Commonwealth Court Sets Aside C&R Agreements

Recent developments regarding appellate review of Compromise & Release Agreements (C&R Agreements) should serve to caution any employer entering into these settlements.  Any deficiency or ambiguity in the Agreement may justify setting it aside. 

In North Penn Sanitation, Inc. v. WCAB (Dillard), Commonwealth Court set aside a C&R Agreement based on a material mistake of fact not known to the Workers' Compensation Judge (WCJ) who approved the Agreement.   In October, 1990, claimant was injured as a result of blunt head trauma suffered in an assault.  The Notice of Compensation Payable (NCP) described the injuries as “fractured skull, body contusions and lacerations.”  In 1999, claimant entered into a C&R Agreement in exchange for a lump sum of $50,000.00.  The Agreement described claimant’s injuries precisely as they were described in the NCP.  Claimant was not represented by counsel when he entered into the settlement, although he testified at hearing that he understood the full legal significance of the Agreement, which was approved by the WCJ. 

Two years later, claimant filed a petition to review/set aside the C& R Agreement.  He requested review of the Agreement in order to include loss of use under Section 306 of the Act for bilateral blindness due to the work injury.  In the alternative, claimant requested the Agreement be set aside entirely as a result of material misstatement of fact in failing to include blindness as part of his work injury. Claimant’s petition was assigned to a different WCJ. 

Claimant presented evidence that, after his work injury, he had several operations to his brain and skull, but his vision was damaged to the point that he is only able to see shadows with some colors.  Claimant testified he contacted the insurer and requested settlement because he needed the money.  He claimed he was never informed he had a right to be represented by an attorney or that he may be entitled to separate payment for loss of vision.  He was never informed, he claimed, that he was giving up legal rights related to his loss of vision, and he did not receive any information from the insurer regarding the terms of the C & R Agreement prior to the hearing at which it was presented.

Claimant testified he told insurer’s attorney he could not see the document because of his injured vision, but signed it anyway without knowing what it said.  Although the Agreement was reviewed generally with him and a friend at the time of hearing, no specific paragraphs were read to him.  Claimant did not advise anyone he was blind because he assumed everyone knew.

Medical evidence was presented that claimant’s blindness was a result of the blunt head trauma.  Based on the evidence,  the WCJ determined that claimant was blind as a result of the work injury, and was blind at the time of the C & R hearing.  He further found that, due to his blindness, claimant was unable to read the Agreement, no one read it to him, and claimant signed the Agreement without knowing what it said.     The WCJ also found that the original WCJ was never made aware that claimant is blind, as the description of injury provided in the C & R Agreement made no reference to vision. Although insurer’s counsel stated claimant had “some trouble seeing,” this was not revealed as related to the work injury.  As a result, the WCJ concluded the C & R Agreement was based upon a material mistake of fact and ordered the Agreement be set aside.  Employer was ordered to reinstate claimant’s total disability benefits as of the date of the C & R hearing, but was entitled to a credit for lump sum payments made under the Agreement.  WCAB affirmed on employer’s appeal, and employer appealed to Commonwealth Court.

Employer argued first that a WCJ lacks authority to set aside a C&R Agreement.  Commonwealth Court agreed that Section 449 of the Act, which provides for such agreements, does not also provide for setting aside an agreement. But, according to the court, the “inherent powers” of a WCJ allow such authority.  The court stated, “It would be illogical to give a WCJ authority to approve a Compromise & Release but no authority to rescind his action.”  The court explained that the test for setting aside a C&R Agreement on the basis of mistake is more stringent than proving fraud, deception or duress.  Commonwealth  Court relied on a Consolidated Rail Corp. v. Port Light, Inc., a federal court case, in which the Third Circuit Court of Appeals held, “Where the purported mutual mistake relates not to a prediction of future events, but to a material fact that existed at the time the release was executed, the mutual mistake doctrine is applicable.”   In order for the mistake to constitute a basis for invalidating a Compromise & Release, the mistake must be a material one and in existence at the time the release was executed.  When  applied to the Agreement in this case, the court held that at the time the Agreement  was executed, a mutual mistake of present fact existed.  Even though claimant’s work related blindness was known to both claimant and insurer, it was not included in the NCP or in the C & R Agreement, nor brought to the attention of the Judge who approved the Agreement.  Therefore, a mutual mistake of present fact existed when the Agreement was signed, and its omission was material.

