Pennsylvania Supreme Court Eliminates Future Credit for Medical Benefits in Workers’ Compensation Third Party Settlements

The recent Pennsylvania Supreme Court decision of Witmoyer v. WCAB (Mountain Country Meats) directly affects workers’ compensation insurers seeking to reduce their future liabilities by utilizing a time-honored practice of taking a future credit against medical benefits.

In Whitmoyer, the Supreme Court held that an insurer’s right to a future credit on workers’ compensation payments after the settlement of a third party case applies only to indemnity payments, not medical benefits.  The claimant in Whitmoyer successfully argued that the language in Section 319 of the Pennsylvania Workers’ Compensation Act attaching a future credit to “future installment payments” applies only to the discrete, biweekly indemnity checks and not to the more uncertain, and potentially far less frequent medical bills.

The worker in Whitmoyer had settled the indemnity portion of his claim soon after his accident, leaving his medical benefits open.   After a third party case relating to his accident settled, the insurer filed a Third Party Settlement Agreement (TPSA), asserting a future credit on the worker’s medical benefits.  His attorney responded that the reimbursement of medical bills was not an “installment payment” as set forth in the Act and thus no future credit could be taken.  Perhaps since the worker was not actively treating, this remained the status quo for thirteen (13) years until the insurer filed a modification petition, again requesting a future credit.  The Supreme Court decided to hear the case in order to determine what, exactly, “future installment” payments were under the Act.

The Supreme Court agreed with the worker’s interpretation of Section 319, holding that “installment payments” were limited to wage loss benefits as future medical payments were “unknown at the time of settlement.”  The Court opined that there is no certainty that medical benefits would be paid at all, let alone be paid as “future installments,” which the Court reasoned were steady and predictable.  Thus, the Court found that a carrier could not assert a credit on future medical payments after the settlement of a third-party claim as they were not “installments,” within the meaning of the Act.

Practically, this has the initial effect of costing insurers more money in future compensation as they are limited to collecting from indemnity payments only, which are almost always either limited or even absent entirely if the worker settled a portion of their claim.  There are, however, several ways an insurer can protect themselves, and the lien, by being aggressive and assertive early on in both the workers’ compensation claim and with their subrogation lien:

1. Assert your subrogation lien to its fullest This is the last chance the carrier has to recover past payments now that it cannot assert a credit on future medical bills.  Practically, this means being aggressive with claimant’s counsel and not agreeing to drastically cut a subrogation lien due to an allegedly “bad case” or the injured worker wanting more money up front. Getting subrogation counsel involved early to negotiate the lien is even more important after this decision as claimant’s attorneys will soon be aware that the settlement of the third-party case is the last chance a carrier has to recoup its lien.
2. Settle the entire workers’ compensation claim (both indemnity and medicals) before the third-party case settles. This assures that the insurer can recover the maximum amount of their claim from the third-party case.  Too often insurers do not settle the workers’ compensation claim until after the third-party case settles, effectively costing them double.  While it may sting to make such a large payment early in a claim, if there is third party recovery potential in the underlying accident, the insurer can do so confidently knowing that it will recover a substantial portion of those payments back when the third-party claim settles.
3. Avoid settling the workers’ compensation claim and leaving medical payments open. This again allows the claimant to double dip as, after the third-party case settles, the carrier will be left on the hook for the entirety of medical care with no further hope at minimizing its damages.  The claimant will then surely look to settle the medical portion of the claim for full value after the third-party case settles, thus granting them a second lump sum payment, and their attorney another fee.

Whether it is a poorly timed settlement, or merely a passive recovery effort, counsel for injured workers will undoubtedly use this Pennsylvania Supreme Court case to strategically reduce or eliminate your subrogation recovery.  When pursuing a workers’ compensation subrogation recovery, it is important to rely on a partner that understands the nuances of this ever-changing and often-confusing area of law. If you have any questions about the implications of this important case, please contact John M. Popilock at PopilockJ@stutmanstaging.wpengine.com, or 215-283-1177 Ext. 121.