September 04, 2013

Supersedeas Fund Reimbursement: What Constitutes Recoverable Compensation?

Under the Pennsylvania Workers’ Compensation Act, employers may request supersedeas in conjunction with Petitions to Terminate, Suspend, and Modify an employee’s benefits. In cases in which supersedeas has been requested and denied, the employer’s insurer is entitled to reimbursement for payments of “compensation” made during the pendency of litigation, if upon final outcome, it is determined that such compensation was not payable.


The Supreme Court (Court) recently visited the issue of what payments actually constitute “compensation” in Department of Labor and Industry, Bureau of Workers’ Compensation v. WCAB (Excelsior Insurance). In Excelsior Insurance, the Court affirmed the decision of the Commonwealth Court, as well as the Workers’ Compensation Appeal Board (WCAB) and WCJ, concluding that the employer’s insurer was entitled to reimbursement for payments made to compensate the claimant for the costs of recovering a third-party settlement.


In Excelsior Insurance, the claimant sustained a work injury in November 2003 while working for Filter Tech, Inc. Following the injury, Excelsior Insurance paid the claimant weekly workers’ compensation benefits in the amount of $410 per week. In November 2005, the employer’s insurer filed a petition to modify the claimant’s benefits, and also requested supersedeas. (The petition was later orally amended to a petition to suspend the claimant’s benefits.) The request for supersedeas was denied in January 2006.


In February 2006, the claimant settled his claim against a third-party tortfeasor arising out of the work injury. The employer’s insurer was subrogated and it recovered the amounts previously paid to the claimant, subject to its pro rata share of the claimant’s expenses of recovery. Further, since the amount of the third-party settlement exceeded the amount already paid by the employer’s insurer, the balance was properly paid to the claimant, but was treated as advance payment of future workers’ compensation. Therefore, the employer’s insurer was granted a grace period during which its weekly indemnity payment amount to claimant was reduced.


Following several months of reduced, grace period payments, the WCJ granted the suspension petition as of August 2005. The employer’s insurer subsequently filed an application for Supersedeas Fund reimbursement seeking the unreimbursed portion paid for the claimant’s legal expenses for recovery in the third party settlement and the reimbursement of the reduced weekly indemnity payments made during the grace period. The Bureau argued that these payments were not reimbursable as they were not “compensation” reimbursable under the Act.


In its decision, the Court held that these types of payments do constitute “compensation” under the Act and are recoverable. The Court stated that the fact that the pre-settlement payments made for legal expenses and the grace period payments were “calculated based upon the funds expended by the Claimant to recover from the third-party tortfeasor” does not detract from the fact that the employer’s insurer paid these funds as compensation to the claimant to satisfy the employer insurer’s obligation to the claimant pending the decision of the WCJ. Accordingly, the insurer was entitled to supersedeas reimbursement.

What It Means to You

As of January 1, 2013, Cipriani & Werner has recovered over $830,000 for its clients from the Supersedeas Fund. This decision from the Court increases the amount subject to recovery to include those payments made to compensate a claimant for the costs of recovering a third-party settlement; thus, permitting C&W to recover even more on behalf of its clients.