A WCJ’s authority to review and set aside C & R Agreements was further bolstered in Wallace v. WCAB (Bethlehem Steel/PA Steel Tech), decided one day later by Commonwealth Court, where the court stated, “Section 413(a) of the Act, … does not prohibit such a review, but, in fact, authorizes it.” 

In Wallace, the parties entered into a C & R Agreement which settled a claim for an injury which occurred as a result of inhaling certain chemicals.  The Agreement was presented at a hearing in March 2001.  Shortly thereafter in July 2001, claimant filed a new Claim Petition alleging total disability due to a low back injury which allegedly occurred in August 1998, prior to settlement of the inhalation injury.  The C & R Agreement for the inhalation injury included the following language:  “By agreeing to this C&R Agreement, claimant specifically represents that he has sustained no other occupational injuries or diseases arising out of or causally related to his employment with Bethlehem Steel; and that he has not given statutory notice of any other injuries or diseases.”  Based on this language, employer asserted in its defense to the back injury claim that claimant was precluded from filing a new claim.  The back injury claim petition was assigned to a second WCJ and hearings were held.

Claimant testified he gave timely notice of the back injury, which included medical reports relating the problem to work.  He further testified that, after being threatened he would be terminated, he retired on September 30, 1998, due to the combination of his back injury, inhalation injury, and threats of termination.  The WCJ  granted claimant benefits for the back  injury, but suspended them based on the conclusion that claimant voluntarily took himself out of the workforce when he retired. 

In his decision the WCJ found, “The Compromise & Release Agreement did not deal with his back injury but rather dealt with a work injury concerning an inhalation problem.”  Both claimant and employer appealed to the Board, which reversed.  The Board applied a doctrine of “judicial estoppel,” and reasoned that since claimant represented in the Agreement which settled his inhalation injury that he had no other work injuries, he should not be allowed to later file a claim petition which for an injury allegedly occurred two years earlier.  Thus, according to the Board, “the WCJ should have dismissed that Claim Petition in light of the approved C&R Agreement stipulating to no other work related injury.”

On further appeal by claimant, Commonwealth Court reversed the Board and reinstated the decision approving the low back claim.  The court concurred that the C&R Agreement settled only the inhalation injury and did not extinguish employer’s liability for the back injury, despite explicit language denying other claims.  Claimant argued that the language of the C&R Agreement did not meet the requirements of Section 449 of the Act to settle a low back injury because none of the required information regarding the back injury was included, and therefore employer could not be released from liability for that specific injury.     

According to the court, “[T]he issue is whether claimant’s representation in Paragraph 4 of the C&R, to the effect that he sustained no other injury other than the inhalation injury, prevents him from filing a subsequent claim for a [prior] back injury.”  Claimant’s inconsistent statements and actions were sufficiently explained by claimant’s reliance on advice from his

attorney that the C&R for the inhalation injury would have no effect on his legal rights regarding his back injury, the court explained.  Moreover, claimant was not questioned at the C&R hearing regarding his understanding of Paragraph 4.

These recent developments make clear that when an insurer seeks to fully and finally settle any workers’ compensation matter, great care must be taken in  drafting the C&R Agreement to clearly spell out not only the description of the accepted injuries, but precisely what is being settled, and claimant must be questioned in detail regarding the terms of the Agreement.  Pennsylvania courts will not hesitate to set aside Agreements which contain any ambiguity or insufficiency.

^ Back to top

Uninsured Employer Loses Even Where A Carrier Files Timely Answer

An uninsured employer cannot rely upon an answer filed by a carrier which denies coverage, and failure to timely file its own answer to a claim petition precludes the employer from “presenting any evidence in rebuttal or as an affirmative defense ….,” the Workers’ Compensation Appeal Board ruled in Gaddy v. Northeast Rehab Center.

