Reimbursement payments made by an insurance carrier to a township employer during a time the claimant's benefits were suspended do not constitute an admission of liability for the claimant's disability compensation.

Following injuries sustained by the claimant in a work-related motor vehicle accident, the claimant returned to work light duty. The claimant's benefits were suspended by a Notification of Suspension. Eventually, the claimant resumed his pre-injury job duties as a police officer, but began losing time due to symptoms of depression. Ultimately, the claimant was relieved of duty because of conduct related to his psychological condition, and, although he never returned to work, he continued to receive his regular pay from the employer through the date he signed a Resignation Agreement. Shortly before signing, the claimant filed a reinstatement petition. He also filed a penalty petition, alleging the employer paid him benefits after the date he was relieved of duty but then unilaterally stopped, violating the Act. The workers' compensation judge granted the Reinstatement and penalty petitions on the basis of testimony from an adjuster that reimbursement payments were made to the township employer under the Heart & Lung Act after the claimant was relieved of duty, and that the payments came from the "indemnity bucket" in the company's computer system. However, the adjuster also testified that the insurance company had nothing to do with the township's decision to pay the claimant after his dismissal or to call the salary payments Heart & Lung benefits. In fact, the decision to continue paying the claimant's salary after his dismissal was made by the police chief after speaking with the Township Solicitor. The workers' compensation judge granted the claimant's reinstatement petition, concluding that the reimbursement payments made to the employer by the insurance carrier after the claimant's separation were indemnity benefit payments that effectively rescinded the suspension that had been in place since the Notification of Suspension had been filed. The Judge also awarded a penalty based on a violation of the Act. The Workers’ Compensation Appeal Board affirmed the judge's decision that the reimbursement payments to the employer were actually indemnity benefits and, therefore, that the insurance carrier was estopped from denying liability. The Commonwealth Court, however, reversed the decisions of the judge and Appeal Board. The court found that the judge erred in reinstating benefits on the basis of one statement that the payments came out of the "indemnity bucket." According to the court, the judge must consider all evidence relative to the question of whether the reimbursements were intended to be payments of compensation. In the court's view, the evidence showed that the intent was not to compensate the claimant for a work-related injury. The court noted that both the insurance carrier and the employer confirmed that the checks were issued as a result of a dispute between the carrier and the employer that did not involve the claimant directly. It was also noted that the insurance carrier issued two separate Notice of Compensation Denials (NCDs) once it concluded that the claimant's psychological issues were not work related. The court found that the record lacked substantial evidence to support a finding that the insurance carrier admitted liability for compensation benefits beyond July 8, 2003. The court also held that the judge erred in granting the claimant's penalty petition, concluding that the insurance carrier legally suspended the claimant's benefits upon issuance of the Notification of Suspension and due to the fact that the payments made to the employer were not workers' compensation but payments made to prevent litigation.

Case Law Alert - 4th Qtr 2010