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In one of their first decisions of 2005, the Commonwealth Court reminds employers and their workers’ compensation insurance carriers that they must be mindful regarding their acceptance or denial of a claim and the approach they take to the litigation of a claim petition filed by an employee. In Johnstown Housing Authority and H.A.R.I.E. v. WCAB (Lewis), filed Jan. 12, Edward Lewis was employed as a maintenance worker with Johnstown Housing Authority since 1985. On July 31, 2002, Lewis was getting supplies when he tripped and twisted his ankle. He reported the injury to his supervisor, who sent him to the emergency room. His employer’s panel physician diagnosed Lewis with a sprained ankle and released him to modified, sedentary work. Following three days off work, Johnstown assigned Lewis to “seated work” doing parts inventory, counting screws, nuts and bolts. The panel physician then referred Lewis to an orthopedic surgeon who saw him Aug. 14, 2002, and ordered an MRI. The MRI revealed a tear of the anterior talofibular ligament in Lewis’ left ankle. The orthopedic surgeon recommended a second opinion regarding possible surgical intervention; however, the employer did not authorize the second opinion. Instead, the employer filed a petition for physical examination, which was granted by the WCJ. In the meantime, Lewis finally obtained a referral from his family physician to see Carl T. Hasselman, an orthopedic surgeon. Following his examination of Lewis and review of diagnostic studies, Hasselman recommended surgery. On Jan. 13, 2003, Lewis underwent an independent medical examination (IME) with his employer’s expert, Stephen Bailey, who opined that Lewis had fully recovered from an ankle sprain and executed an affidavit of recovery. On Jan. 15, 2003, Johnstown Housing Authority filed a termination petition based upon Bailey’s opinion. On Jan. 31, 2003, Lewis underwent surgery, performed by Hasselman. Lewis remained off work from Jan. 31, 2003, until he was released to return to sedentary duty on May 17, 2003; however, the employer refused to assign Lewis to sedentary work, forcing him to seek unemployment benefits. At the hearing Feb. 18, 2003, the initial hearing on Johnstown’s termination petition, the employer, for the first time, indicated that on Aug. 20, 2002, it had filed a Notice of Workers’ Compensation Denial (NCD). The NCD noted that although an injury took place, it was not disabling and was, therefore, a “medicals-only claim.” Lewis testified that he never saw nor received the NCD. Based upon its issuance of the NCD, the employer’s termination petition was withdrawn as premature. On Feb. 24, 2003, Lewis filed a claim petition with a request for penalties and unreasonable contest attorney fees. In its answer, the employer acknowledged that the claimant had given notice of an injury but specifically denied that a work-related injury existed, as well as denied all of the other elements alleged in Lewis’ claim petition. Following the submission of the evidence, including the testimony of Hasselman and Bailey, the workers’ compensation judge granted the claim petition, found the employer engaged in an unreasonable contest and awarded a 50 percent penalty for the employer’s failure to issue an “acceptance document” for Lewis’ injury. The employer appealed, challenging only the WCJ’s award of penalties and unreasonable contest attorney fees. Following the board’s decision affirming the WCJ’s decision, the employer filed a petition for review with the Commonwealth Court questioning whether the WCJ erred first in awarding penalties for the failure to issue an “acceptance document” and second in awarding unreasonable contest attorney fees when it had issued a timely NCD and had medical evidence to support its denial. In support of its first claim of error, the employer contended that penalties were not appropriate pursuant to the Commonwealth Court’s prior decision in Darrall v. WCAB (H.J. Heinz Co.). In Darrall, the employer had filed an NCD because it contended the claimant’s disability lasted less than seven days; however, the employer stated that it would pay reasonable, necessary and related medical expenses. The claimant filed a claim petition, which was granted by the WCJ but her request for penalties was not. The claimant appealed and asserted that the employer’s notice of denial, which required her to file a claim petition, required penalties pursuant to Lemansky v. WCAB (Hagan Ice Cream Co.). The Commonwealth Court, in affirming the WCJ’s decision, held that because the employer issued a timely notice and disagreed with the claimant regarding the length of disability, it did nothing wrong, in contrast to the employer in Lemansky, who filed no notice of any kind. The employer in Johnstown Housing attempted to equate its actions in issuing a denial with those of the employer in Darrall. The Commonwealth Court, in rejecting the employer’s contention, first