Tanya Gaddy filed a claim petition for an arm injury sustained in June 2002 when she was pinned in a sliding door.  There was no dispute about the occurrence of the injury.  However, Employer disputed the extent and severity of claimant’s alleged disability. 

State Workers’ Insurance Fund (SWIF) initially filed a timely answer denying all allegations in the Claim Petition.  Unfortunately, employer did not have Workers’ Compensation Insurance Coverage with SWIF or any other carrier at the time of claimant’s injury, which it apparently acknowledged in a July 2002 letter to SWIF. 

As a result, despite its answer, SWIF was dismissed after proving it did not insure employer on the date of injury.  Employer did not file its own answer to the claim petition.  Further, employer failed to appear for a hearing on the petition.  Instead, employer merely sent a letter to the Judge acknowledging that claimant had sustained a right arm injury at work, but disputing the extent and severity of her injuries and her allegations that she was unable to work. 

The Workers’ Compensation Judge (WCJ) ruled that employer could not avail itself of the protection of the answer previously filed by SWIF since SWIF did not insure employer at the time of injury.  The failure to file its own answer to the petition caused employer to be precluded from raising potential defenses, pursuant to Section 416 of the Act, the Judge ruled.   In addition, because employer did not have workers’ compensation insurance, it could not as a matter of law present a reasonable contest to the claim petition, the Judge concluded.

As a result, the WCJ granted the claim petition and awarded claimant benefits from the date of injury ongoing into the indefinite future, along with the payment of medical bills.  The WCJ ruled that because employer did not have a reasonable basis to contest the petition, payment of attorney fees to Claimant’s counsel in the amount of $5,150.00, was required.

On employer’s appeal, WCAB affirmed but noted that an Affidavit submitted by claimant’s attorney to support the counsel fee was “not a part of the record.”  Thus, the case was remanded solely to “make findings” as to whether the counsel fee award is reasonable. 

Northeast Rehab Centers’ failure to have workers’ compensation insurance could potentially expose it to other civil liability and criminal penalties.  For example, the owners could face criminal penalties.  Under Section 305 of the Pennsylvania Workers’ Compensation Act, each and every day an employer fails to have workers’ compensation insurance can constitute a separate criminal offense of either a third degree misdemeanor, or if the failure to insure is found to be intentional, a third degree felony.  Criminal penalties can range from probation to imprisonment and the payment of court costs, fines and restitution of the benefits due to the injured employee.  An employer without workers’ compensation insurance may also have civil liability, as it loses the protection against civil lawsuits by its injured workers which insured employers have under the Act.  Thus, Gaddy is another example of the dire consequences resulting from the failure to have workers’ compensation insurance.

^ Back to top

Job Offer Not Required To Modify Benefits Under Act 57

"Act 57 eliminated [the] requirement [of an actual job offer to a claimant in order to modify of suspend benefits] and under the standard now applicable, employer need only establish claimant’s earning power…  Although the jobs must be available, ‘the Act contains no clear indication that a claimant actually receive an offer of employment in order to establish earning power,’” according to Commonwealth Court in Edwards v. WCAB (MPW Industrial Services, Inc.).  Claimant injured his left arm and elbow in 1998 and received benefits pursuant to a Notice of Compensation Payable.  In 2001, employer filed a petition to suspend benefits alleging “that work was generally available as claimant had been released to modified duty.”  The petition was based upon a release for modified duty work acknowledging ongoing symptoms, and a labor market survey in which the vocational expert testified, “That there were no positions available with the time of injury employer,” a necessary condition to an attempt to modify compensation on this basis.

Interestingly, the vocational expert “never had a face to face meeting with the claimant,” but performed an earning power assessment “[u]tilizing claimant’s educational background, training, past employment and [the IME] report to identify appropriate jobs for the claimant…”  On-site analyses at three of 72 potential employers were conducted by the vocational expert, and job descriptions were submitted to the IME physician, who approved them.  The vocational expert “also testified that before performing the assessment, he contacted employer at the time of injury and was informed there were no physically appropriate positions available.” 

