Court Opinion

ID: 9956929
Source: CourtListenerOpinion
Date Created: 2024-04-03 14:11:02.415703+00
Date Added: 2024-06-11T08:17:59.011600
License: Public Domain

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Medical Revenue Associates,                    :
                                               :
                             Petitioner        :
                                               :
               v.                              : No. 1186 C.D. 2022
                                               : Submitted: October 10, 2023
Sue Ellen Kanefsky (Workers’                   :
Compensation Appeal Board),                    :
                                               :
                             Respondent        :

BEFORE:       HONORABLE MICHAEL H. WOJCIK, Judge
              HONORABLE ELLEN CEISLER, Judge
              HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE WOJCIK                                                    FILED: April 3, 2024

              Medical Revenue Associates (Employer) petitions for review of the
October 7, 2022 Order of the Workers’ Compensation (WC) Appeal Board (Board).
The Board affirmed WC Judge (WCJ) Denice Krass’s April 13, 2022 Order, which
applied Employer’s subrogation credit as of January 17, 2019, and granted Sue Ellen
Kanefsky’s (Claimant) Penalty Petitions under Section 435(d)(i) of the WC Act
(Act).1 On appeal, Employer argues that its subrogation credit should have been
applied to all past due indemnity benefits and that the record does not evidence any

       1
         Act of June 2, 1915, P.L. 736, as amended, added by the Act of February 8, 1972, P.L.
25, 77 P.S. §991(d)(i). In pertinent part, Section 435(d)(i) of the Act provides: an employer, in
violation of the Act, may be penalized up to 10 percent of the amount awarded, but may be
penalized up to 50 percent “in cases of unreasonable or excessive delays.” 77 P.S. §991(d)(i).
violation of the Act - such that penalties are unwarranted. For the foregoing reasons,
we affirm.
               On January 19, 2015, Claimant sustained work-related injuries to her
upper right leg, both knees, right foot, and right ankle. WCJ Opinion, 4/13/22, at
Finding of Fact (F.F.) No. 1.2 Claimant settled a third-party lawsuit relating to these
injuries for $650,000.00 on or around August 3, 2018. Id. at F.F. No. 24(a). Subject
to expenses, the balance of recovery for this settlement was $370,988.66. Id.
               Prior to executing the third-party settlement agreement, Claimant filed
a claim petition seeking, inter alia, WC benefits. In an order circulated on January
19, 2022, WCJ Joseph McManus found “Claimant was entitled to total disability
benefits on and after January 19, 2015 at the weekly compensation rate of $475.50.”
WCJ Opinion, 4/13/22, at F.F. No. 1. Neither party appealed. Because Employer
did not pay WC benefits pursuant to this order, Claimant filed the first of her instant
Penalty Petitions.      Id. at F.F. No. 3.          Thereafter, Employer filed suspension,
modification, and review petitions (Review Petition), “requesting subrogation and a
credit for a third-party recovery of $650,000.00 as of January 16, 2019.” Id. at F.F.
No. 4. By May 15, 2019 Interlocutory Order, WCJ McManus ordered Employer to
comply with his January 16, 2019 Order. Id. at F.F. No. 5. Claimant filed the second
of her Penalty Petitions on June 20, 2019, contending Employer violated the Act by
failing to abide by the WCJ’s Interlocutory Order. Id. at F.F. No. 6. Ultimately,
WCJ McManus granted Claimant’s Penalty Petitions, while denying Employer’s
Review Petition. Id. at No. 7. Employer appealed this order to the Board. Id.

       2
          The WCJ Opinion, dated April 13, 2022, may be found in the Reproduced Record (R.R.)
at 103a–166a. Further, we will correct Employer’s improper pagination of the Reproduced
Record. See Pa.R.A.P. 2173 (“[T]he reproduced record . . . shall be numbered separately in Arabic
figures and not in Roman numerals: thus 1, 2, 3, etc., followed in the reproduced record by a small
a, thus 1a, 2a, 3a, etc. . . .”).
                                                2
             In an opinion dated June 3, 2021, the Board “specifically reversed WCJ
McManus’s denial of [] Employer’s [Review Petition], vacated WCJ McManus’s
grant of the Penalty Petitions, and remanded for the WCJ ‘to determine the net
amount of subrogation [Employer] is entitled to.’” WCJ Opinion, 4/13/22, at F.F.
No. 9.
             On remand, WCJ Krass granted Employer’s Review Petition as well as
Claimant’s Penalty Petitions. WCJ Opinion, 4/13/22, at F.F. No. 16. Relevant here,
WCJ Krass concluded that “Employer ha[d] successfully proven its subrogation
interest/lien in the amount of $370,988.66. As such, [] Employer is responsible for
42.92% of any future weekly benefits or $204.09 per week beginning on January 17,
2019[,] . . . until the subrogation interest of $370,988.66 is exhausted.” Id. at F.F.
No. 24(b). WCJ Krass found that Employer’s subrogation lien was not effective
until this time, because

