eNotes: Workers’ Compensation – January 2025 – Pennsylvania

SIGNIFICANT CASE SUMMARIES

Pennsylvania Case Summaries

City of Philadelphia v. Deloatch
Commonwealth Court of Pennsylvania
CASES CONSOLIDATED No. 541 C.D. 2022, No. 589 C.D. 2022

Decided Dec. 24, 2024

The Commonwealth Court addresses the impact of failing to preserve the issue of a subrogation lien at every stage of a case as well as the failure to attach the correct decision to an appeal.

Background

This case concerns a dispute between a medical insurance company (Insurer) and Employer concerning the Employer’s failure to reimburse the Insurer’s subrogation lien from the bills the Insurer paid during the pendency of an employee’s workers’ compensation case. The employee initiated the litigation by filing a Claim Petition, and the Insurer established its right to subrogation in this dispute. The WCJ acknowledged the Insurer’s lien in her Decision granting the Claim Petition. The Employer appealed to the Board, which reversed, but the employee appealed to the Commonwealth Court, which reversed the Board. The Employer failed to pay the subrogation lien, triggering the Insurer to file a Penalty Petition, which the WCJ granted. The Employer appealed, arguing that the Insurer waived its right to subrogation by not raising the issue when the Decision granting the Claim Petition was on appeal. Although the Employer was appealing the Decision granting the Penalty Petition, it erroneously attached the Decision granting the Claim Petition to its appeal. The Board alerted the parties of the issue, and the parties promptly provided the correct Decision in response.

Holding

The Insurer was not required to raise the issue of its subrogation lien at each stage of the appeal of the Decision granting the Claim Petition. In reversing the Board, the Commonwealth Court reinstated the WCJ’s Decision in its entirety, which included the finding that the Insurer was entitled to reimbursement. Thus, pursuant to Section 406.1, the Employer was required to pay the subrogation lien with interest. Although the Employer technically violated Section 111.11(a)(5) of the Board Rules by failing to attach the correct Decision to its appeal of the Decision granting the Penalty Petition, the error was not fatal here since there was no prejudice.

Takeaway

A medical insurer does not waive its subrogation lien for payments made during the course of a workers’ compensation case by not preserving the issue at each stage of an appeal. Secondly, a party’s failure to attach the correct decision to its appeal may not be fatal if the failure does cause prejudice.

Questions about this case can be directed to Cailey Farinaro at 610-332-7008 or cfarinaro@tthlaw.com.

Cty. of Allegheny v. Marzano
No. 1111 C.D. 2022
Commonwealth Court of Pennsylvania

Decided: Dec. 24, 2024

The Commonwealth Court addresses the impact of FMLA leave occurring within the year preceding a work injury on the determination of a claimant’s earning compacity.

Background

Claimant, a corrections officer with Employer, Allegheny County Jail (Employer), filed a Claim Petition alleging physical injuries following an inmate attack in June 2018, seeking ongoing total disability benefits, medical bill payments, and disfigurement benefits. Later, Claimant amended the Petition to include a psychological component. The WCJ granted Claimant’s Petition and the WCAB affirmed the decision. On appeal, upon other issues, Employer contended that the WCJ erred by determining that Claimant is entitled to benefits based upon a 40-hour work week.

Specifically, Employer appealed the WCJ’s decision that when Claimant was called back to work in June 2018 following the injury, he had a reasonable expectation based on a Collective Bargaining Agreement that he would be paid an hourly salary based upon a 40-hour week. The WCJ found that the wages earned by Claimant in the year prior to the work injury, a period where Claimant took employer-approved FMLA leave, to be a gross underestimation of Claimant’s true earning capacity. Employer asserted that the WCJ erred in determining that Claimant had an Average Weekly Wage (AWW) based upon 40 hours of work per week when: 1) Claimant never testified that he had an expectation of working 40 hours per week; and 2) he had not done so in the year leading up to his work injury.