In addition, employer’s area manager testified at a deposition that employer “did not have any work available for claimant because he was fired for a violation of company policy.” 

The Workers’ Compensation Judge granted employer’s suspension petition, accepting as credible the testimony of the employer’s manager, vocational expert, and IME physician.  On claimant’s appeal, WCAB affirmed, and claimant appealed to Commonwealth Court.

Claimant raised multiple arguments in his appeal, including a contention that the vocational expert’s testimony regarding “the availability, hours and wages of particular jobs” other than with the original employer is inadmissible hearsay.  Commonwealth Court, citing Rule 703 of the Pennsylvania Rules of Evidence, disagreed.  The court reasoned that the vocational expert “properly based his opinion regarding available jobs on the information he received from [the IME physician’s] assessment of claimant’s capabilities and limitations, on claimant’s education and work experience, and on the information he obtained regarding particular jobs.  This is precisely the kind of third party information that Rule 703 contemplates is an acceptable foundation for expert opinion testimony,” according to the court.  Moreover, the court observed that while the Rules of Evidence “do not strictly apply to workers’ compensation proceedings, those proceedings are subject to more relaxed, not more stringent standards.”

In addition, the court ruled that the requirement of a specific job offer was eliminated by Act 57, which requires only that “the jobs must be available.”

In Edwards, Commonwealth Court has clarified important evidentiary considerations at the heart of modification petitions where work with the original employer is not available, and made much more likely the prospect of success in such petitions. 

^ Back to top

Supreme Court Limits On Special Supersedeas Hearing Following Notification Of Suspension

"[W]here an employer has suspended a claimant’s benefits pursuant to a section 413(c) notice of suspension and the claimant subsequently stops working and files a challenge to the employer’s notice, the employer must file a section 413(a) petition for suspension with a request for a supersedeas to protect its right to continue to suspend the claimant’s benefits after the time the claimant stopped working.  The employer may present such a petition to the claimant and the workers’ compensation judge prior to or at the supersedeas hearing on the claimant’s challenge petition, and if the judge finds that the claimant would not be prejudiced by the introduction of evidence on the matter, the judge may permit the employer to present evidence on its request for a supersedeas at the hearing,” according to Supreme Court in U.S. Airways, et al. v. WCAB (Rumbaugh).  In so holding on this important procedural issue arising from Act 57, the court disagreed with Commonwealth Court’s ruling in this case (See “Special Supersedeas Hearing: Not Limited to Claimant’s Work Status” Tucker Arensberg Workers’ Compensation Newsletter, Winter 2003). 

Claimant, a flight attendant, was injured in August, 1999.  A Notice of Compensation Payable was issued describing her injury as “acute cervical trapezius strain and left shoulder contusion.”  Claimant received benefits until she returned to full-duty work on October 29, 1999.  Employer filed a Notification of Suspension pursuant to Section 413(c) of the Act on November 1, 1999.  Twelve days later, on November 13, claimant “called out sick from work.”  Nine days later, on November 22, 1999, claimant filed a challenge to employer’s notice of suspension pursuant to Section 413(c) (1).  Subsequently, on December 14, 1999 employer filed a  “… petition to suspend claimant’s benefits on the basis that Claimant was fully capable of returning to her position with Employer.”  In its petition, employer requested a supersedeas pursuant to Section 413(a.2) of the Act.

The Workers’ Compensation Judge held two supersedeas hearings.  The first, on December 15, 1999, one day after the suspension petition was filed, was continued after evidence was presented; on February 4, 2000, a “second Supersedeas hearing” was held.  At the second hearing, the Judge “noted…that she had been assigned [the] suspension petition with its…request for a supersedeas…”  She stated further “she would rule first on claimant’s Challenge to Employer’s Notice of Suspension and then on Employer’s Section 413(a.2) Request for a Supersedeas.”