             the underlying record clearly support[ed] that [] Employer
             was aware of the third[-]party litigation . . . and the
             settlement of the third[-]party litigation . . . but did not
             assert its right to subrogation during the initial litigation
             before WCJ McManus. Additionally, [] Employer’s
             pending [Review Petition] specifically requested
             subrogation and credit for third[-]party recovery as of
             January 16, 2019[,] not January 19, 2015.
Id. at F.F. No. 20 (emphasis added). As for the Penalty Petitions, the WCJ opined:

             Employer violated the provisions of the Act by failing to
             comply with the January 16, 2019 Decision and Order of
             WCJ McManus and May 15, 2019 Interlocutory Order of
             WCJ McManus in that [] Employer engaged in self-help
             regarding the subrogation matter without a Court Order
             and continued to pay Claimant at a reduced rate through
             September of 2020, an excessive delay. As such, a penalty
             in the amount of 50% of the initial shortfall . . . is found
             to be warranted under the circumstances.

                                          3
Id. at F.F. No. 24(c). All told, WCJ Krass found that, as of April 2019, Employer
still owed Claimant and her counsel $103,716.42, subject to penalties. Id. at F.F.
No. 24(b).
               Employer appealed this decision on May 2, 2022, arguing: (1) WCJ
Krass’s decision did not consider Employer’s subrogation interest in determining the
amount Employer owes on past indemnity benefits, inconsistent with the Board’s
June 3, 2021 Opinion; and (2) the grant of the Penalty Petitions should be reversed
and vacated.
               In an opinion circulated on October 7, 2022, the Board affirmed WCJ
Krass’s order.3 First, the Board noted that the past due benefits were predicated on
figures that did not consider Employer’s subrogation interest, because neither
Employer, nor Claimant, brought Employer’s subrogation interest to WCJ
McManus’s attention. Board Opinion, 10/7/22, at 6. Because this order was final,
and neither party appealed it, “[the Board found] no error in the WCJ’s calculations
of Claimant’s past due indemnity benefits . . . .” Id. at 7. Concerning Employer’s
purported violation of the Act, the Board agreed with WCJ Krass that Employer
“engaged in self-help regarding the subrogation matter without a court order, and
there was an excessive delay in [Employer’s] payments to Claimant.” Id. at 8. It is
from this Board Opinion that Employer has filed a timely appeal.4
               Employer first argues that under the third-party settlement agreement,
Employer “is responsible for 42.92% of weekly benefits to satisfy its obligation to

       3
     The Board Opinion, dated October 7, 2022, may be found in the Reproduced Record titled
“WCAB Opinion 10/7/2022.” R.R. at 178a-90a.

       4
          Our review “in a [WC] appeal is limited to determining whether necessary findings of
fact are supported by substantial evidence, whether an error of law was committed, or whether
constitutional rights were violated.” Elberson v. Workers’ Compensation Appeal Board (Elwyn,
Inc.), 936 A.2d 1195, 1198 n.2 (Pa. Cmwlth. 2007).
                                              4
reimburse pro rata Claimant’s fees and expenses until the $370,988.66 subrogation
interest is exhausted.” Petitioner’s Brief at 12. Because WCJ McManus’s January
16, 2019 order determined Employer was responsible for $475.50 per week in wage
loss benefits, when applying the subrogation credit, Employer believes it is only
responsible for $204.09 payable per week to Claimant. Id. at 13. Critically,
Employer argues that this credit should apply towards all of Employer’s past due
indemnity benefits from the date of injury.5 Id. Considering other expenses,
Employer claims that Claimant and her counsel are only entitled to $101,033.22,6
but have been paid $191,545.22 as of February 28, 2022, resulting in a $90,512.00
overpayment. Id. at 14-15.
                Presently, the discrepancy between the Board’s calculations of past due
benefits and Employer’s own calculations turns entirely on the effective date of the
subrogation credit.7 Hence, if the credit is to be applied beginning on January 17,

       5
           According to Employer, WCJ McManus’s January 16, 2019 Order

                found a compensation rate of $475.50 per week. Pursuant to the
                [t]hird[-p]arty [s]ettlement agreement[, Employer] is responsible for
                42.92% of weekly benefits which equals $204.09 . . . . The wage
                loss benefits payable from the date of injury through the date of
                decision is $42,538.19 ($204.09 per week for 208 weeks and 3 days
                [1/19/2015 - 1/16/2019]).