Holding

On appeal, the Commonwealth Court acknowledged that Section 309 of the Workers’ Compensation Act governs the calculation of a claimant’s “wages” for purposes of determining the appropriate amount of workers’ compensation benefits to which he is entitled. Specifically, Section 309 of the Act provides that when a claimant “has worked less than a complete period of thirteen calendar weeks” prior to sustaining the work injury “and does not have fixed weekly wages, the AWW shall be the hourly wage multiplied by the number of hours the employee was expected to work per week under the terms of employment.” 77 P.S. §582(d.2). Section 309(d.2) does not contain a look-back period but, rather, “provides for a prospective calculation of potential earnings.”

Citing to the Pennsylvania Supreme Court cases, Hannaberry HVAC and Colpetzer, the Commonwealth Court acknowledged that Claimant was a long-term employee, having worked for Employer over the course of ten (10) years. Claimant maintained a continuing employment relationship with Employer pursuant to the terms of his Collective Bargaining Agreement even when he was not working due to past work-related disabilities or FMLA leave. Because Claimant worked less than a complete period of thirteen calendar weeks as of the date of the injury, Section 309(d.2) applied. Because Employer offered Claimant to return to work via a modified work offer letter following the injury which listed a “7am-3pm shift, five days a week […] at the pay rate of $33.59”, the Commonwealth Court believed it supported the expectation that Claimant’s schedule would remain the same as it was prior to the injury. To conclude otherwise and base Claimant’s AWW on the period in which he took Employer-approved FMLA leave and worked approximately 10 days would grossly underestimate Claimant’s true earning capacity and would penalize Claimant for taking Employer-approved FMLA leave. Therefore, the AWW determined by the WCJ was supported by substantial evidence and in accordance with the humanitarian purposes of the Act.

Takeaway

This Decision makes it clear that when a claimant works less than thirteen (13) weeks in the year preceding the work injury due to employer-approved FMLA, the WCJ will not consider the vast number of days not worked when calculating the Average Weekly Wage because a claimant had no earning capacity during that time away. In doing so however the Court has conflated the concepts of length of employment and weeks worked. Section 309 (d.2) was intended to address short term employees who were recently hired, not employees who have been employed at least more than one calendar quarter who are unable to complete a 13 week period prior to the injury for non-work injury reasons.

Questions about this case can be directed Taryn Vender at 570-825-4794 or tvender@tthlaw.com.

700 Pharm. v. Bureau of Workers’ Comp. Fee Review Hearing Off. (State Workers’ Ins. Fund)
No. 274 MAL 2024
Supreme Court of Pennsylvania

Decided: Dec. 11, 2024

The PA Supreme Court grants allowance of appeal regarding a pharmacy’s entitlement to payment where the Claimant’s physician has a financial interest in the pharmacy.

Background

In May 2024, TT&H attorney Christopher Scott represented State Workers’ Insurance Fund (SWIF) in a dispute against 700 Pharmacy regarding fee reviews for 5 different Claimants. The case centered around the application of the anti-referral provision of the Workers’ Compensation Act, specifically whether this provision extended to pharmacies. The core issue before the Commonwealth Court was whether the prescriptions at the center of the fee review applications were properly denied due to being products of a prohibited self-referral under Section 306(f.1)(3)(iii) of the Act. 700 Pharmacy contended that the anti-referral provision should not apply to pharmacies or pharmaceuticals, as these were not specifically enumerated in the statute.

Attorney Scott persuaded the Commonwealth Court to interpret “goods or services” within the provision to include medications. The Court held that the anti-referral provision was designed to cover a broad spectrum of medical goods and services, including pharmaceuticals.

Holding

On December 11, 2024, the Supreme Court of Pennsylvania granted allowance of appeal on the question of if a pharmacy is entitled to payment for prescription drugs and pharmaceutical services provided to a Claimant whose physician has a financial interest in the pharmacy. Section 306(f.1)(3)(iii) of the Workers’ Compensation Act makes it “unlawful for a provider to refer a person for laboratory, physical therapy, rehabilitation, chiropractic, radiation oncology, psychometric, home infusion therapy or diagnostic imaging, goods or services pursuant to this section if the provider has a financial interest with the person or in the entity that receives the referral.” Because this provision neither includes nor refers to “prescription drugs” or “professional pharmaceutical services,” the issue presented to the Supreme Court arose.

