January 04, 2013

“Interest”ing Decision for the Defense

In the underlying litigation, the WCJ granted the claimant’s claim petition and ordered the employer to pay two closed periods of benefits. As usual, the WCJ assessed interest at the rate of ten percent per annum on all overdue benefits and directed the employer to pay all reasonable and necessary medical expenses incurred by the claimant.

On March 24, 2009, the claimant filed a Petition for Penalties against the employer, requesting that penalties be assessed because the employer refused to pay all interest due to the claimant and the subrogation liens of Healthcare Recoveries (Healthcare) and Highmark Blue Shield (Highmark) in violation of the Act.

In defense of the petition, the employer presented the deposition testimony of a senior claims representative for the carrier. She testified that she handled the employer’s account and was familiar with the claimant’s case. She stated that she calculated the benefits and interest due the claimant for the two closed periods using a worksheet provided by the Bureau of Workers’ Compensation (Bureau). She further testified regarding the system by which medical bills in a workers’ compensation claim are received and paid by the carrier, including the medical bills received from medical providers as a result of treating the claimant. She stated that the lien statements were not payable because they did not include supporting documentation such as office notes from the treatment provided.

The WCJ determined that the employer violated the terms and provisions of the Act by failing to pay the proper amount of interest due and owing to the claimant for the closed periods of disability, as well as by failing to pay the subrogation liens of Healthcare and Highmark. The WCJ granted the claimant’s Penalty Petition and ordered the defendant to pay 50% of all unpaid interest due and owing the claimant, plus a penalty of 50% of the outstanding subrogation liens of Healthcare and Highmark, plus costs and attorney’s fees for an unreasonable contest.

Appeals followed to the Workers’ Compensation Appeal Board which affirmed the WCJ findings. An appeal followed to the Commonwealth Court.

In reviewing the issue of statutory interest, the Commonwealth Court relied on Section 406.1(a) of the Act,77 P.S.§ 717.1(a), provides that “[i]nterest shall accrue on all due and unpaid compensation at the rate of ten per centum per annum.” It noted that interest will accumulate, or continue to grow, on all unpaid compensation at a rate of ten percent until such compensation is paid.

The court determined that the employer violated the Act by failing to pay the proper amount of interest due and owing the claimant for the closed periods of disability as ordered by the WCJ’s prior decision. The court found as fact that the employer admitted that it refused to pay the claimant interest from the end of the disability periods to February 13, 2009, the date it paid the claimant the overdue workers’ compensation benefits, but argues that it did not owe interest past the closed period because the claimant was fully employed at that time and it relied upon the Bureau’s worksheet to calculate the interest due.

The employer’s error in calculating the interest and the fact that the claimant returned to work are irrelevant in determining the interest due the claimant for the loss of use of the money he was owed. Therefore, the court determined the award of a 50% penalty on past interest due was warranted.

Furthermore, the penalty of 50% of the subrogation liens was affirmed because the court reasoned that a lien is not subject to repricing, but is payable on a dollar-for-dollar basis; therefore, the additional documentation normally required for payment of medical bills is not required for payment of a medical lien. As such, the employer violated the Act when it failed to pay the lien in a timely manner and 50% penalties were not inappropriate.

What It Means to You

This decision is important for carriers to consider. Statutory interest calculations are encountered regularly in paying awards for indemnity benefits. This decision illustrates that you cannot shield yourself from liability by merely relying on a Bureau provided form. If you have questions on how to calculate statutory interest, contact a C&W workers’ compensation attorney to discuss the statutory interest calculation as it relates to a specific claim.


Cleveland Brothers v. WCAB(Hazlett), Pa. Cmwlth. Ct.-No. 68 C.D. 2012 (Reported November 21, 2012)