Department of Labor & Industry, Bureau of Workers' Compensation v. Workers' Compensation Appeal Board

DISSENTING OPINION BY

Judge PELLEGRINI.

The central issue in this appeal is whether payments Insurer made to Claimant for *864the recovery costs associated with obtaining a third-party settlement qualify as “compensation” under Section 443(a) of the Pennsylvania Workers’ Compensation Act (Act).1 Because I believe that such fees do not meet the requirements for reimbursement from the supersedeas fund, I respectfully dissent.

The purpose of the supersedeas fund is to protect an employer who makes compensation payments to an employee who ultimately is determined not to have been entitled to those payments by providing a means of reimbursement. City of Wilkes-Barre v. Workers’ Compensation Appeal Board (Spaide), 868 A.2d 620 (Pa.Cmwlth.2004). Section 443(a) of the Act outlines the requirements for reimbursement as follows:

If, in any case in which a supersedeas has been requested and denied under the provisions of Sec. 113 or Sec. ISO, payments of compensation are made as a result thereof and upon the final outcome of the proceedings, it is determined that such compensation was not, in fact, payable, the insurer who has made such payments shall be reimbursed therefor....

77 P.S. § 999(a). (Emphasis added). Because what is sought here is reimbursement not for compensation that employer had to pay but for attorney’s fees and costs governed by Section 319 of the Act, not Sections 413 and 430 of the Act, I disagree with the majority that reimbursement from the supersedeas fund is authorized.

Whether payments can be recovered from the supersedeas fund in this case in part turns on whether those payments were for “compensation” as that term is used in Section 443(a) of the Act. While the Act itself does not define the term “compensation,” it is settled that a determination of what constitutes “compensation” must be made on a section-by-section basis by examining the statutory language and legislative intent. Berwick Industries v. Workers’ Compensation Appeal Board (Spaid), 537 Pa. 326, 643 A.2d 1066 (1994). We have defined compensation for the purposes of Section 443 of the Act as including both wage loss and medical expenses for employees’ injuries sustained in the course of employment. Insurance Co. of North America v. Workers’ Compensation Appeal Board (Kline and Packard Press), 137 Pa.Cmwlth. 393, 586 A.2d 500 (1991), aff'd per curiam, 533 Pa. 112, 619 A.2d 1356 (1993).

In Universal AM-CAN, Ltd. v. Workers’ Compensation Appeal Board (Minteer), 870 A.2d 961 (Pa.Cmwlth.2005), we held that an employer was not entitled to reimbursement from the supersedeas fund for its attorney’s fees and litigation costs incurred in directly litigating an employee’s compensation claim because such fees did not fall within the definition of the term “compensation.” While our holding in Minteer is not necessarily controlling in this matter, because this case involves a third-party settlement rather than direct litigation of an employee’s worker’s compensation claim under Section 440 of the Act, the result should be the same.

The supersedeas fund does not exist to satisfy the obligations of a third-party tort-feasor and it does not assume financial responsibility for an injury caused by a third-party. Kidd-Parker v. Workers’ Compensation Appeal Board (Philadelphia Sch. Dist.), 907 A.2d 33 (Pa.Cmwlth.2006). Eligibility for attorney’s fees and costs are governed by Section 319 of the Act which provides for subrogation of the *865employer in third-party injury cases; however, it also provides as follows:

[Reasonable attorney’s fees and other proper disbursements incurred in obtaining a recovery or in effecting a compromise settlement shall be prorated between the employer and employee.... The employer shall pay that proportion of the attorney’s fees and other proper disbursements that the amount of compensation paid or payable at the time or recovery or settlement bears to the total recovery or settlement. Any recovery against such third person in excess of the compensation theretofore paid by the employer shall be paid forthwith to the employee ... and shall be treated as an advance payment by the employer on account of any future installments of compensation.

77 P.S. § 671.

While Section 319 allows an employer to recoup its accrued lien from a third-party settlement and treat any balance of recovery as satisfaction of any future payments of compensation, an employer remains responsible for its share of the expenses and attorney’s fees expended in obtaining a third-party settlement. These fees are not “compensation” in and of themselves, but rather the costs that must be borne by an employer to obtain the ability to not have to pay compensation. Insurer has already recouped the wage loss and medical expenses it paid to Claimant through reimbursement of its accrued lien and the benefit of the grace period. The remaining amount it wishes to be reimbursed for is not compensation, but rather its pro rata share of the attorney’s fees and costs expended in obtaining these benefits of the third-party settlement.

Not only are attorney’s fees and costs not “compensation,” the provision authorizing collection of those costs is governed by Section 818 of the Act, which makes them, by definition, ineligible for supersedeas fund reimbursement. Reimbursement is only authorized for compensation paid as a result of denial of a supersedeas under Sections 413 and 430 of the Act. Both of those provisions involve the obligation of an employer to pay benefits when an employer is attempting to modify benefits or a claimant is awarded benefits.2 Because Section 443 does not authorize reimbursement for a Section 318 claim, based on the plain language of the statute, supersedeas fund reimbursement is not available for petitions filed under § 306(f.l)(8). See Department of Labor and Industry, Bureau of Workers’ Compensation v. Workers’ *866Compensation Appeal Board (Exel Logistics), 586 Pa. 85, 890 A.2d 1045 (2005).

Because the fees associated with recovery of a third-party settlement are not compensation, they are not reimbursable under Section 443(a) of the Act. For this reason, I would reverse the Board and respectfully dissent.

. Act of June 2, 1915, P.L. 736, as amended, 77 P.S. § 999(a).

. Under Section 413 of the Act, the filing of a petition to terminate, suspend or modify a notice of compensation payable, compensation agreement or award may operate as a request for a supersedeas to suspend the payment of compensation fixed in the agreement or award, depending on whether the petition alleges that the claimant has fully recovered. In that situation, if it is accompanied by an affidavit of a physician based on a physical examination within 21 days prior to the petition being filed, the petition automatically operates as a request for supersedeas. In any other case, the petition does not automatically operate as a supersedeas but may be designated as a request for a supersedeas, which is granted at the discretion of the WCJ. While Section 413 deals with what occurs when an employer files a petition to modify compensation already being paid, Section 430 of the Act deals with an adverse ruling to the employer after the WCJ or the Board awards benefits. In such a situation, the filing of an appeal from a WCJ’s or Board’s decision granting benefits does not lift the ‘‘lien of judgment” or operate as a supersedeas. Instead, the employer must file a petition for supersedeas and must continue paying benefits pursuant to the WCJ’s decision until such time that a request for a supersedeas is granted.