March 06, 2014

Will Language in Your C&R Agreement Prevent You from Obtaining Supersedeas Fund Reimbursement?

The Commonwealth Court recently addressed a prevalent issue regarding the ramifications of language in Compromise & Release (C&R) agreements on supersedeas fund reimbursement in H.A. Harper Sons, Inc. v. WCAB.

The General Assembly originally created the supersedeas fund for the purpose of reimbursing, under prescribed circumstances, an employer who has been ordered to pay workers’ compensation benefits that are later determined not to have been owed.

In the underlying case, the claimant filed a Claim Petition against the employer, which was granted by the WCJ. The employer appealed the WCJ’s decision, challenging the calculation of the claimant’s AWW. While the appeal was pending, the employer filed a termination petition. The parties then settled the case by way of compromise and release agreement.

Thereafter, the Board granted the employer’s appeal of the Claim Petition, only as it related to the incorrect calculation of the claimant’s AWW. The employer then filed the subject application, seeking reimbursement from the supersedeas fund for overpayment of compensation to the claimant as of result of the incorrect AWW calculation by the WCJ. The Commonwealth filed an answer denying that the employer was entitled to reimbursement from the fund, as the matter was settled by way of compromise and release. The Bureau assigned the application to the WCJ for a judicial determination, who granted the application. The Bureau appealed to the Board, which reversed the WCJ’s decision.

In concluding that the employer was not entitled to reimbursement, the Board reasoned that the C&R agreement resolved all litigation and/or liability and that it was clear from the language of the C&R agreement that it was the final outcome of the proceedings.

On appeal to the Commonwealth Court, the employer argued that the C&R agreement did not settle the issue of the AWW calculation, and that following the approval of the C&R agreement the employer did not withdraw its appeal of the AWW issue pending before the Board.

The court noted that the question in this case was whether the C&R agreement settled the employer’s challenge of the claimant’s AWW. Focusing on the relevant provisions of the C&R agreement, the court concluded that the agreement did not settle the dispute as to the claimant’s AWW.

The court reasoned that the C&R agreement arose out of a termination petition, which is a proceeding to cut-off future, not past, benefits. The parties agreed, in the C&R agreement, that the employer had paid all indemnity benefits due up to the date of the C&R agreement. The parties agreed to a single lump sum payment to the claimant “in an exchange for a compromise and release of all future wages.” The court found that this language clearly indicated the parties’ intent that the C&R agreement was executed to resolve only the employer’s payment of future benefits.

The court also pointed out that in making its decision, the Board focused on the language in the agreement suggesting a desire to resolve past indemnity payments, as well. However, the court disagreed, finding that the reference in the C&R agreement to additional (i.e. unpaid) past, present, and future indemnity payments is directly related to a resolution of the termination petition. The court found nothing in the C&R agreement that addressed any pending disputes over the amount of benefits previously paid. Therefore, the court held that the Board erred in denying the employer’s application for supersedeas fund reimbursement.

What It Means to You

This case highlights the extent to which the Commonwealth Court will scrutinize the language cited in a C&R agreement when determining an employer’s entitlement to supersedeas fund reimbursement. This case illustrates that the language in a C&R agreement must be written with such precision that there can be no question that the employer is not resolving the period for which it intends to pursue reimbursement from the supersedeas fund. The use and placement of one word in a C&R agreement may impact the court’s decision. In the above case, the words “additional” and “future” had direct bearing on the outcome of the court’s decision.

Employers must also keep in mind that the Commonwealth Court reaffirmed that it will not award supersedeas reimbursement if the underlying proceedings, coupled with the C&R agreement, reveal an attempt to place the cost for an employer’s agreed to liability on the shoulders of others or to subsidize a lump sum payment made as a result of a C&R agreement.

Sources

Case: H.A. Harper Sons, Inc. v. WCAB, 2014 Pa. Commw. Lexis 12 (Pa. Commw. Ct. Jan. 3, 2014)