Despite the Commonwealth Court’s well-reasoned Decision, allowance of such appeal opens the door to potential change in referral situations that are not explicitly called out in Section 306(f.1)(3)(iii), depending on what the Supreme Court holds.

Takeaway

Employers and insurers should watch this space to see if the Supreme Court will uphold the Commonwealth Court’s Decision that Section 306(f.1)(3)(iii) of the Act was meant to cover a wide range of anti-referral situations.

Questions about this case can be directed to Gabrielle Martin at 610-332-7003 or gmartin@tthlaw.com or Christopher Scott at 717-237-7111 or cscott@tthlaw.com.

Erie Ins. Prop. & Cas. Co. v. Heater (Workers’ Comp. Appeal Bd.)
No. 301 MAL 2024
Supreme Court of Pennsylvania

Decided: Dec. 17, 2024

For sole proprietors seeking workers’ compensation benefits, timely notice of an injury must be provided directly to the insurer within 120 days, as notice to oneself as an employer is insufficient. Failure to meet this requirement will result in the denial of the claim.

Background

David Heater, a sole proprietor, sustained a serious injury while performing work for his business. He notified himself (as Employer) of the injury but did not notify Erie Insurance, his workers’ compensation insurer, until nearly two years later. Erie denied the claim, arguing that notice was untimely. Erie also argued the injury was a result of a backflip that Mr. Heater did while on break from his work duties. However, the Board found Mr. Heater’s testimony that he sustained the injury during work, was credible. Erie argued that it was absurd that Mr. Heater would notify himself as he and the Employer are one, and that was not the intention of Section 311.

Holding

The Commonwealth Court held that when a sole proprietor is both the injured employee and the employer, the “employer” for purposes of providing notice under Section 311 of the Workers’ Compensation Act (the Act) is the insurer. Failure to notify the insurer within 120 days of the injury bars the claim

The Court rejected previous rulings (e.g., Travelers Insurance), which allowed notice to an employer to suffice, distinguishing this case because Heater, as a sole proprietor, did not represent a separate corporate entity. The Court found that allowing a claimant in Heater’s position to delay notifying the insurer defeated the purpose of Section 311, which is to allow prompt investigations and prevent stale claims. The Court emphasized that insurers must be treated as the “employer” for notice purposes when the employer and employee are the same individual.

Takeaway

If the Pennsylvania Supreme Court grants the Petition for Allowance of Appeal and rules that an employee satisfies Section 311 of the Act by giving notice solely to the employer, insurers could face significant challenges in investigating and defending claims involving sole proprietors. In cases where the injured party is both the employer and the employee, notice to oneself as the “employer” may leave the insurer uninformed for months or even years, frustrating the purpose of Section 311 to prevent stale claims and ensure timely investigations.

Alternatively, if the Supreme Court affirms the Commonwealth Court’s interpretation that Section 311 requires notice to the insurer when the claimant is a sole proprietor, it would establish clearer responsibilities for claimants and strengthen insurers’ ability to promptly investigate claims. This interpretation ensures that insurers, as the ultimate bearers of liability, are informed within statutory deadlines, maintaining the integrity of the claims process and protecting against potential abuse by sole proprietors who might delay notice.

A decision that notice to the employer alone suffices under Section 311 could also blur the statutory protections provided to insurers under the Act. This interpretation may open the door for potential inequities where other employees must notify their employer, who then promptly informs the insurer, while sole proprietors could bypass the notice requirement to the insurer altogether. Such a precedent could disrupt the balance between employee protections and insurer rights under the Act.

Questions about this case can be directed to Elizabeth Saleb at 610-332-7020 or esaleb@tthlaw.com.