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A DOUBLE-EDGED SWORD
By Jeffrey D. Snyder, Esquire
A recent, Court ruling in County of Allegheny v. WCAB (Parker), recently decided in 2016, held that attorneys’ fees that are awarded on the basis of unreasonable contest are considered to be litigation costs, that must be reimbursed by a Claimant Attorney, if the unreasonable contest of attorneys’ fees were paid pursuant to a denial of Supersedeas, on a prior Appeal, where the Employer ultimately prevailed that is contests of the Claimant’s claims and Petitions were reasonable.
Factually, this case involved the 80 year old Claimant sustaining a work-related shoulder injury in 1993. In 2007, the Claimant’s compensation benefits were suspended, as a result of the granting of a Suspension Petition.
Appealed to the Workers’ Compensation Appeal Board, the underlying WCJ’s Decision was reversed, and remanded for an assessment of Counsel fees on the basis that the Appeal Board believed that the Employer’s contest was unreasonable, and that the Claimant was entitled to an award of unreasonable contest of attorneys’ fees under Section 440 of the Act.
The Board, in its infinite wisdom, believed it was bound by a prior 2004 Decision that had denied a Suspension of the Claimant’s compensation benefits.
On the remand, the WCJ did award Counsel fees on the basis of unreasonable contest, with the finding of an unreasonable contest then affirmed by the Appeal Board, although, it actually changed the amount of the unreasonable contest, increasing in favor of the Claimant and against the Employer.
Undaunted, the Employer appealed to the Commonwealth Court, with the Commonwealth Court concluding that the Appeal Board had been mistaken in relying on collateral estoppel, and that it further committed a legal error in awarding counsel fees on the basis of an unreasonable contest, given that the Employer had ultimately prevailed, with the Commonwealth Court sustaining the suspension of compensation benefits in deciding the underlying issues on Appeal.
Applying for Supersedeas Fund reimbursement, as the unreasonable contest attorneys’ fees had been assessed in the amount of $14,750.00, the Supersedeas Fund denied the reimbursement request, on grounds that the Act only allows it to reimburse for medical and wage loss benefits, not for litigation costs.
The Commonwealth Court then explained that to allow a situation where unreasonable contest attorneys’ fees are paid following the denial of Supersedeas on an Appeal, and the Claimant does not prevail with respect to the underlying case and issues, would constitute an unjust enrichment to Claimant’s Counsel, regardless of any intent to distribute the funds to the Claimant.
As a recommendation, the Commonwealth Court suggested that there be an agreement to stay an Appeal in similar circumstances, so that fund disbursements are not issued prior to the issues being ultimately decided.
The Commonwealth Court further noted that the procedure for seeking reimbursement is to file a Petition for Refund, filing the same with the Bureau for assignment to a Workers’ Compensation Judge. This mechanism appears to extend to all litigation costs that include unreasonable contest of attorneys’ fees, where the issue is ultimately decided in favor of the Employer, that the Employer’s contest in the underlying claim was reasonable, and should not have been subject to an unreasonable contest attorney fee Award.
Finally, in County of Allegheny, the Commonwealth Court remanded the case for the Petition for Refund to be granted, in the amount of $14,750.00 in unreasonable contest attorneys’ fees that the Employer had paid to Counsel, ultimately requiring Counsel to reimburse the Employer for the same fees.
By way of a takeaway, this is an obviously favorable Decision for Employers and Insurers, although, in practice, it has been our experience that unreasonable contest attorneys’ fees, on Appeal, usually result in Supersedeas being granted, meaning that the Employer or Insurer does not become obligated for paying the unreasonable contest attorneys’ fees during the pendency of an Appeal of factual and legal issues decided in a Decision by a Workers’ Compensation Judge or by the Appeal Board.
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