March 22, 2006

Supersedeas
Reimbursement
Update

Two recent Pennsylvania Supreme Court rulings could well have an impact on your Supersedeas reimbursement practices. The rulings were rendered in Department of Labor and Industry v. WCAB (Excel Logistics), 890 A.2d 1045 (Pa. 2005) and in Snizaski v. WCAB (Rox Coal Company), decided on February 22, 2006.

Excel Logistics

In Excel Logistics, the Employer applied for Supersedeas Fund Reimbursement after successfully suspending the Claimant’s workers’ compensation benefits on a Forfeiture Petition, alleging that the Claimant had refused reasonable medical services. The forfeiture of compensation was sought under Section 306(f.1)(8) of the Act, and not under Section 413 of the Act, which Section controls the termination, suspension, or modification of compensation benefits based on a physical change in the claimant’s injury and disability status.

In Excel, the Workers’ Compensation Judge had granted the Employer’s Forfeiture Petition, finding that the Claimant had refused medical treatment. That forfeiture was not appealed by the Claimant, with the Employer seeking reimbursement from the Supersedeas Fund for compensation benefits paid during the pendency of its Forfeiture Petition. The Workers’ Compensation Judge denied the petition on grounds that it did not fulfill the statutory requirements for Supersedeas Fund Reimbursement, as the forfeiture was not made under Sections 413 or 430 of the Act.

The Appeal Board granted, however, the Employer’s Supersedeas Fund Reimbursement request, concluding that the request fell within the purview of Section 430. The Supersedeas Fund award was then reversed by the Commonwealth Court, which held that Section 443 of the Act specifically limits Supersedeas Fund Reimbursements to Supersedeas requests that are made under petitions filed based on Sections 413 or 430, and that there is no statutory provision for Supersedeas Fund Reimbursement in connection with a petition requesting forfeiture under Section 306(f.1)(8)

The Supreme Court held that the plain language of the Act would not permit reimbursements for forfeiture petitions filed under Section 306(f.1)(8).

The Supreme Court affirmed the Commonwealth Court finding that the Appeal Board had incorrectly concluded that a Forfeiture Petition fell within the purview of Section 430, which prohibits an employer from terminating, decreasing, or refusing to make compensation benefits without first filing and securing an affirmative Supersedeas. Finding no statutory authority empowering the employer to seek Supersedeas Fund Reimbursement, the Supreme Court held that the plain language of the Act would not permit reimbursements for forfeiture petitions filed under Section 306(f.1)(8).

A dissenting opinion authored by Justice Newman countered that the General Assembly had carefully constructed a comprehensive scheme for suspending, modifying, reinstating, or terminating benefits, including within this statutory scheme provisions for a forfeiture of compensation benefits where a claimant had refused reasonable medical treatment. Arguing that a well-developed corpus of decisions by Pennsylvania Courts treated benefit forfeitures as “suspensions”, Justice Newman would have permitted the employer to have been awarded Supersedeas Fund Reimbursement for the compensation benefits paid while its forfeiture petition was being litigated.

The Court made no comment on what remedy the employer might have against a claimant whose compensation benefits are reinstated following the claimant electing to undergo the reasonable medical treatment at issue.

Although the Supreme Court effectively struck down an employer’s right to seek Supersedeas Fund Reimbursement after successfully suspending a claimant’s compensation benefits on a forfeiture petition, the Court made no comment on what remedy the employer might have against a claimant whose compensation benefits are reinstated following the claimant electing to undergo the reasonable medical treatment at issue. Presumably, it could be argued that the employer should be entitled to credit the “forfeited” benefits against future compensation benefits, although there is no specific statutory authority for that credit.

Snizaski

This case deals with the timeline within which an employer is required to make compensation payments with a timely Supersedeas request being made during appeal of the award.

Snizaski deals with the timeline within which an employer is required to make compensation payments in satisfaction of an award of compensation that the employer has appealed with a timely Supersedeas request being made during the appeal. In Snizaski, the Claimant sought penalties, alleging that the Employer had violated the Act by failing to pay compensation benefits under an award that the Employer was appealing with a timely Supersedeas request.

Snizaski involved a Fatal Claim Petition that was initially denied by the Workers’ Compensation Judge. That denial was reversed by the Appeal Board, which remanded the Petition back to the WCJ for a computation of benefits. Employer’s Reconsideration Petition was denied, with the Employer being ordered to pay fatal claim benefits to the dependant Claimant.

Thirty (30) days after award of benefits, the Claimant sought payment. Employer responded that it was not required to make payments during the pendency of the Supersedeas request.

The Employer not only appealed the compensation award to the Commonwealth Court, but also filed a timely application for Supersedeas with the Appeal Board. Thirty (30) days after the Appeal Board’s award of compensation benefits, the Claimant sought payment from the Employer, which, in turn, responded that it was not required to make payments during the pendency of the Supersedeas request.

Forty-two (42) days after the fatal claim compensation award was entered, the Employer paid the dependant Claimant all compensation benefits awarded. Six (6) days later, the Appeal Board denied the Employer’s Supersedeas request. Similarly, the Commonwealth Court denied the Employer’s subsequent application for Supersedeas.

