Walker v. Workmen's Compensation Appeal Board

FRIEDMAN, Judge,

dissenting.

I respectfully dissent. Because I believe that Nationwide Insurance Company (Nationwide) was the insurance carrier for Sher-bren Manufacturing, Inc. (Employer) when Judy Walker, Rita McNaughton DeSanto, Charlotte Haas, and Rebecca Kunselman (collectively, Claimants) sustained work-related injuries on January 7 and January 9, 1987, I would reverse the decision of the Workmen’s Compensation Appeal Board (Board) and hold Nationwide liable for the payment of compensation benefits to Claimants. In addition, because I believe that the Board lacks authority to grant a supersedeas with respect to the payment of medical benefits, I would vacate the Board’s grant of supersedeas here.1

I. INSURANCE COVERAGE

Unlike the Majority, I believe that the Board erred in concluding that Nationwide was not Employer’s insurance carrier when Claimants sustained their work-related injuries. Rather, I agree with Claimants that Nationwide cannot deny that it agreed to retroactively reinstate Employer’s insurance coverage to December 26, 1986 because (1) Employer reasonably relied upon the actions and words of Nationwide’s agent and employees that Nationwide was providing eontinuous workmen’s compensation coverage and (2) Nationwide knew or should have known that the actions and representations of its agent would reasonably induce lay people to believe that its agent could bind Nationwide to ongoing coverage. As the Majority notes, this is a two-step argument, the first involving the doctrine of equitable estoppel and the second based on the rule of apparent authority. I will examine each in turn.

A. Equitable Estoppel

The doctrine of equitable estoppel applies “where one party through its acts (1) negligently misrepresents material facts (2) knowing or having reason to know that the other party will justifiably rely upon the misrepresentation to its detriment and (3) the other party so relies.” Williams v. Workmen’s Compensation Appeal Board (Realty Services Co.), 166 Pa.Commonwealth Ct. 276, 282, 646 A.2d 638, 636 (1994). I believe that Employer has proven all three of these elements.

1. Negligent Misrepresentation

First, I am convinced that local Nationwide agent Paul “Pappy” Jones negligently misrepresented material facts to Employer. “A misrepresentation is an assertion that is not in accord with the facts.” Restatement (Second) of Contracts § 159 (1981). An assertion need not be fraudulent to be a misrepresentation; a statement intended to be truthful may be a misrepresentation because of ignorance or carelessness. Restatement (Second) of Contracts § 159 cmt. a (1981).

The findings clearly indicate that Nationwide told Jones that it would reissue, not reinstate, Employer’s policy if Employer would pay all past due amounts and make a 30% down payment on a new policy. (Referee Morrison’s Finding of Fact, No. 12.) Yet, when Employer questioned Jones in January of 1987 about the audit bill for $4,981, Jones *174told Employer that this amount represented all monies past due and a 30% down payment on a 1986-87 policy. (Referee Morrison’s Finding of Fact, No. 14.) In representing that the new policy would cover both 1986 and 1987, Jones was saying that, upon payment of the $4,981, Nationwide would “reinstate” coverage to include the last few days of December, 1986. As indicated above, however, the $4,981 only covered the balance owed for the period ending December 25, 1986 and did not include a 30% down payment on a reinstated or a reissued policy. Thus, Jones misrepresented material facts to Employer.

The Majority, in support of a contrary view, makes much of the fact that Jones based his misrepresentation upon what Employer told him over the telephone regarding the contents of the audit bill. (Referee Morrison’s Finding of Fact, No. 16.) However, this does not alter the fact that Jones made the misrepresentation. Nor does it excuse Jones for negligently failing to inquire of Nationwide regarding the audit bill if he was uncertain of its purpose. As noted above, an assertion made out of ignorance or carelessness is still a misrepresentation.

2. Justifiable Reliance

Next, the Majority concludes that Jones had no reason to know that Employer would justifiably rely to its detriment upon Jones’ misrepresentation. However, I have found much in the record to suggest an opposite conclusion. First, Employer dealt exclusively with Jones as to insurance matters. (Referee Seacrist’s Finding of Fact, No. 4.) Second, Employer had a history of missing premium due dates and then curing the default through the intercession of Jones. (Referee Seacrist’s Finding of Fact, No. 5.) Third, when Employer telephoned Nationwide on January 12,1987 and on February 3,1987, as Jones instructed, concerning the filing of workmen’s compensation claims for the injuries of January 7 and January 9, 1987, neither Jones nor Nationwide questioned Employer’s coverage. (Referee Seacrist’s Finding of Fact, No. 7.) Finally, Jones could not remember if he explained to Employer’s staff the difference between a “reissued” policy and a “reinstated” policy, and neither Nationwide nor Jones can presume that lay persons would know the difference. (Referee Morrison’s Finding of Fact, No. 14.) For these reasons, I believe that Jones had reason to know that Employer would justifiably rely upon his representation that a portion of the $4,981 payment was for the retroactive “reinstatement” of Employer’s policy.2

