PA Workers’ Comp Insurance Carrier Allowed to Take Credit for Overpayment

Nobody wants to get hurt at work. Suffer from the pain and physical limitations? Not a good time. Aside from medical treatment for the work injury, the injured worker in PA generally receives about two-thirds of his or her salary. No pain and suffering is ever received, contrary to other types of personal injury matters. But, gosh, if there is a suggestion that an injured worker in Pennsylvania has received “unjust enrichment,” the PA workers’ compensation insurance industry is up in arms.

The Commonwealth Court of Pennsylvania recently addressed the issue of whether the workers’ comp insurance carrier can obtain recoupment of an overpayment in Commonwealth of PA DOT v. Workers’ Compensation Appeal Board (Noll). Here, the injured worker hurt his left shoulder in 1995.

After the injury, there were periods in which the injured worker was back at work, and periods in which he was out. After one of these periods, the injured worker filed a Petition alleging the workers’ comp insurance carrier paid him less than he was due. The Workers’ Compensation Judge (WCJ) granted the Petition, agreeing the insurance carrier did not pay correctly. In addition, the WCJ found that the workers’ comp insurance carrier did not have a “reasonable basis” to contest to this Petition, and ordered that they pay “quantum meruit [QM](fees paid to an attorney based on the time the attorney spent and the character of the work required) fees of 20% ‘of all past due and owing benefits directly to Claimant’s counsel not [to be deducted] from Claimant’s proceeds.”

Misunderstanding the decision of the WCJ, the workers’ comp insurance carrier continued to pay a 20% attorney fee over and above the payments to the injured worker for a period of several years, accumulating an overpayment of more than $30,000. The workers’ comp insurance carrier filed a Petition to Review, seeking a future credit to recoup this overpayment. The injured worker argued that, since the overpayment resulted from the unilateral mistake of the insurance carrier, they were not entitled to any relief.

The WCJ denied this Petition, finding, first, that he ordered the injured worker to be paid the full amount ongoing in the previous decision, and, second, that recoupment of an overpayment can only be obtained if “there has been a mathematical miscalculation or a mistake in the agreement by which the claimant receives compensation.” Finding, again, that the insurance carrier had no reasonable basis for the Petition, he ordered QM attorney fees paid to the injured worker’s attorney.

Upon appeal, the Workers’ Compensation Appeal Board (WCAB) affirmed the decision denying the Petition to Review, though they found the WCJ was incorrect on each of his bases. The WCAB ultimately concluded, however, that the workers’ comp insurance carrier failed to prove it made the payments under a “mistaken belief,” as would be required for the insurer to win. The award of QM attorney fees was reversed, as the contest was found by the WCAB to be reasonable.

The Commonwealth Court of Pennsylvania first agreed with the WCAB that the WCJ erred by saying the injured worker should have continued to receive 100% of the workers’ compensation benefits; an award of QM must be based on actual work done and cannot be an ongoing amount. The injured worker should only have been receiving ongoing benefits in the amount of 80%, with 20% being deducted and paid to his attorney. Thus, the Court concluded that there was an overpayment.

Next, the Court reviewed whether the insurance carrier was entitled to a recoupment of this overpayment. Recognizing “there are circumstances where an employer can recoup an overpayment directly from the claimant, i.e., to prevent unjust enrichment or a double recovery,” the Court found the WCAB erred, and said the insurer was entitled to recoupment of the overpayment in this case. Specifically, the Court said:

Employer proved that it paid the $509 per week undiminished by counsel fees under the mistaken belief that those payments were necessary to discharge its duty under the WCJ’s orders. This entitles it to a credit against Claimant’s future workers’ compensation benefits to prevent unjust enrichment . . . ”

The Court remanded the case for a determination of the amount to be deducted from the injured worker’s checks which would be “just under the circumstances and manageable for Claimant.” Since the insurer did prevail, the dismissal of the QM fees by the WCAB was affirmed.

For us, as attorneys who represent injured workers in PA, this decision was disappointing. There was no “mistaken belief” of anything by the insurer – the wording in the WCJ’s original decision was clear that the 20% paid over and above was for past due benefits. The insurer simply screwed up and made voluntary payments it was not required to make. The adjuster erred and the insurer lacked the internal controls to notice, let alone prevent, such a mistake. That’s a shame, and they were correct to stop doing that. But, to use the Court system to rescue them from their own incompetence? That seems rather misplaced. Was the injured worker unjustly enriched? Hard to say – again, as with every injured worker, he did not ask to be hurt, to suffer from the pain and to be rendered disabled. How much did the CEO of that insurer make last year? Was that not an unjust enrichment in the eyes of many?