Claimant petitioned for penalties, alleging that the Employer failed to make timely payments of compensation. Employer argued that payments are stayed during the pendency of its Supersedeas application.

Two months later, the Claimant petitioned for penalties, alleging that the Employer failed to make timely payments of compensation following the Appeal Board’s initial compensation award. Claimant alleged that the Employer was in default under Section 428 of the Act, and that penalties should be awarded. Defending, the Employer denied that its payments were late, arguing that compensation payments are stayed during the pendency of its Supersedeas application.

The Workers’ Compensation Judge granted the Claimant’s Penalty Petition, but was reversed by the Appeal Board, which found that there could be no violation of the Act as the Employer had no statutory obligation to satisfy the compensation award while its timely Supersedeas request was pending.

The Workers’ Compensation Judge granted the Claimant’s Penalty Petition, awarding a 10% penalty with attorney’s fees for an unreasonable contest. The penalty award was reversed by the Appeal Board, which found that there could be no violation of the Act as the Employer had no statutory obligation to satisfy the compensation award while its timely Supersedeas request was pending. The Appeal Board’s ruling was affirmed by the Commonwealth Court in Snizaski v. WCAB (Rox Coal Company), 847 A.2d 139 (Pa. Cmwlth 2004); this decision was reviewed for you in our June 17, 2004 newsletter.

In reviewing the interplay between the Act and the Bureau’s regulations pertaining to Supersedeas, the Supreme Court affirmed the Commonwealth Court and Appeal Board rulings that the Employer was not in default for not making compensation payments during the pendency of the Supersedeas application, and that the Claimant was not, therefore, entitled to an award of penalties, reversing the WCJ’s award.

The Supreme Court held that the Act recognizes that an employer or insurer is entitled to seek Supersedeas.

The Supreme Court held that the Act recognizes that an employer or insurer is entitled to seek Supersedeas, with the Act failing to set forth a specific procedure or timeframe within which the Supersedeas request must be decided. The procedures and timeframe for considering Supersedeas are then controlled by the Bureau’s regulations governing Supersedeas practice, which effectively establish a maximum of fifty (50) days, in the case of an appeal from a WCJ or Appeal Board decision, within which the employer need not make compensation benefits in reliance upon a timely Supersedeas application.

Under Snizaski, compensation payments will not be deemed “late”, for purposes of a violation of the Act being alleged or liability for a penalty being asserted, unless the employer has failed to make the compensation payments within eighty (80) days, inclusive of the fifty (50) days following an appeal from the WCJ or Appeal Board, with the employer then being required to make the compensation payments within thirty (30) days of the expiration of the initial fifty (50) day window.

Compensation Timeline

For clarity, the timeline for penalty-precluding compensation payments to be made, following an award of compensation appealed by the employer with a timely Supersedeas request being made, is as follows:

1. Issuance of WCJ or Appeal Board award;
2. Employer has twenty (20) days from issuance of compensation award to file both a timely appeal and a timely Supersedeas request;
3. Special Rules permit the filing of a response or answer to Supersedeas to be filed within ten (10) days of Supersedeas being requested;
4. The filing of a response or answer to a Supersedeas request compels the Appeal Board to rule on Supersedeas within twenty (20) days of the answer being filed; and,
5. Compensation payments must be made within thirty (30) days of Supersedeas either being denied or the Appeal Board failing to rule on Supersedeas, effectively characterized under the Act and the Special Rules as a denial of Supersedeas.

An employer that follows the above timeline, in terms of taking an appeal and seeking Supersedeas following the issuance of an award of compensation in favor of a claimant, will not be held to be in violation of the Act, or subject to penalties, under the Supreme Court’s ruling in Snizaski.

Practical Tips

Employers, insurers, and third-party administrators must understand the practical implications of integrating Supersedeas procedures into the administration of workers’ compensation claims.

Excel Logistics, the Supreme Court is limiting Supersedeas applications to petitions that are filed under Sections 413 or 430 of the Act.

The initial inquiry is under what provisions of the Act Supersedeas can be requested. Under Excel Logistics, the Supreme Court is limiting Supersedeas applications to petitions that are filed under Sections 413 or 430 of the Act. It is not permitting Supersedeas reimbursements under Section 306(f.1)(8), involving forfeiture-based petitions.

Practitioners must understand the procedures and timelines within which compensation payments need to be made after an award of compensation by a WCJ or by the Appeal Board, particularly when the employer appeals the compensation award and also concurrently seeks a timely request for Supersedeas.

The timeline for making timely payments of compensation following an employer appeal and timely Supersedeas request is eighty (80) days from the issuance of the compensation award.

The timeline for making timely payments of compensation following an employer appeal and timely Supersedeas request is eighty (80) days from the issuance of the compensation award. This window is only open if an employer files a timely appeal and Supersedeas request from the WCJ’s decision; if the decision is not appealed, the award must be satisfied within thirty (30) days of its issuance.

Once again proving that the less than clear language of the Act is often the subject of controversy and confusion as to its meaning and certainty, we encourage you to contact us with any questions that you might have about your workers’ compensation claims or practice.

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