The Majority’s contrary position assumes without reason that Employer has greater knowledge about insurance matters than the ordinary lay person: “Employer, as an ongoing manufacturing establishment, ‘presumably has a higher level of sophistication in business matters, including insurance, than the ordinary consumer.” (Majority op. at 171.) (Emphasis added.) Yet, this presumption is not supported by the record. In fact,

No evidence of record indicates that [Employer] or the particular individual employees handling its insurance matters understood the difference between reinstated and reissued policies, and a common lay person would not be presumed to understand that distinction, particularly in light of the history of curing defaults by late payments.

(Referee Seacrist’s Finding of Fact, No. 9.) I agree with Referee Seacrist; indeed, Employer’s history of defaulting, seeking the intervention of Jones and then curing the defaults by late payments demonstrates that Employer is not highly sophisticated in insurance matters. Like every other common lay person, Employer relies on its insurance *175agent to take care of its insurance coverage. It is not the role of this court here to presume facts not in the record in order to support a particular result.

3. Detriment

Finally, I also believe that Employer relied to its detriment on the representation made by Jones. The Majority offers two arguments in opposition to this view. First, the Majority maintains that such payment does not constitute a detriment because the $4,981 was a lawful debt to Nationwide.3 (Majority op. at 1171.) However, there is no prohibition in law that forbids two parties from negotiating a settlement of their debts for an amount less than originally agreed to. Here, through Jones, Nationwide agreed that Employer could settle all of its debts to Nationwide and continue coverage,4 just as Employer had done in the past under the instruction of Jones, by payment of a sum of money ($4,981) by a certain date (January 30, 1987).

Second, the Majority asserts that Employer could not have detrimentally relied upon the representation of Nationwide because the representation was made after the January 7 and January 9, 1987 injuries. However, the date of the representation is irrelevant where Nationwide agreed to retroactively reinstate Employer’s insurance coverage upon Employer’s payment of $4,981 by January 30, 1987. Thus, I do not find either of the Majority’s arguments persuasive.

Employer relied on Nationwide’s promise to reinstate coverage when, on January 30, 1987, Employer made the $4,981 payment.5 However, because Nationwide failed to reinstate Employer’s coverage after receiving Employer’s payment, Employer never received the benefit of the bargain and, thus, relied on the representation of Jones to its detriment.

B. Apparent Authority

I turn now to Claimants’ contention that Nationwide knew or should have known that the representation of Jones would reasonably induce lay people to believe that Jones could bind Nationwide to ongoing coverage. Once again, I must disagree with the Majority which, ignoring that the issue here is apparent authority, rejects this argument because Jones did not have actual authority to unilaterally reinstate workmen’s compensation insurance coverage.

Section 27 of the Restatement (Second) of Agency states the general rule for the creation of apparent authority:

Except for ... conduct of transactions required by statute to be authorized in a particular way, apparent authority to do an act is created as to a third person by ... conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have *176the act done on his behalf by the person purporting to act for him.

Restatement (Second) of Agency § 27 (1958).

The Majority maintains that there is nothing in the record to establish that Nationwide acted in such a way as to make Employer reasonably believe that Jones had authority to reinstate Employer’s workers’ compensation insurance policy. (See Majority op. at 172.) However, my examination of the record indicates otherwise. The record shows that Nationwide allowed Employer, through Jones, to cure defaults by making late payments. (Referee Seacrist’s Finding of Fact, No. 5.) Indeed, Employer testified that, even though Jones was aware of the' December 25, 1986 cancellation notice, Jones nevertheless instructed Employer on January 16, 1987 to send two months of unpaid premiums ($514) to Nationwide, presumably to once again cure the default. (Referee Morrison’s Findings of Fact, Nos. 3 and 4.) Jones did not deny giving these instructions to Employer. (Referee Morrison’s Finding of Fact, No. 14.)

In addition, the record shows that there were two direct contacts between Employer and Nationwide. The first contact occurred on January 12, 1987 when Employer telephoned Nationwide to ask whether Employer should file a separate form for each of the claimants injured between January 7 and January 9, 1987. Nationwide did not inform Employer at that time that Employer’s coverage had been cancelled; rather, Nationwide provided information to facilitate Employer’s filing of the workmen’s compensation claims. Second, on February 3, 1987, Employer telephoned Nationwide to actually report Claimants’ injuries. Nationwide accepted the information but failed to inform Employer that its coverage had been cancelled. (Referee Seaerist’s Finding of Fact, No. 7.)