Petitioner’s Brief at 14.

       6
          Employer claims: “Altogether through the underlying litigation (2/28/2022), Claimant
and Claimant’s counsel are entitled to $101,033.22 ($67,824.66 payable pursuant [to] the
1/16/2019 Decision + $33,208.36 payable from the date of the decision through the underlying
litigation = $101,033.22).” Petitioner’s Brief at 14.

       7
         The right to subrogation is supported by the following threefold rationale: “to prevent
double recovery for the same injury by the claimant, to ensure that the employer is not compelled
to make compensation payments made necessary by the negligence of a third party, and to prevent
(Footnote continued on next page…)
                                                 5
2019, as the WCJ found, then no overpayment has occurred. To that end, Section
319 of the Act, 77 P.S. §671, provides in relevant part:

              Where the compensable injury is caused in whole or in
              part by the act or omission of a third party, the employer
              shall be subrogated to the right of the employe, his
              personal representative, his estate or his dependents,
              against such third party to the extent of the compensation
              payable under this article by the employer[.]
Although it is true that “subrogation is ‘automatic,’ and ‘by its terms, admits no
express exceptions, equitable or otherwise[,]’” an employer nevertheless bears the
burden of establishing its right to subrogation. Young v. Workers’ Compensation
Appeal Board (Chubb Corporation), 88 A.3d 295, 302 (Pa. Cmwlth. 2014).

              To establish its right to subrogation, the employer must
              demonstrate that it was compelled to make payments due
              to the negligence of a third party and that the fund against
              which the employer seeks subrogation was for the same
              injury for which the employer is liable under the Act.
              Whether an employer is entitled “to subrogation is a
              question of law based upon the facts as found by the
              WCJ.”
Id. See also Serrano v. Workers’ Compensation Appeal Board (Ametek, Inc.), 154
A.3d 445, 450 (Pa. Cmwlth. 2017); Kalmanowicz v. Workers’ Compensation Appeal
Board (Eastern Industries, Inc.), 166 A.3d 508, 511 (Pa. Cmwlth. 2017). Therefore,
the onus of asserting its right to subrogation lies squarely with Employer.
              In light of the above, we discern no error in WCJ Krass’s determination
that Employer’s subrogation credit should be applied beginning on January 17, 2019.
As the same noted, Employer did nothing to demonstrate its entitlement to
subrogation until it filed its Review Petition on April 15, 2019, wherein it

a third party from escaping liability for his negligence.” Dale Manufacturing Co. v. Bressi, 421
A.2d 653, 654 (Pa. 1980).
                                               6
specifically requested that the WCJ order application of its subrogation credit as of
January 16, 2019. See R.R. at 37a. For lack of a better phrase, and based on a review
of its own filings, Employer got what it asked for. However, in now asking this
Court to apply its subrogation credit toward all of Claimant’s past due indemnity
benefits, Employer would have us circumvent its burden of asserting its subrogation
right. We decline to do so.
             Further, as the Board correctly noted, the decision of a WCJ is a final
order. Section 418 of the Act, 77 P.S. §833, states in relevant part: “The findings of
fact made by a [WCJ] to whom a petition has been assigned or any question of fact
has been referred . . . shall be final, unless an appeal is taken under this [A]ct.” See
also 34 Pa. Code §131.111(b) (“The decision of the [WCJ] will be a final order,
subject to a correction or amendment under [Section ]131.113 (relating to correction
or amendment of decision) or appeal.”).
             Here, WCJ McManus found as fact that Claimant became temporarily
totally disabled on January 19, 2015, and was entitled to a weekly compensation rate
of $475.50, subject to a credit for unemployment. WCJ Opinion, 1/16/19, at F.F.
Nos. 22-23, 25. As such, these findings became final, and crediting Employer’s
subrogation lien toward Claimant’s past due benefits would effectively attack WCJ
McManus’s final order. Thus, the Board did not err when it observed:

             Initially, we must point out that even though both parties
             were aware of Claimant’s third-party settlement prior to
             WCJ McManus’[s] Order on January 16, 2019, neither
             party notified WCJ McManus of the settlement.
             Therefore, when he ordered payment of past due amounts,
             he necessarily did not include a subrogation credit.
             Additionally, neither appealed WCJ McManus’[s] January
             16, 2019[] Decision and Order. As a result, it became a
             final order and obligated [Employer] to pay Claimant’s
             benefits at the full weekly amount of $475.50 beginning