At the hearings, claimant testified that when she ceased working in November 1999, her neck and shoulder were not bothering her, though these are the conditions accepted as compensable on the Notice of Compensation Payable.  Rather, she said lower back and leg problems kept her from working.  On February 15, 2000, the judge issued an order denying the challenge and found that claimant’s inability to continue working after November 13, 1999, was not related to the accepted work injury.  Claimant appealed, and WCAB reversed, concluding that the only relevant inquiry at the time of the challenge hearing was whether or not claimant had returned to work at wages equal to or in excess of her pre-injury wage, and was still working at the time. 

On employer’s appeal, Commonwealth Court reversed.  That court reasoned that “Section 413(c) does not explicitly define the parameters for special supersedeas hearings,” and that an employer “should be permitted to present evidence on the underlying reason or cause for [a claimant’s] inability to work and whether that inability was related to [the work] injury.”  Commonwealth Court based its ruling on considerations of judicial economy.  “It makes no sense to require a judge to turn a blind eye to evidence that the employer is entitled to a supersedeas when all of the parties are already assembled before him or her for an expedited hearing,” the court observed.  Most importantly, the court noted, “It is fundamental that in any proceeding under the Act the parties have a right to be heard, and the court cannot conceive of any circumstance under which the legislature intended to deprive either party an opportunity to be heard in the challenge proceeding.”  Supreme Court, on the other hand, easily conceived of such circumstances.

According to Supreme Court, the language of Section 413(c) “is clear and unambiguous.”  It “grants insurers the right to immediately suspend a claimant’s benefits where the claimant has returned to work without a wage loss…The insurer is not required to first provide notice to the claimant of the suspension or seek preliminary approval from a workers’ compensation judge.”  Under Section 413(c), claimant is provided a procedure to challenge the suspension by notifying the Bureau “within 20 days after the date” the notice is received.  If no such challenge is filed, claimant “will be deemed to have admitted the insurer’s assertions…and the notice of suspension ‘shall be deemed to have the same binding effect as a fully executed supplemental agreement for the suspension of benefits.’ “ But, if a timely challenge is presented by claimant, Section 413(c) requires a “special supersedeas hearing.”

According to Supreme Court, “As Section 413(c) states that a Special Supersedeas hearing will only be held where a claimant indicates that [the claimant] wishes to challenge the insurer’s Suspension of…benefits…, it is clear that the General Assembly intended the suspension hearing to involve just that:  the claimant’s challenge to the insurer’s Notice of Suspension.  Moreover, as an insurer may only suspend a claimant’s benefits pursuant to a Notice of Suspension where the claimant has returned to work without a wage loss, we agree with the Board that the only relevant questions in the special supersedeas hearing on the claimant’s   challenge are whether: (1) the claimant has indeed returned to work without a wage loss as the insurer has averred; (2) …as of the date the insurer issued the notice of suspension and started suspending …benefits; and (3) [whether claimant] is still currently working without a wage loss.”

Nonetheless, Supreme Court provided an easy mechanism to overcome the narrow scope of the challenge hearing.  An employer need only file a petition to suspend benefits prior to the special supersedeas hearing on claimant’s challenge, and present that petition to claimant and the workers’ compensation judge.  So long as the judge determines that claimant will not be prejudiced by surprise evidence, “The judge may permit the employer to present evidence on its request for a Supersedeas at the hearing.”  In practice, since a Workers’ Compensation Judge has discretion to “permit” such evidence, defendants in these cases may well find themselves confronted with narrow issues set forth by the Board and then ordered to reinstate compensation benefits.

^ Back to top

Claimant Cannot Stack Compensation Benefits, Supreme Court Rules

A “Claimant cannot collect, concurrently, specific loss benefits and total disability benefits, even though the disability benefits have been offset by payments [claimant] receives from an employer-funded disability pension,” pursuant to Section 204(a) of the Act, according to Supreme Court in Coker v. WCAB (Duquesne Light Company), where Tucker Arensberg represented the employer.

Coker is a case of first impression concerning circumstances in which a claimant sought concurrent payment of specific loss and total disability benefits.  “The primary issue [according to the court,] is whether a claimant can receive concurrent payments of both total disability benefits and specific loss benefits, when the amount of total disability benefits he receives has been reduced by a disability pension offset.” 