The Majority’s position is that these contacts only involved the filing of claims with Nationwide, not the reinstatement of Employer’s insurance coverage. (Majority op. at 172.) But, in this respect, the Majority misses the point. These contacts with Nationwide, where Nationwide actually took information regarding the January 7 and January 9, 1987 claims, would reasonably lead Employer to believe that Jones had the apparent authority to reinstate Employer’s coverage.

Thus, I believe that Employer reasonably interpreted Nationwide’s conduct to mean that Jones had correctly represented that Employer’s coverage had been “reinstated” to cover the last few days of 1986 and all of 1987. Indeed, not until February 5,1987 did Nationwide act to clearly inform Employer that its workmen’s compensation coverage had been cancelled.

II. SUPERSEDEAS FOR MEDICAL EXPENSES

A. Mootness

Next, I would consider whether the Board had authority to grant Nationwide a superse-deas for medical expenses. The Majority declines to address this issue because its holding renders the matter moot. However, this court will decide an issue, even when moot, where the question is one that is capable of being repeated and of continuing to escape review. Cumberland Publishers, Inc. v. Carlisle Area Board of School Directors, 166 Pa. Commonwealth Ct. 176, 646 A.2d 69 (1994). Likewise, our Supreme Court will address matters that are moot where the question is capable of repetition and is of sufficient public importance that it ought not to escape appellate review. Consumers Education and Protective Association v. Nolan, 470 Pa. 372, 368 A.2d 675 (1977).

Here, I note that the Board will continue to receive requests for supersedeas with respect to medical expenses. Each time the Board denies the request, the matter escapes appellate review. Each time the Board grants the request and the claimant wins, the matter escapes appellate review. Each time the Board grants the request and the claimant loses, but declines to appeal, the matter escapes appellate review. For these reasons, and because I believe that the question is of sufficient public importance that it ought not escape our review here, I would address the issue.

*177B. Supersedeas

Claimants contend that the Board lacks authority under the Act to grant a superse-deas for medical expenses in the same way that referees lack authority under The Pennsylvania Workmen’s Compensation Act (Act)6 to grant a supersedeas for medical expenses. See ADIA Personnel Agency v. Workmen’s Compensation Appeal Board (Coleman), 137 Pa.Commonwealth Ct. 405, 586 A.2d 507, appeal denied, 528 Pa. 624, 597 A.2d 1154 (1991).

In ADIA Personnel Agency, we considered whether Section 306(f) of the Act authorizes a referee to grant a supersedeas for medical expenses. Section 306(f)(2)(ii) provides in pertinent part:

The employer shall have the right to petition the department for review of the necessity or frequency of treatment or reasonableness of fees for services provided by a physician or other duly licensed practitioner of the healing arts. Such a petition shall in no event act as a supersedeas, and during the pendency of any such petition the employer shall pay all medical bills if the physician or other practitioner of the healing arts files a report or reports as required by ... this subsection.

77 P.S. § 531(2)(ii) (emphasis added). We then noted that while the Act clearly states that there is no automatic supersedeas upon filing a petition to review medical treatment, we could find “no section” of the Act that authorizes a discretionary supersedeas as to the payment of medical expenses. ADIA Personnel Agency. Accordingly, we concluded that a referee is not authorized to grant a discretionary supersedeas for medical expenses. In reaching this result, we reasoned that a policy of cutting medical aid before an adjudication could seriously impair a claimant’s right to receive immediate treatment for injuries. Id. We also considered that the supersedeas fund provides a statutory remedy for employers who were ultimately found to have no liability for medical expenses. Id.; see also section 443 of the Act, 77 P.S. § 999.

The Board, in granting Nationwide’s su-persedeas request for medical expenses, relied on Travelers Ins. Co. v. Gunson, 79 Pa.Commonwealth Ct. 39, 468 A.2d 529 (1983), aff'd, 506 Pa. 334, 485 A.2d 390 (1984). In Travelers Ins. Co., this court held that section 430(b) of the Act provides authority for the Board to grant a supersedeas for compensation payments. Section 430(b) states:

Any insurer or employer who terminates, decreases or refuses to make any payment provided for in the Decision without filing a petition and being granted a supersedeas shall be subject to a penalty as provided in Section 435, except in the case of payments terminated as provided in Section 434.

