9,686.61. The WCJ noted that the total amount of indemnity and medical payments paid to Claimant following the denial of supersedeas was $22,271.91. She noted that this amount represented 32% of the total benefits paid to Claimant during the lifetime of her claim.*fn1 Therefore, she concluded that 32% of the net subrogation lien payment is attributable to the compensation paid during the eligible period of December 2, 2005 through January 3, 2007, i.e., $12,585.30.*fn2 Finally, the WCJ concluded that this amount should be deducted from the total amount paid during the eligible period of reimbursement to get the net amount Insurer is eligible to recover from the Supersedeas Fund; i.e., $9,686.61.*fn3 The Board affirmed. This appeal followed.*fn4

The Bureau argues on appeal that reimbursement is not warranted in this instance. It contends that only compensation payments paid after the denial of supersedeas are subject to reimbursement. The Bureau asserts that Insurer is not attempting to recover compensation in this matter, but rather its portion of costs in obtaining the third party recovery.

At the heart of the Bureau's argument is the interplay between Section 443(a) of the Pennsylvania Workers' Compensation Act (Act), Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §999(a), and Section 319 of the Act, 77 P.S. §671. Section 443(a) of the Act provides as follows:

If, in any case in which a supersedeas has been requested and denied under the provisions of Sec. 413 or Sec. 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 therefor..*fn5

77 P.S. §999(a). (Emphasis added).

Section 319 of the Act provides, in pertinent part:

Where the compensable injury is caused. by. a third party, the employer shall be subrogated to the right of the employe. against such third party to the extent of the compensation payable under this article by the employer; reasonable attorney's fees and other proper disbursements incurred in obtaining a recovery or in effecting a compromise settlement shall be prorated between the employer and employe.. The employer shall pay that proportion of the attorney's fees and other proper disbursements ...


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