                                           7
               on the date of her injury until January 17, 2019, when it
               began taking the subrogation credit resulting in a weekly
               payment of $204.09. The parties, as well as the Board, are
               bound by the final unappealed Order. We find no error in
               the WCJ’s calculations of Claimant’s past due indemnity
               benefits.
Board Opinion, 10/7/22, at 7. Because Employer owed full compensation from the
date of injury through January 16, 2019, no overpayment occurred.8
               Finally, Employer also contends that its statutory subrogation rights
under Section 319 of the Act, 77 P.S. §671, are absolute. Petitioner’s Brief at 16.
Because Claimant bears the burden of proof in establishing a violation of the Act,
and, in its view, Claimant did not establish a violation by competent evidence, the
WCJ and Board erred in finding a violation. Id. at 17. Employer also asserts that it
cannot be deemed to have violated the Act for engaging in self-help, because the
record demonstrates that Claimant has been overpaid. Id. at 17-18.
               Conversely, Claimant argues “[u]nquestionably, [] Employer in this
matter ignored multiple judicial orders and determinations in this case and exercised
‘self-help’ and delayed the full payment of compensation to [C]laimant, all in the
interest of securing [its] subrogation lien without a Court Order or fully executed
[t]hird[-p]arty [s]ettlement [a]greement.”            Respondent’s Brief at 6.           Finally,
Claimant argues that her Penalty Petitions were appropriate, despite the recognition
of Employer’s right to a subrogation lien, because Employer refused to pay the full
amount of indemnity benefits owed based on Employer’s unilateral calculation of
payments. Id. at 6-7.
               Regarding the Penalty Petitions:

       8
          We also emphasize that this outcome does not corrode the right to subrogation. To the
contrary, this outcome ensures that Employer will receive the benefit of its subrogation lien until
it is exhausted while also respecting the finality of WCJ McManus’s January 16, 2019 Order.
                                                8
             Section 435(d)(i) of the Act, [77 P.S. §991(d)(i),] . . .
             provides that an employer may be penalized ten percent of
             the amount awarded for its failure to comply with the Act
             or its supporting regulations and that, in cases of
             unreasonable or excessive delays, the penalties may be
             increased up to fifty percent. A claimant who files a
             penalty petition must first meet her initial burden to prove
             that a violation of the Act occurred. Thereafter, the burden
             shifts to the employer to prove that a violation of the Act
             has not occurred. The decision to impose penalties as well
             as the amount of penalties is within the discretion of the
             WCJ. The WCJ’s decision regarding penalties will not be
             disturbed on appeal absent an abuse of discretion.
City of Philadelphia v. Workers’ Compensation Board of Appeal (Andrews), 948
A.2d 221, 228 (Pa. Cmwlth. 2008) (emphasis added) (citing Shuster v. Workers’
Compensation Appeal Board (Pennsylvania Human Relations Commission), 745
A.2d 1282 (Pa. Cmwlth. 2000)).
             “An employer violates Section 428 of the Act, [added by the Act of
June 26, 1919, P.L, 642,] 77 P.S §921, if the employer does not begin to make
payments within thirty days of the date on which its obligation to pay arises.”
Thomas v. Workers’ Compensation Appeal Board (Delaware County), 746 A.2d
1202, 1205 (Pa. Cmwlth. 2000). Similarly, Section 430(b) of the Act, 77 P.S.
§971(b), states: “[a]ny insurer or employer who . . . refuses to make any payment
provided for in the decision without filing a petition and being granted a supersedeas
shall be subject to a penalty as provided in [S]ection 435 . . . .” Thus, an employer’s
failure to commence payment of compensation in accordance with a WCJ’s order is
sufficient to warrant the imposition of penalties. See, e.g., City of Philadelphia v.
Workers’ Compensation Appeal Board (Thompson), 264 A.3d 408, 412 (Pa.
Cmwlth. 2021) (citing Westinghouse Electric Corp., v. Workers’ Compensation
Appeal Board (Weaver), 823 A.2d 209, 213-14 (Pa. Cmwlth. 2014)).

