Elizabeth Yespelkis v. WCAB (Pulmonology Associates, Inc. and AmeriHealth Casualty); 1150 C.D; 2009; filed December 4, 2009; by Judge Simpson

An employer does not, per se, engage in unreasonable contest when it files a penalty petition against the claimant.

Following the claimant's work injury, the claimant settled a related third party case while receiving benefits. In March 2007, a workers' compensation judge found that the employer was entitled to reimbursement of its accrued subrogation lien and a credit against future compensation when the claimant's third party action was released to her for payment. The proceeds from the third party settlement were placed into escrow, pending equitable distribution of a marital estate, since the claimant and her husband were divorcing. Nine months after the workers' compensation judge's decision, the employer filed a penalty petition against the claimant, alleging the claimant violated the workers' compensation judge's order by failing to provide the employer with the information necessary to calculate its lien and future credit. The employer also alleged the claimant violated the order by failing to complete a Third Party Settlement Agreement. The workers' compensation judge denied the employer's penalty petition but found that the information the employer sought was reasonable given the status of other pending petitions. The workers' compensation judge denied a request made by the claimant for payment of unreasonable contest counsel fees. The WCAB affirmed but ordered that the litigation costs be reimbursed. The Commonwealth Court held that the mere filing of a penalty petition against the claimant by the employer does not present an unreasonable contest, as a matter of law. According to the court, the Act does permit the imposition of a penalty against a claimant. Specifically, §435 (d) (iii) allows for the forfeiture of interest normally payable to the claimant with respect to any period of unexcused delay which they have caused. The court also noted that the Special Rules for Administrative Practice and Procedure before workers' compensation judges ("workers' compensation judge Rules") states that penalty proceedings may be initiated by a party and that the workers' compensation judge Rules define the employer as a party. The court held, however, that the employer failed to present evidence in support of the penalty petition and, thus, concluded that the record did not support the workers' compensation judge's conclusion of a reasonable contest.

Case Law Alert - 2nd Qtr 2010