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Payments of medical expenses by an employer may toll the three-year limitations period of the Workers’ Compensation Act, but the claimant bears the burden of establishing that the payments were made “in lieu of workmen’s compensation,” a plurality of the Pennsylvania Supreme Court has ruled. “We … take this opportunity to expressly overrule Paolis [ v. Tower Hill Connellsville Coke Co.] and hold that payments of medical expenses can constitute ‘payments of compensation’ for purposes of Section 315 and will toll the limitations period in an appropriate case,” Justice Ralph Cappy wrote in the opinion announcing the judgment of the court. While the lead opinion affirmed the commonwealth court’s decision in the case with regard to whether medical payments can toll the statute of limitations, it disagreed with the intermediate appellate court’s ruling that it was the employer’s burden to prove that the payments were not made in lieu of compensation. Noting that it was an issue of first impression for the high court, the lead opinion concluded that it is the claimant’s initial burden to demonstrate that the medical payments were made in lieu of compensation. And “the mere proof of receipt of benefits is insufficient to meet the claimant’s burden,” Cappy said. Justice Sandra Schultz Newman was the only justice to join Cappy’s opinion. Chief Justice Stephen Zappala joined the plurality’s opinion but wrote a separate concurring opinion. Justice Russell M. Nigro concurred in the result only, without writing separately. Justice Thomas Saylor wrote a dissenting opinion that was joined by Justice Ronald Castille. Former Chief Justice John P. Flaherty did not participate in the decision. Terry Schreffler worked for the Kocher Coal Co. as a miner. In 1979, he suffered a back injury that left him totally disabled. Kocher filed a notice of compensation payable (NCP) for Schreffler’s injury, and Schreffler began receiving workers’ compensation payments. Although the NCP listed only Schreffler’s back injury, Kocher was also paying for his psychological care unrelated to the back injury. Some time before he injured his back, a flood in one of the Kocher mines killed several of Schreffler’s co-workers. He was part of the team that recovered their bodies. Schreffler began having nightmares and flashbacks after the event. In 1993, Kocher’s insurer stopped paying Schreffler’s bills for psychological treatment. In January 1996, Schreffler filed a petition to review the NCP, which did not address his psychological problems. Kocher defended that Schreffler’s appeal was beyond the three-year statute of limitations under � 315 of the Workers’ Compensation Act. Section 315 has an exception that tolls the limitations period for payments made “in lieu of compensation.” A workers’ compensation judge determined that Schreffler’s claim was time-barred by � 315 and that the medical payments did not toll the limitations period. The Workers’ Compensation Appeal Board affirmed. On appeal, the commonwealth court reversed. The court said that “any reasonable mind would be compelled” to determine that Schreffler conclusively established that the psychological medical bill payments were intended in lieu of compensation and that Schreffler created an inference that Kocher made the payments for more than 13 years to compensate him for that work-related injury. The commonwealth court also said the burden was on Kocher to come forward with any evidence to show its intent was not to pay the bills in lieu of compensation. When Kocher failed to offer any evidence, the court deemed the claim petition to be timely and reversed and remanded the case. According to Cappy’s opinion, Schreffler relied on the plain meaning of “compensation” to argue that voluntary payments of medical expenses should toll the limitations period until the most recent payment by employer. Kocher, on the other hand, argued that such a rule would deter employers from making voluntary payments because they would risk “continued and possibly unending” liability. Cappy said the question before it could be answered by looking at the court’s 1994 decision in Berwick Industries v. WCAB, a holding the court said appears to have “confused” other tribunals. Berwick held that medical expense payments are “payments of compensation” that can be barred by the limitations period of � 315. Therefore, the court said, the logical corollary to Berwick is that such payments are also “payments of compensation” for purposes of the tolling provision of � 315. Because of the confusion surrounding Berwick, Cappy said, other courts had mistakenly followed Paolis, a 1919 Pennsylvania Supreme Court decision, as precedent. Paolis held that payments of medical expenses did not constitute compensation for purposes of the tolling provision of � 315. However, Cappy said, Berwick effectively overruled Paolis. Thus, he said, payments of medical expenses can constitute “payments of compensation” for purposes of � 315 and can toll the limitations period. BURDEN OF PROOF The second issue the court addressed was which party had the burden of proving that payments of medical expenses are “payments of compensation” for purposes of � 315. The commonwealth court applied a shifting burden of proof, whereby the claimant only needs to show a work-related cause for the injury for the burden to shift to the employer to disprove its intent to make the payments in lieu of compensation. Cappy concluded that the commonwealth court did not require sufficient evidence to shift the burden to the employer. “The important inquiry is the intent with which the payments were made,” Cappy said. “Thus, the claimant must adduce some additional evidence regarding the purpose of the payments, i.e., showing that the employer intended the payments to be in lieu of workers’ compensation. This additional evidence should, at a minimum, demonstrate that the employer either had actual or constructive knowledge of a work-related injury.” However, Cappy noted, the commonwealth court developed an exception to this rule that the justice said was worth extending: When payments are made to an employee with a total disability, a rebuttable presumption arises that the payments are in lieu of workers’ compensation. “While the Commonwealth Court developed this exception in the context of disability policy and wage payments, we think that it is equally applicable to payments for medical expenses,” he said. An employer must rebut the presumption, or the fact finder is required to determine that the payments were made in lieu of worker’s compensation. Once the employer produces sufficient evidence, the burden returns to the claimant. But the Schreffler case presented “an additional wrinkle” in applying the burden of proof, Cappy said, because Schreffler had two distinct injuries — the back injury and the psychological injury. Therefore, the presumption that medical payments made during a total disability, arising out of Schreffler’s back injury, was in recognition of the psychological injury did not apply. CONCURRENCE, DISSENT Zappala said he agreed with the opinion announcing the judgment of the court. He wrote separately “to note that it may prove difficult for a claimant to adduce direct evidence that the employer intended the payments for medical expenses to be ‘payments of compensation’ for purposes of Section 315.” In some cases, he said, an employer’s intent may have to be determined from what a reasonable person would deduce from the evidence. In his dissent, Saylor said he agreed that the tolling provision of � 315 may be triggered by the voluntary payment of medical expenses and agreed that Paolis should be overturned, but he disagreed with how the “in lieu of compensation” exception to the rule should be analyzed. “The Commonwealth Court has frequently stated that ‘payment in lieu of compensation’ means ‘any voluntary or informal compensation, apart from the act, paid with the intent to compensate, for a work-related injury,’” Saylor said. He said that standard requires proof of only two elements: � actual compensation paid for a type of loss the WCA would require payment for, were the employer found liable; and � an intent to redress such loss in relation to a specific work-related injury. “As I believe that the above-quoted formulation provides an appropriate, workable standard consistent with the statutory framework, I would adopt it here and, correspondingly, reject [Kocher's] assertion that the voluntariness of its payments should be viewed as negating the effect of Section 315′s tolling clause,” Saylor said. Finally, Saylor said he agreed with the lead’s conclusion that a claimant bears the burden of proof by a preponderance of the evidence and that that the claimant’s proof should at a minimum demonstrate that the employer had actual or constructive knowledge of the work-related injury at issue. Saylor said he did not think Schreffler met that burden. Saylor said, however, that he would remand the case to the commonwealth court for consideration of Schreffler’s argument that Kocher was equitably estopped from claiming the statute of limitations as a defense. Because the intermediate appellate court decided Schreffler satisfied his burden of proving the limitations period was tolled, it never addressed the claimant’s alternate theory.

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