Claimant sustained catastrophic injuries in March 1999 after coming into contact with a high voltage electrical wire.  In addition to total disability, claimant’s injuries included “extensive third-degree burns on the left side of his body, his face, neck and head, which left him permanently scarred, in addition to a traumatic amputation of his left lower arm.  The incident also resulted in claimant losing his left ear.”  In a subsequent petition filed by claimant, the WCJ awarded 275 weeks of benefits for disfigurement and ruled that claimant had also suffered the permanent loss of his left arm, compensable for 410 weeks.

Although claimant’s total disability began in 1999 at the rate of $588 per week, “[b]ecause Claimant received a pension funded by Employer, Employer offset the workers’ compensation benefits” by the amount of the pension. Thus, though he received $588 per week from employer in two separate checks, the workers’ compensation check was in the amount of $445.28 per week, and the disability pension payment was in the amount of $142.72 per week. In ruling against claimant’s request to stack his specific loss benefits on top of his weekly workers’ compensation benefits, the WCJ concluded that claimant’s total disability status was unaffected by the offset and he could not, therefore, simultaneously receive both forms of workers’ compensation benefits.  Claimant appealed to WCAB, which affirmed, following which claimant appealed to Commonwealth Court.

Commonwealth Court noted that the language of Section 306(d) the Act is clear and unambiguous.  “[A] claimant can prove that he sustained either a specific loss or disability from each separate injury; however, payment of specific loss benefits does not begin until after his receipt of total disability payments ends.”  Claimant argued that his receipt of total disability benefits essentially “ended” because he was not receiving the full amount per week in his workers’ compensation check.  “Specifically, he asserts that because his total disability payment is reduced by the pension offset he claims he is not receiving a total disability payment of $588 weekly.”  (emphasis in original)

Commonwealth Court rejected this argument, reasoning that claimant failed to “take into account that he is receiving, every week, a total of $588 in employer funded disability payments.  He receives two checks instead of one: he receives a disability pension payment and a workers’ compensation disability payment that, together, total the amount of disability payment to which he is entitled under the Act.”

The court’s opinion is consistent with a long line of cases which rely upon the explicit language of Section 306(d) and preclude simultaneous receipt of benefits for total disability and specific losses.  Claimant has filed a Petition for Allowance of Appeal with Pennsylvania Supreme Court, which is presently pending.

^ Back to top

Exclusive Remedy Protection Does Not Apply To Third Party Rehabilitation Company

Damages for “vocational malpractice and intentional infliction of emotional distress arising out of conduct by” a rehabilitation company retained to find work for an injured claimant are not precluded by the exclusive remedy protection provided by Section 303 of the Workers’ Compensation Act, according to Superior Court in Taylor v. Woods Rehabilitation Service and Dana L. Chattin, M.Ed, NCC.   The case involved claimant’s appeal from a grant of summary judgment entered on behalf of Woods Rehabilitation Service and its vocational expert by a county trial court, based on Section 303 of the Act. 

Claimant was injured in 1996 while working for Bethlehem Area School District.  As a result, claimant “suffers from various conditions including the inability to use and control his bowel and bladder movements.”  Employer in the workers’ compensation case, through its claim administrator, retained Woods “to provide vocational rehabilitation services  for” claimant.  In the trial court, claimant brought three separate causes of action:   (1) vocational malpractice, “part of the general handling of [his] workers’ compensation insurance claim…”; (2) breach of implied contract, arising from the “failure of [Woods Rehabilitation] to pay proper attention to [claimant’s] physical limitations…; and (3)  intentional infliction of emotional distress arising from the “failure of [Woods] to inform potential employers of [claimant’s] limitations [which] led to… embarrassment, humiliation, and emotional distress when he attended job interviews and had to discuss his limitations.”  Relying on the exclusive remedy clause of the Act, Woods filed a Motion for Summary Judgment, which was granted by the trial court.  On claimant’s appeal, Superior Court reversed.

