Pennsylvania Client Advisory: Commonwealth Court Clarifies Carrier’s Responsibility on Paying For a Claimant’s Purchase of a New Home vs Renovation of Existing Home

The following is a summary of a new, reported case, filed on August 1, 2022 which holds that while an employer is responsible for home modifications necessitated by a work-related injury, an employer is not liable for the contribution towards a new home.

Ralph Martin Construction and Lackawanna American Insurance Co., v. Miguel Castaneda-Escobar (WCAB),  341 C.D. 2021, filed August 1, 2022.

The Commonwealth Court has held that Section 306(f.1)(1)(ii) of the Act, which provides for the payment of, intra alia, orthopedic appliances does not obligate an employer to contribute to the purchase of a new home, even if the requested payment is calculated to be equal to the cost of renovation of the injured employee’s existing home.

The claimant, Miguel Castaneda-Escobar, was injured on when he fell off a roof in the course of his employment rendering him a paraplegic. Employer accepted liability via a Notice of Compensation Payable. At the time of the injury, Mr. Castaneda-Escobar was residing in his brother’s row house where the bedrooms and bathroom are located on the second floor. A design and reconstruction firm estimated that the cost to modify the row house to add a first floor bedroom and bathroom would cost $119,722.21. It suggested that it might be more cost effective to relocate to a single floor residence. Modifications on the row house were never performed.

Instead, Mr. Castaneda-Escobar purchased a home for $230,000 that could accommodate his needs with a first floor master bedroom and bathroom. Mr. Castaneda-Escobar also incurred closing costs in the amount of $4,158. The master bathroom required modification for wheelchair access. Employer reimbursed Mr. Castaneda-Escobar $5,905.04, the cost of the bathroom renovation.

Thereafter, employer filed a Petition to Review Medical Treatment and/or Billing asserting that the purchase of the new home was not reimbursable under Section 306(f.1)(1)(ii) of the Act.

The WCJ concluded that the Employer was not liable to reimburse Claimant for the purchase of the new home or for the estimated cost to renovate the row house. However, the WCJ did find employer liable for the closing costs incurred to purchase the new home reasoning that by purchasing a new home, Employer was relieved of the obligation to modify the row house. The WCJ also awarded litigation costs since Claimant prevailed in part.

Both parties appealed to the WCAB. Citing Griffiths v. WCAB (Seven Stars Farm, Inc.), the WCAB concluded that the purchase of the new home did not relieve the Employer from its obligation to renovate the row house to accommodate Mr. Castaneda-Escobar’s physical limitations and therefore reversed the WCJ’s decision and ordered the Employer to pay the cost of the proposed renovation, with a credit for what Employer had already paid for the bathroom renovation. The WCAB also affirmed the award of litigation costs.

Employer appealed to the Commonwealth Court. The Court began its analysis by citing to Section 306(f.1)(1)(ii) of the Act which establishes an employer’s obligation to provide payment for, intra alia, orthopedic appliances and prostheses. “Orthopedic appliances” has been construed to cover the acquisition of vehicles and the construction of home modifications, where necessary, to allow the claimant to use orthopedic appliances and prostheses. Reiger v. WCAB (Barnes & Tucker Co.), 512 A.2d 84 (Pa. Cmwlth. 1987). Employer argued that “the fact that claimant spent less to modify his new home than it would have cost to modify his prior residence does not make the new home an orthopedic appliance. The fact that Claimant eliminated an expense that was never incurred by purchasing the new home is not the equivalent of modifying the home.”

The Commonwealth Court agreed with Employer holding that the purchase of a new home extends the phrase “orthopedic appliance” beyond a reasonable construction. The Court also notes that the estimated cost to renovate the row house did not become Mr. Castaneda-Escobar’s baseline entitlement, and unlike Reiger and Griffiths, where the injured workers sought reimbursement for costs after they were incurred, Mr. Castaneda-Escobar did not incur any costs to modify his home. And where Mr. Castaneda-Escobar did incur costs to modify his home, those costs were voluntarily reimbursed.

Ultimately, the Employer was liable for the renovations to the new home, which were voluntarily paid, but not liable for the portion of the purchase price of the new home equal to the prior renovation estimate, nor was the Employer liable for closing costs or litigation costs, since the employee did not prevail in whole or in part.

Editor’s note: The Court noted that Mr. Castaneda-Escobar did not provide any testimony as to why he chose to purchase a new home versus renovation of his existing residence. That testimony may have shed light on why that decision was made. However, the Court also notes that there was no discussion about the reasonableness of the cost of the home to determine whether or not the estimate was reasonable. Further, the Court noted that due to its age and construction, the row house would need both an addition as well as further modifications to the interior of the residence. Lastly, the Court notes that there was no evidence of other alternatives such as rental of a one story apartment or house.