Unreasonable Contest in PA Workers’ Comp Not Found Even Though No Basis to Contest Claim

Under the Pennsylvania Workers’ Compensation Act, Section 440(a), “where a claimant succeeds in a litigated case reasonable counsel fees are awarded against the employer, as a cost, unless the employer meets its burden of establishing facts sufficient to prove a reasonable basis for the contest.” The Act, as you can see, clearly states that this is to be the rule, not the exception. The employer/insurance carrier has the burden to prove that there was a reasonable contest. One would read that language and believe unreasonable contest counsel fees are often awarded. One would be dead wrong.

The reason why unreasonable contest counsel fees are rarely found these days is reflected in a recent decision by the Commonwealth Court of Pennsylvania, Grady v. Workers’ Compensation Appeal Board (Lutz t/a Top of the Line Roofing). Here, a roofer suffered a T12 burst fracture resulting in paraplegia of both lower extremities and depression when he fell from a rooftop.

Ultimately, a Claim Petition was filed against the Employer and the Uninsured Employers’ Guaranty Fund (UEGF). Initially, the parties asked the Workers’ Compensation Judge (WCJ) to “bifurcate” the case, to decide whether the injured worker was actually an employee (as opposed to an independent contractor). This lets the parties get past a threshold issue, before litigating the remainder of a case.

The WCJ issued an “interlocutory decision” (a decision before a final decision), finding the injured worker was an employee, on July 9, 2008. The Employer and the UEGF did nothing, and offered no defense to the Claim Petition. A final decision was rendered by the WCJ on January 14, 2009, granting the Claim Petition and awarding unreasonable contest attorneys fees, since there was no reasonable basis to deny the claim after the interlocutory decision

Though the decision granting the Claim Petition was affirmed by the Workers’ Compensation Appeal Board (WCAB), the aspect awarding unreasonable contest attorneys fees was reversed. Upon further appeal, the Commonwealth Court of Pennsylvania agreed with the WCAB.

The Commonwealth Court of PA found that the Employer’s failure to pay benefits may be the subject of a Penalty Petition, for a violation of the PA Workers’ Compensation Act, but that such a failure did not create an unreasonable contest. The Court chastised the WCJ for confusing unreasonable contest with a violation of the Act. (Note that unreasonable contest fees, and penalties, cannot be assessed against the UEGF by law, though they probably can still be assessed against the employer – the Court did not reach that issue).

With all due respect, in my view, the WCJ was entirely correct and it is the Commonwealth Court of PA who confused unreasonable contest with a violation of the Act. The Employer/UEGF had no duty to pay benefits based only on the interlocutory order; payment of benefits would have had to come by the issuance of a Notice of Compensation Payable (NCP) or Stipulation. Since there was no legal duty to commence benefits, there can be no violation of the Act. Meanwhile, the continued denial of the Claim Petition, without reason or basis can truly be seen as nothing other than unreasonable. Indeed, by condoning this behavior, the Commonwealth Court of Pennsylvania is allowing workers’ comp insurance carriers across PA to deny Claim Petitions at will, and engage in the all-too-common practice of starving out injured workers (forcing injured workers to return to work while still disabled, or to accept a minimal settlement to feed a family).