In reversing the order of the trial court, Superior Court stated that it is not commenting on the merit of the claims raised in the lawsuit, but at the same time it noted that the damages sought by claimant in his action against Woods Rehabilitation “relate to an entirely different injury than the one for which [claimant] originally received workers’ compensation under the Act.”  In addition, the relationship between Woods and claimant is not that of employer/employee, and the exclusive remedy clause of the Act is inapplicable to entities which are not a party to the Act.

While not a final decision on the merits of the claims against the vocational company, the court’s Opinion is a warning shot in the ongoing struggle to find meaningful work for claimants whose injuries prevent them from returning to their original employers, and reinforce that full disclosure of a claimant’s injuries and health problems to potential employers is required.

^ Back to top

Carrier Penalized For Stopping Prescription Plan Program

Changing the way a claimant obtains prescription medication injury should be done carefully, as an insurer can be penalized if new procedures make obtaining medication more difficult, Commonwealth Court ruled in Brenner v. WCAB (Drexel Industries). In that case, the court reinstated a 50 percent penalty on unpaid prescription medications and awarded costs and counsel fees against an insurer which cancelled a prescription card service. 

Claimant injured her low back on March 14, 1995.  Although she commuted her wage loss benefits, medical bills continued to be the responsibility of employer.  Claimant took a variety of medications including Oxycontin, Xanex, Ambien and Relafen.  She would get her medicine using a prescription card provided by PMA which eliminated the need for her to pay any costs related to prescriptions or present bills or reports to PMA for reimbursement.  In April 2002 the prescription plan was eliminated.  Claimant was required to pay for her medicine out of pocket as a result, and then seek reimbursement.

Claimant filed a Penalty Petition asserting that the carrier unilaterally stopped paying for her prescription medications.  An Answer was filed in which PMA stated it would continue to pay for work related prescription medications when appropriate documentation was provided.  No Utilization Review requests were filed by PMA prior to cancellation of the prescription card service.

Claimant testified at hearing that canceling the prescription card without prior warning rendered her unable to obtain prescription medications without first having to pay for them out of pocket.  Because claimant could not afford to fill her own prescriptions, she said, she suffered withdrawal symptoms which required additional medical treatment.  Claimant admitted that none of her reimbursement requests were denied by PMA between April and August 2002, when she filed her Penalty Petition.

The Workers’ Compensation Judge (WCJ) agreed that ordinarily, under 306 (f.1) (5) of the Act, an obligation to pay medical bills does not arise until the defendant is in possession of appropriate bills and related reports. “Circumstances exist, however, under which this obligation may arise prior to the insurer’s receipt of such documents,” he concluded, relying on McLaughlin v. WCAB (St. Francis Country House),  where the Commonwealth Court reasoned, “An employer may not avoid its obligation to pay medical bills based on sections of the Act which require the presentation of medical bills or reports prior to payment when the employer has acted to prevent the very treatment that would generate the bills or report.”  (See, “Commonwealth Court Addresses Pre-Certification of Treatment,” Tucker Arensberg Workers’ Compensation Newsletter, Winter 2003).  The WCJ assessed a 50 percent penalty on the cost of prescriptions as well as counsel fees and costs.  On employer’s appeal, WCAB reversed.

Claimant argued on further appeal to Commonwealth Court that because the prescription card was a means for controlling costs and distribution of medication to her, PMA was not permitted to cancel the card without providing a reason for doing so; and also should not be permitted to unilaterally impose a new procedure which would obstruct the generation of bills and reports by the provider.  Commonwealth Court agreed and noted that Regulations authorize an insurer to contract with pharmacies for drug prescription costs, at 34 Pa. Code §127.132.  The court concluded claimant was correct in asserting that PMA was required to continue payment of prescription medications according to the prescription card system it established, and that the claimant was not required by that procedure to submit bills or reports prior to payment.   Because she was not given prior warning that she could no longer use the prescription card to obtain medications, claimant’s medications were eventually interrupted, causing new medical problems.  This case demonstrates that Commonwealth Court's ruling last year in McLaughlin continues to cause problems for insurers whose actions interfere in any way with a claimant’s medical treatment.

^ Back to top

< Back