noted that its decision in Darrall had indeed permitted employers to accept responsibility only for medical treatment and contest liability by issuing a timely denial; however, in Johnstown Housing, it was undisputed that the employer had failed to give Lewis notice that it was denying liability for loss of earning power. Because Lewis testified that he never received the NCD, and apparently no testimony or other evidence was offered to controvert this assertion, the employer’s purported NCD failed to achieve its statutory purpose: to put Lewis on notice that it was denying his claim and the reasons why. As such, the employer’s NCD was invalid, and it was deemed to have not timely accepted or denied liability for Lewis’ injury. Therefore, penalties were appropriate. In support of its second claim of error, the employer contended that the award of unreasonable contest fees was not appropriate in this case because at the time it filed its answer to Lewis’ claim petition, it had medical evidence to substantiate its contest. The Commonwealth Court did not agree with the employer regarding this issue either. In arriving at its determination that unreasonable contest fees were properly assessed against Johnstown, the court examined the answer the employer filed to Lewis’ claim petition. It noted that the employer, in its answer, “denied nearly every factual averment contained in the claim petition, including that ‘Lewis suffered an injury’ and that ‘such injury was work-related.’” The Commonwealth Court noted that the record supported the WCJ’s decision to award unreasonable contest fees because the record revealed that at the time the employer filed its answer, the employer had no basis to dispute that Lewis suffered an injury during the course and scope of his employment. The court also determined that the employer was unable to dispute Lewis’ allegation that an injury occurred because it paid Lewis’ medical bills and “overt[ly] recognized” that Lewis was unable to return to his pre-injury position after he injured his ankle when it assigned Lewis to the sedentary, “seated-only,” parts-inventory job. The Commonwealth Court held that as the claimant was forced to incur attorney fees to litigate his claim petition when the record was clear that the employer did not have a basis to deny his injury or its relationship to his employment at the time it answered his claim petition, the WCJ did not err by awarding him unreasonable contest attorney fees. In so holding, the court apparently relied upon the board’s extensive restatement of the employer’s transgressions regarding its approach to Lewis’ claim petition. Included in these infractions were the employer’s lack of a basis to dispute that Lewis had suffered an injury in the course of his employment, its lack of basis to dispute that Lewis reported the injury and was treated with a panel physician for the required time period, and its lack of basis to dispute that Lewis was at least partially disabled due to its creation of a sedentary position. Johnstown Housing Authority reminds each and every practitioner that Lemansky v. WCAB (Hagan Ice Cream Co.) is still viable (just in case anyone might have forgotten about Lemansky) and unreasonable contest attorney fees can be assessed against an employer if it makes a claimant litigate every aspect of his burden of proof in a claim petition setting, even those items where the employer clearly has no defense. Once again, this case reveals how dangerous it can be for an employer when it files an answer denying every allegation of a claimant’s claim petition because, by doing so, it may be facing the assessment of unreasonable contest attorney fees by a WCJ. In addition, Johnstown Housing Authority poses a concern for employers by assessing penalties for an employer’s violation of the act in not giving timely notice to Lewis of a denial of its claim based solely upon the testimony of a claimant that he or she did not receive the NCD. As a result, employers now apparently must be more cautious of a claimant’s assertion that they did not receive an NCD and account for such a claim. Undoubtedly, the testimony of whoever sent the NCD would be helpful. Finally, employers and carriers must recognize that the creation of sedentary positions for its injured workers will not protect them from subsequent claim petitions merely because the claimant suffered no loss of earnings and continue to allow them to deny certain aspects of a claimant’s claim, such as notice, whether the injury actually occurred, and course and scope of employment. Deborah A. Beck is an associate with Sand & Saidel and the assistant chairwoman of its workers’ compensation department. She is also the 2004 defense co-chairwoman of the workers’ compensation section of the Philadelphia Bar Association. If you are interested in submitting an article to Law.com, please click here for our submission guidelines.

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