A recent Law.com article by Christian Petrucci, “Courts Finally Taking Unreasonable Contest Counsel Fees Seriously,” reports on attorney fee claims in workers’ compensation cases. This article was posted with permission. The article reads:
Absent the legal mechanism to pursue a bad faith claim against a workers’ compensation carrier, one of the only weapons in a claimant’s arsenal to discourage the baseless denial of claims is that of the unreasonable contest counsel fee demand. Tragically, it is commonplace for an overly aggressive defendant to deny a claim with no factual or legal basis to do so. Claimants are routinely forced to needlessly prosecute a petition for benefits or otherwise oppose baseless defense petitions, which causes precious judicial resources to be misallocated and inflicts significant undue stress, mental anguish and financial distress on the injured worker.
Of course, the humanitarian nature of the Workers’ Compensation Act is supposed to prevent any delay in the payment of benefits or the baseless denial of claims. The law directs that the act be liberally construed to be remedial in nature, although one would never know it from the paucity of unreasonable contest counsel fee awards at the trial level. The actual law provides that awarding counsel fees is to be the rule and excluding fees the exception to be applied only where the factual record establishes a reasonable contest. See Millvale Sportmen’s Club v. Workers’ Compensation Appeals Board, 393 A.2d 49 (Pa. Commw.1978). It is also important to note that the question of whether a reasonable basis exists for an employer to have contested liability is fully reviewable on appeal as a question of law to be based upon findings supported by substantial evidence. See Kuney v. Workers’ Compensation Appeals Board, 562 A.2d 931 (Pa. Commw. 1989).
The Pennsylvania Workers’ Compensation Act provides in pertinent part: In any contested case where the insurer has contested liability in whole or in part … the employee, or his dependent, as the case may be, in whose favor the matter at issue has been finally determined in whole or in part shall be awarded, in addition to the award for compensation, a reasonable sum for costs incurred for attorney fee, witnesses, necessary medical examination, and the value of unreimbursed lost time to attend the proceedings: Provided, That cost for attorney fees may be excluded when a reasonable basis for the contest has been established by the employer or the insurer.
Despite the plain reading of the statue, unreasonable contest attorneys fees are almost never awarded and even in the most egregious situations, are awarded in a nominal amount which is stayed pending appeal in every instance.
Given this background, Gabriel v. Workers’ Compensation Appeals Board (Procter and Gamble Products), decided by the Commonwealth Court in September, offers significant hope that the tide will be turning in the effort to police instances of bad faith in the workers’ compensation world. At a minimum, Gabriel affords a heightened expectation that an attorney can be compensated in cases which lack a wage-loss benefit award, which is the normal corpus on which contingency fees are based.
In Gabriel, the claimant injured his arm at work and notified his employer. The claimant treated with doctors based at the company’s plant and the employer’s insurance carrier actually paid medical expenses associated with the claim. However, the employer inexplicably failed to file a bureau document either accepting or denying the claim within 21 days, as required by the act. Consequently, the injured worker was forced to retain an attorney and file a claim petition, which was summarily denied by the employer.
Before the WCJ, both parties presented evidence over the course of a number of hearings and the record was eventually closed. Perhaps sensing what was about to happen, the employer finally issued a medical only notice of compensation payable toward the end of the litigation. The filing date was more than two years after the date of injury.
The WCJ granted the claim petition, but as is normally the case consistent with the above background, did not award unreasonable contest counsel fees or grant a penalty for failure to file a bureau document within 21 days as required by law. The WCJ reasoned that the employer “was paying the claimant’s medical bills,” and “it was not until the last hearing in this matter that the claimant produced any medical evidence establishing a specific diagnosis for his work injury other than a puncture wound.”
The claimant appealed the denial of attorney fees and penalties, but the board affirmed the WCJ’s decision. The board held that the WCJ did not err or abuse his discretion in not awarding a penalty or attorney fees since although the employer paid for the claimant’s medical expenses, doing so is not an admission of liability. The board also found that the claimant was seeking a description of injury different than what was listed on the NCP.
Following the board decision, the claimant petitioned for review by the Commonwealth Court. The court reversed the decisions of the WCJ and the board, finding that the employer presented an unreasonable contest in defending the claim petition because it had, in fact, violated the act by failing to timely issue a bureau document. The court also noted that the employer denied all allegations in the claim petition, including ones it knew to be true, forcing the claimant to commence needless litigation. Moreover, the employer did not present any evidence to contest the claim petition. Had the employer filed a bureau document timely, the claim petition would have had to be filed.
Similarly, the court found a penalty award to be appropriate, since the employer violated the act when it did not timely issue the medical only NCP as required under Section 406.1(a) of the act, thus forcing the claimant to hire an attorney, produce evidence of the injury of which it had notice, and hire an expert to review the medical records of the employer’s own company doctors who had treated him. The act was intended to avoid this.
As a practice tip, it is vital that claimants’ attorneys zealously demand the imposition of unreasonable contest counsel fees in almost every case. Until insurance companies actually begin to risk the forfeiture of entire counsel fee awards during the pendency of a two-year petition, they will continue to have little incentive to voluntarily accept claims that have no defense but are denied anyway for a variety if bogus reasons. Gabriel demonstrates that a new day may have arrived in this battle.
Christian Petrucci of the Law Offices of Christian Petrucci, concentrates his practice in the areas of workers’ compensation and Social Security disability. He also counsels injured workers in matters involving employment discrimination and unemployment compensation benefits.