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A workers’ compensation judge was wrong in ruling that an employer was not obligated to continue paying a claimant’s attorney fees after the claimant received a third-party recovery and released the employer from future liability, a majority of the Pennsylvania Commonwealth Court has ruled. Writing for the three-judge panel in Gingerich v. Workers’ Compensation Appeal Board, Commonwealth Court Judge Rochelle S. Friedman said a compromise and release agreement between a claimant and an employer did not absolve all liability under the Workers’ Compensation Act. “Thus, if some liability is not ‘compromised and released’ in the agreement, then that particular liability still exists,” Friedman said. “In other words, a compromise and release agreement only extinguishes liability which is claimed to exist under the act where the person with the claim specifically agrees to relieve the liable person from that liability.” A dissenting judge, however, said the two-judge majority misinterpreted the WCA and no ongoing benefits were owed after the release was signed. The claimant’s decendent died during the course of his employment with U.S. Filter, Friedman said. Jeffrey Gingerich, the decedent, won an award of workers’ compensation benefits on his fatal claim petition. Attorney Elizabeth Gebhardt represented Donna Gingerich in the fatal claim proceedings, Friedman said. The workers’ compensation judge approved an ongoing award of attorney fees to Gebhardt in the amount of 20 percent of Gingerich’s compensation. The order, Friedman said, stated that U.S. Filter would “directly pay [claimant's] counsel a fee of 20 percent of the amount of compensation payable, chargeable to [claimant's] share.” Some time later, Gingerich received compensation in excess of U.S. Filter’s accrued lien from a third-party action. Gebhardt did not represent Gingerich in the third-party action, Friedman said. Gingerich eventually entered into a compromise and release agreement with U.S. Filter under � 449 of the Workers’ Compensation Act. The agreement stipulated that Gingerich was not obligated to satisfy U.S. Filter’s subrogation lien for the benefits already paid, that U.S. Filter was released from all future fatal claim benefits and that even though U.S. Filter believed Gebhardt was not entitled to ongoing attorney fees, it would pay the fees if there were a court determination that such fees were owed. After a hearing, the WCJ approved the agreement and, in so doing, determined that Gebhardt was not entitled to additional attorney fees. The Workers’ Compensation Appeal Board affirmed on appeal. On appeal to the Commonwealth Court Gingerich argued her waiver of future benefits from U.S. Filter did not eliminate Gebhardt’s rights to ongoing attorney fees. Friedman said the language in � 449(a) of the WCA allows a party to compromise and release “any and all liability” claimed to exist under the act. That language, Friedman said, should not be read as meaning that all liability is extinguished. “We interpret this language to mean that a compromise and release agreement may address ‘any’ liability, but not necessarily ‘all’ liability, which is claimed to exist under the act,” Friedman said. In Gingerich’s case, Friedman said, while U.S. Filter released Gingerich from liability for subrogation and Gingerich released the employer from its liability for future benefits paid, Gebhardt did not release Gingerich from her liability for a 20 percent attorney fee. “[Gingerich] could not release herself from this liability simply by waiving future benefits,” Friedman said. “Thus, [Gingerich's] liability for attorney fees still exists.” Friedman also explained the timeframe relevant to the award of fees. When a claimant receives recovery against a third party in excess of the compensation paid by the employer, that recovery is treated as an advance payment by the employer in place of future installments of payments, Friedman said. Under the WCA, the employer is not required to pay benefits again until the excess money from the third party runs out, Friedman said. The period of time between the employer’s obligations of payment is called the grace period, she said. In 1985, Friedman said, the Pennsylvania Supreme Court held in Rollins Outdoor Advertising v. Workmen’s Compensation Appeal Board that an employer must still pay any fee owed to an attorney based on compensation payable during a grace period. When Gingerich received her excess compensation from the third party, Friedman said, U.S. Filter was entitled to a grace period, during which time Gebhardt was entitled to her 20 percent fee. In the action, Gebhardt only sought fees for the grace period, Friedman said. In his dissenting opinion, Judge James R. Kelley also looked to � 449 of the WCA, but he said that under it, Gingerich and U.S. Filter did agree to release “all” liability under the act, even though Gingerich did not specifically agree to release the employer from liability for attorney fees. “In order for there to be a liability for attorney’s fees, there must first be a liability. As a result of the compromise and release, no ongoing benefits are owed,” Kelley said. “Therefore, there can be no legal liability due for ongoing attorney’s fees because the source of the same has been extinguished by the principal, specifically claimant. The majority’s opposite conclusion is effectively interfering with the outside relationship between claimant, as the client, and her counsel.” Kelley said Friedman’s reliance on Rollins was misplaced, as the high court case involved not a compromise and release situation but one that involved issues of an illegal subrogation agreement and attorney fees in connection with an award from a third-party tort action and subsequent proceedings under the WCA. “More importantly, the issue of what party was required to pay the claimant’s counsel who successfully defended the claimant on a subsequent termination petition was not determined by our Supreme Court but was remanded to the workers’ compensation judge, because the award of attorney’s fees is in the discretion of the referee, to clarify who was charged with the liability for payment of the counsel’s fee,” Kelley said. “Therefore, I believe that Rollins is not applicable to the present situation.”

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