In Light of Whitmoyer, Have Third Party Settlement Agreements Radically Changed?

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Since the Pennsylvania Supreme Court’s decision in Whitmoyer v. Workers’ Compensation Appeal Board (Mountain Country Meats), 186 A3d 947 (Pa. 2018), circulated on June 19, 2018 (as you will see, the date matters), an employer's right to subrogation in Third Party Settlement Agreements has drastically changed. Whitmoyer states that an employer may no longer take a credit against payment of future medical expenses, pursuant to Section 319 of the Pennsylvania Workers’ Compensation Act (the Act) when there is a balance of recovery remaining after a third party settlement or recovery. Whitmoyer now holds that Section 319 of the Act permits an employer to take a credit for future indemnity benefits only against the balance of recovery. This decision has prompted claimant’s attorneys to assert a corresponding right to the “return” of the amount of prior medical expense reductions, leaving the courts to address the question as to when, if at all, a claimant is entitled to reimbursement of their medical expenses.

Three cases post-Whitmoyer from the courts have shed light on this fairly murky area of the law.

Beaver Valley Slag, Inc, v. Marchionda (WCAB), ____ A.3d. (Pa. Cmwlth Nos. 867, filed 3/10/21)

In the reported decision of Beaver Valley, issued on March 10, 2021, the Commonwealth Court first addressed the retroactivity of Whitmoyer. [1] Namely, the court was asked to decide whether an employer was required to reimburse medical expenses made after the date that Whitmoyer was decided or back to the date that the Third Party Settlement Agreement (TPSA) was signed.

The court found that timing matters. In Beaver Valley, claimant sustained a compensable injury which was recognized, and thereafter, a TPSA was drafted, executed, and filed with the bureau that detailed the employer would be responsible for 33 percent of future disability payments and medical bills until their subrogation interest against the balance of recovery was exhausted. Per the TPSA, once exhausted, the employer would be responsible for 100 percent of all ongoing benefits.

After the TPSA was executed, Whitmoyer was decided, and claimant filed a review petition seeking to void the employer’s subrogation credit for medical expenses. The WCJ granted the claimant’s petition but noted that the claimant was only entitled to reimbursement for the partial payment of medical expenses by the employer from the date that Whitmoyer was decided. The WCJ further held that the employer would be responsible for full payment of all medical expenses, pursuant to the Act, as of the date that Whitmoyer was decided and ongoing. Claimant appealed, and the WCJ's decision/order was affirmed by the WCAB. The claimant then appealed to the Commonwealth Court.

The Commonwealth Court cited the “general rule” from Dana Holding that, where a prior judicial precedent is not overruled, a holding that a statute is unconstitutional will be applied to cases pending on direct appeal in which the constitutional challenge has been raised and preserved.

Applying this rule to Beaver Valley, the court held that since the status of TPSA terms for future medical expenses were not pending on direct appeal, the court would not order that Whitmoyer applied retroactively to the date that the TPSA was signed.

Todd v. WCAB (Fastrack Construction, Inc.), No. 505 C.D. 2020

On March 23, 2021, in an unreported decision, the Commonwealth Court addressed the issue of whether Whitmoyer would essentially void the terms of the TPSA.

The dates and times are again of note, as the claimant in Todd sustained a work injury in August 2010, resolved his entitlement to wage loss benefits via Compromise and Release in October 2016, and signed and submitted a TPSA in December of 2016, in light of a third party recovery of $750,000. The TPSA noted that the employer was entitled to receive a lump sum for reimbursement of its lien, along with a credit against the balance of recovery (employer was obligated to pay 29.33 percent of future wage loss and medical expenses - despite the prior settlement/release of same pursuant to the Compromise and Release Agreement, as this was boilerplate language noted on the TPSA.) The TPSA noted that, rather than receiving the lump sum monies pursuant to the TPSA, the employer agreed to exercise a credit beyond the credit associated with the balance of recovery, for the payment of future benefits. There was additional language regarding how the claimant could satisfy the lien via a lump sum payment.

Thereafter, Whitmoyer was decided, and claimant filed a Review Petition seeking to void the employer’s right to subrogation credits for medical benefits dating back to the time their TPSA was executed.

The Commonwealth Court held that prior to Whitmoyer, an employer had an “unquestioned” right to a credit against payment of future medicals expenses. The court then took a more detailed look at the TPSA and held that the claimant consented to the employer’s rights to subrogation which, at the time the TPSA was executed, included future medical expenses. However, the court further noted that there was nothing in the TPSA that suggested that the claimant was entitled to waive any additional rights/obligations beyond what Section 319 provided.

Simply put, the court noted that, at the time that the TPSA was executed, there appeared to be a right of the employer to exercise its credit against the balance of recovery for the payment of medical bills. However, there was nothing in the agreement that prohibited/prohibits the claimant from reaping the benefits of the decision issued in Whitmoyer, as there was nothing in the TPSA that suggested that the claimant contemplated giving up any rights beyond those contained in Section 319. The court remanded the matter to the WCJ to determine the current amount of employer’s lien.

Miguel Castaneda-Escobar v. Ralph Martin Const. (WCAB), No. 961 C.D. 2020

On March 25, 2021, the Commonwealth Court issued another unreported opinion addressing another fact-specific instance where the issue was whether Whitmoyer should be applied retroactively for reimbursement of medical expenses.

The facts are similar to those set forth above in the Todd case. In this case, claimant sustained a compensable work injury in 2010 and filed multiple third-party liability cases that were resolved. The claimant executed his first TPSA and filed it with the bureau on August 11, 2014 (TPSA I). After settling his second, third party action, claimant executed and filed another TPSA with the bureau on April 1, 2015 (TPSA II). Claimant then resolved another third-party matter in December 2015, but no TPSA was executed. TPSA II noted that the balance of recovery would be credited again future wage loss and medical expenses, resulting in the employer taking a credit for the same.

Years later, Whitmoyer was decided, and the employer immediately stopped taking their credit for ongoing medicals. However, the claimant sought reimbursement for all medical expenses paid since the execution of TPSA II. The employer argued they were entitled to this credit up to the date of Whitmoyer and refused to reimburse the claimant. In turn, the claimant filed a Penalty Petition which was denied by the WCJ. The claimant appealed, and the WCAB affirmed the decision of the WCJ. Claimant again appealed and asked that the Commonwealth Court address the issue as to whether Whitmoyer should be applied retroactively.

The Commonwealth Court cited to Beaver Valley summarizing the same, noting that since the terms of the TPSA were not pending on appeal at the time that Whitmoyer was decided, and, therefore, Whitmoyer could not be applied retroactively. As such, since TPSA II was finalized and submitted prior to Whitmoyer, the court found that the employer did not have an obligation to retroactively reimburse claimant for medical payments.

Impact

In light of Whitmoyer and its recent progeny, it appears that timing is everything. The court has made it abundantly clear that Whitmoyer is to be applied on all cases where no TPSA related issues were on appeal with an effective date of June 19, 2018 (the date that Whitmoyer was decided). It is further relevant to note that Whitmoyer appears to apply across the board even if there was specific language included in an agreement noting that an employer was entitled to a credit for future medical expenses against the balance of recovery.

[1] The issue of retroactively, with respect to the impact of provisions in the Act and our statutes that are found to be unconstitutional, was addressed recently in Dana Holding (II), which in pertinent part held that when a statute is found unconstitutional, the new rule of law will be applied to cases pending on direct appeal in which the constitutional challenge has been raised and preserved.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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