                                          9
              Here, the Board affirmed the grant of Claimant’s Penalty Petitions,
because “[i]t is undisputed that [Employer] failed to make any payments to Claimant
from the date she was injured on January 19, 2015 until April 2019, a period of more
than four years” in violation of multiple WCJ orders. Board Opinion, 10/7/22, at 7-
8. This established, by competent evidence, the requisite violation of the Act. See
77 P.S. §921; and 77 P.S. §971(b). Hence, Employer’s repeated bald assertion that
Claimant has failed to carry her burden in proving that a violation of the Act has
occurred must fail. The closest that Employer comes to carrying its burden in
response is by reiterating its argument that an overpayment has occurred, such that
it has complied with the January 19, 2016 Order insofar as it was mitigated by the
third party settlement agreement. Because we have already determined that no
overpayment occurred, this argument necessarily fails. Nevertheless, we observe
that the Act does not permit an employer to engage in self-help by unilaterally
withholding payment in accord with what it believes to be the proper calculation of
indemnity benefits. See City of Philadelphia v. Workers’ Compensation Appeal
Board (Sherlock), 934 A.2d 156, 160 (Pa. Cmwlth. 2007) (“However, the Act does
not give the employer the right of self-help, i.e., the right to ignore the requirements
of the Act and unilaterally suspend, terminate, modify or refuse to pay benefits
without following the prescribed statutory remedies.”). Thus, the Board did not err
in affirming the WCJ’s grant of the Penalty Petitions.9

       9
          To the extent that Employer argues that the WCJ erred in finding it engaged in an
unreasonable contest and awarding attorney’s fees in the amount of 20% of the penalty award, this
argument also fails. See Petitioner’s Brief at 17-18. Section 440(a) of the Act, added by the Act
of February 8, 1972, P.L. 25, 77 P.S. §996(a), plainly and unambiguously provides that when an
employer unreasonably contests a claim, the employee, in whose favor the matter has been
resolved, shall be awarded a reasonable sum for costs incurred for attorney’s fees. See Ramich v.
Worker’s Compensation Appeal Board (Schatz Electric, Inc.), 770 A.2d 318, 322 (Pa. 2001). An
(Footnote continued on next page…)
                                               10
               Accordingly, the Board’s October 7, 2022 Order is affirmed.

                                              MICHAEL H. WOJCIK, Judge

unreasonable contest is presumed, such that Employer bears the burden of establishing a
reasonable basis for its contest. Hansen v. Workers’ Compensation Appeal Board (Stout Road
Associates), 957 A.2d 372, 375 (Pa. Cmwlth. 2008). To overcome this presumption, an employer
must establish that its contest was prompted to resolve a genuinely disputed issue. Essroc
Materials v. Worker’s Compensation Appeal Board (Braho), 741 A.2d 820, 826-27 (Pa. Cmwlth.
1999). “Because the issue of reasonable contest is a question of law, this Court must examine the
entire record to determine if the evidence presented supports the WCJ’s conclusion.” Hansen, 957
A.2d at 375 (citing Striker v. Workmen’s Compensation Appeal Board (California University of
Pennsylvania), 650 A.2d 1109 (Pa. Cmwlth. 1994)).

        The WCJ determined Employer did not have a reasonable basis for contesting the Penalty
Petitions, for the following reasons:

               [C]ounsel was required to attend multiple hearings before [WCJs],
               one of which involved the presentation of Claimant’s testimony;
               counsel was required to attend a fact witness deposition; counsel
               prepared and filed briefs for the underlying litigation and for the
               appeal before the [Board]; [and C]ounsel is a known experienced
               [WC] attorney.

WCJ’s Opinion, 4/13/22, at F.F. No. 24h. On this point, Employer once more reiterates that it
made payment to Claimant as required by WCJ McManus’s January 16, 2019 Order, but “pursuant
to the [t]hird[-p]arty [s]ettlement agreement.” Petitioner’s Brief at 18.

        As indicated, Employer’s use of self-help clearly warranted the grant of Claimant’s Penalty
Petitions. Contesting it solely on the mistaken basis that it was justified in withholding
compensation because of a purported overpayment does not satisfy the “genuinely disputed issue”
needed to overcome the presumption of an unreasonable contest. For example, a reasonable
contest might exist where there is disagreement over conflicting evidence or the evidence is subject
to contrary inferences, see Pennsylvania State University v. Workers’ Compensation Appeal Board
(Sox), 83 A.3d 1081, 1089 (Pa. 2013), but not here where the issue pertains to Employer’s
compliance with the final order of a WCJ. Consequently, the WCJ did not err in finding Employer
engaged in an unreasonable contest and awarding attorney’s fees.
                                                11
         IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Medical Revenue Associates,            :
                                       :
                       Petitioner      :
                                       :
            v.                         : No. 1186 C.D. 2022
                                       :
Sue Ellen Kanefsky (Workers’           :
Compensation Appeal Board),            :
                                       :
                       Respondent      :

                                    ORDER

           AND NOW, this 3rd day of April, 2024, the Order of the Workers’
Compensation Appeal Board dated October 7, 2022, is AFFIRMED.

                                     __________________________________
                                     MICHAEL H. WOJCIK, Judge