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March 27, 2006

Penalty Petition Pitfalls In Pennsylvania

The extensive amendments to the PA Workers’ Compensation Act contained in Act 57 of 1996 created the need for new and/or updated forms or “Bureau documents.” Since passage of the Act, the Department of Labor and Industry has promulgated a host of revised or new Bureau forms, complete with detailed, and occasionally confusing, instructions and guidelines. The form-driven and time-sensitive nature of PA Workers’ Compensation practice heightens the need for our clients to be attentive to detail in administering the large volume of claims encountered in the current system.

Though imposition of penalties is discretionary, a review of the circumstances when penalties were imposed should serve as a warning to be vigilant in the investigation and administration of claims. The following situations resulted in the imposition of penalties:

- Failing to commence payments within 30 days of the date on which the obligation to pay arises;

- Failing to issue a Notice of Denial, Notice of Compensation Payable or Notice of Temporary Compensation Payable within 21 days of receiving notice of the injury;

- Failing to provide 20 day’s notice of Benefit Offset;

- Forwarding periodic compensation checks to an old address after having received notice of address change from Claimant;

- Suspending or terminating benefits without compliance with the provisions of the Act even though Employer/Insurer ultimately prevailed on the merits of a litigated Petition;

- Employer/Insurer’s unilateral change of payments agreed to in an approved C&R (credit for sick pay). In this regard, it is noteworthy that penalties may be assessed on the total amount of an underlying awarded prior to any allowable credit(s) being taken;

- Failing to pay after denial of Supersedeas, even where Employer/insurer ultimately prevails in the case. (As noted above, penalties may be imposed where Employer/Insurer fails to make payment in accordance with an order. Importantly, the filing of an appeal and the request for supersedeas is not a sufficient basis to suspend Employer/Insurer’s payment obligation and does not constitute a valid defense to a subsequent Penalty Petition);

- Failing to use the Act 44 Medical Cost Containment/Utilization Review mechanism to challenge the reasonableness and necessity of medical bills or treatment and instead unilaterally ceasing payment of medical expenses

- unsuccessfully challenging medical bills and/or treatment based solely on causation and then not prevailing in a proceeding before a WCJ with respect to that element of contest;

- failing to pay interest on medical bills paid by a third-party insurer;

- failing to authorize Claimant’s surgery from the date of a canceled procedure to the date of a WCJ’s grant of a subsequent Penalty Petition (and in circumstances where Employer/Insurer failed to utilize the proper vehicle of prospective Utilization Review);

- failing to timely object to the format of a medical provider’s bills (based upon the absence of HCFA or LIBC-9 forms) but subsequently refusing to pay without those same forms; and,

- Failing to pay medical expenses after execution of a supplemental agreement suspending compensation.

With this need for heightened attention to detail comes the realization that, at times, despite best efforts and intentions, a deadline is missed or a Bureau form is incorrectly issued, filed and/or served. It is in such circumstances that our clients are increasingly likely to see the filing of a Petition for Penalties. Though official Bureau statistics for the year to-date are not currently available, our offices have seen, and our clients report, a significant increase in the number of Penalty Petitions received (whether as a stand-alone Petition or concurrent with other Petitions). In the current litigation environment which has seen WCJs more willing to impose monetary penalties upon Employers and Insurers for even technical violations of the Act, it is important that to understand the basis for potential penalty imposition.

Section 435 of the Act increased the maximum amount of penalty from twenty percent to fifty percent. Importantly, as this provision is procedural in nature, the fifty percent maximum penalty may be assessed for acts that occur on or after August 23, 1996, regardless of the date of injury.

Additionally, the Act provides that the Department (through its WCJs), the Workers’ Compensation Appeal Board, and any court that may hear proceedings under the Act has the authority to impose penalties. In this regard, WCJs may conduct penalty proceedings on Petition of a Claimant, may combine proceedings on penalties with hearings on other Petition(s), or may actually initiate Penalty proceedings of his/her own volition without any Petition having been filed by a Claimant. 

What It Means to You

The foregoing situations represent a small fraction of the instances in which a penalty situation could arise. It is always a balancing act to handle each claim at all times in accordance with the Act. The attorneys at Cipriani & Werner provide our clients with advice, assistance and service in navigating the intricate and perilous waters of the Pennsylvania Workers’ Compensation system. We remain ready to be of service to you. We invite you to contact any of our attorneys should you have questions, comments or concerns about workers' compensation matters. Thank you for the opportunity to be of service to you.