77 P.S. § 971(b) (emphasis added). The Board reasoned that because the payment of medical expenses under a referee’s decision constitutes “any payment,” the Board not only has authority to grant a supersedeas for compensation payments, but also has authority to grant a supersedeas for medical expenses under the Act. I disagree.

In ADIA Personnel Agency, we stated that “[sjeetion 430 of the Act, 77 P.S. § 971, pertains to the effect of an appeal on a lien of judgment. However, no section within the Act authorizes a discretionary supersedeas as to payment of medical expenses.” ADIA Personnel Agency, 137 Pa.Commonwealth Ct. at 408, 586 A.2d at 508. Clearly then, in ADIA Personnel Agency, we considered whether section 430 of the Act could authorize a discretionary supersedeas for medical benefits and concluded that no section of the Act authorizes such a supersedeas. Accordingly, I would hold that the authority granted to the Board under Travelers Ins. Co. applies only to a grant of supersedeas for compensation payments. The Board does not have authority under section 430 of the Act to grant a supersedeas for the payment of medical benefits.

III. CONCLUSION

In summary, because I believe that Employer reasonably relied to its detriment upon Jones’ representation that Nationwide *178had reinstated Employer’s workers’ compensation policy and because I also believe that Employer reasonably interpreted Nationwide’s conduct to mean that Jones spoke on behalf of Nationwide, I conclude that Nationwide is estopped from denying that it retroactively reinstated Employer’s coverage when Employer made a payment of $4,981 on January 30, 1987. Accordingly, I would reverse the decision of the Board as to Nationwide’s liability. In addition, because I believe that the Board lacked authority to grant a supersedeas with respect to the payment of medical benefits, I would vacate the superse-deas.

. Nationwide appealed the referee's decision to the Board and requested a supersedeas, which was granted with respect to costs and medical expenses, but was denied with respect to Claimants’ weekly indemnity benefits. Claimants petitioned for reconsideration, arguing that the Board lacked authority to grant a supersedeas for medical expenses, and the Board held a hearing on the matter. After giving due consideration to the petition, the Board denied Claimants’ request to revoke its grant of supersedeas for costs and medical expenses.

. My conclusion is not altered by the fact that Referee Morrison found that the audit bill “clearly stated that the total owed was for the period from May 30, 1985 to December 25, 1986” (Referee Morrison's Finding of Fact, No. 6) because Referee Seacrist found that the audit bill, as interpreted to Employer by Jones, did not clearly communicate that Nationwide had truly can-celled Employer’s coverage and that Employer's payment of $4,981 would not reinstate coverage. (Referee Seacrist's Finding of Facts, Nos. 6 & 10.)

Although the findings appear to conflict, Referee Morrison's finding concerns the audit bill on its face, whereas Referee Seacrist's finding concerns the audit bill viewed in light of Employer's dealings with Jones.

.Thus, the Majority rests its position on a particular version of the pre-existing duty rule which, in this context, has a long and checkered past. The doctrine's origin has been traced to Pinnel's Case, 5 Coke 117, where Lord Coke, in the year 1602, stated in dictum that payment of a lesser sum'Sn satisfaction of a greater cannot be satisfaction of the whole. In 1884, this dictum was put to the test in Poakes v. Beer, 9 App.Cas. 605 (1884), where the House of Lords ruled that even a bargained for lesser payment could not discharge an entire obligation because the debtor had only done what he was legally obligated to do. See John D. Calamari and Joseph M. Perillo, The Law of Contracts 211 (1987) [hereinafter Calamari].

After poakes, the rule was so persistently criticized that courts eagerly searched for some kind of detriment in order to further justice. See Calamari. If there was any legal possibility of benefit to the creditor, that additional weight tipped the scale in support of the modified agreement. See Jaffray v. Davis, 124 N.Y. 164, 26 N.E. 351 (1891). Some states even passed legislation to avoid the rule, which was characterized by various courts as "rigid,” "technical,” "not very well supported by reason” and "old law.” See Jaffray. Here, the Majority clings to the "old . law,” failing to adopt the modem view as expressed in the Restatement (Second) of Contracts and relying instead on a 1938 case to support its position.

. Jones represented that Employer’s payment of $4,981 by January 30, 1987 would not only act to satisfy past due amounts but also would serve as a 30% down payment on a 1986-87 policy, thereby effecting the retroactive reinstatement of Employer’s coverage.

. Nationwide’s promise was also supported by adequate consideration. Because Employer is insolvent, this renegotiated agreement enabled Nationwide to avoid the burden of debt collection.

. Act of June 2, 1915, P.L. 736, as amended, 77 P.S. § 1-1031.