In 1972, the Pennsylvania Workers’ Compensation Act was amended to include language mandating that attorney fees be awarded as a cost to the employer unless the employer established that it had a reasonable basis to contest the claim.
The humanitarian purpose of the act is central to the interpretation of this section. The courts often cite to the remedial nature of the act and the need to liberally construe the act in favor of the claimant. Most important, however, is the intent behind Section 440, which is to ensure that successful claimants receive compensation benefits undiminished by the costs of litigation.
Despite the language of the statute and the liberal interpretation by the appellate courts, it is unusual for unreasonable contest attorney fees to be awarded.
In nearly 25 years of practicing workers’ compensation law, I have never had a judge award attorney fees sua sponte. In nearly 20 years of representing injured workers, I have only seen unreasonable contest fees be awarded in a few cases. It is time for judges and attorneys to take unreasonable contest attorney fees seriously in every case.
It is a judge’s obligation to make a reasoned decision. Specific findings of fact must be supported by substantial competent evidence. Yet, judges routinely overlook or give scant attention to the issue of unreasonable contest. Nearly every decision issued contains a finding of fact that the employer has established a reasonable basis for its contest. The finding almost never contains any citation to the record or analysis of evidence to explain the basis of the finding. As a result, judges are not fulfilling their obligation to consider whether employer established a basis for its contest, and the bar is allowing this to happen.
When an injured worker prevails, there is a presumption that the employee is entitled to attorney fees. The judge must make an award of attorney fees unless the employer meets its burden of establishing that it had a reasonable basis for its contest. The circumstances surrounding the contest should be evaluated in order to determine whether the contest was prompted to resolve a genuine disputed issue or merely to harass the claimant. A contest which was originally reasonable can become unreasonable when the totality of the circumstances and the facts occur during the litigation process. Likewise, an unreasonable contest may become reasonable at some later point in the proceedings. Whether or not there has been a reasonable basis for contesting a claimant’s award of benefits depends upon both the facts and the legal issues involved.
In the two most common types of workers’ compensation litigation, the ease with which employers can establish a reasonable basis for its contest vary because of the burdens of proof associated with the petition. Employer-driven petitions, such as petitions to terminate, modify or suspend benefits, are typically supported by medical evidence in hand at the time of the filing. Typically, the legal dispute is based upon conflicting medical evidence and the contest is clearly reasonable. Where medical evidence is conflicting, the employer’s contest was, as a matter of law, reasonable. In claim petitions, and possibly in other claimant-driven petitions, employers should be prepared to present evidence to support the denial of the claim and contest of the petition. Employers must have evidence that the contest involved a genuine dispute, not just a blanket denial of the claim.
Many claims are denied by adjusters and employers because of the belief that it is claimant’s burden to prove entitlement to benefits. In the first few days of a claim, claimant has often submitted a written injury report and undergone evaluation by a workers’ compensation panel provider documenting the injury. Nevertheless, it is not uncommon for a notice of compensation denial to be issued stating “further investigation pending.” Based on the statute and case law, this is not the basis for a reasonable contest. It is also not uncommon for claims to be denied because the claimant had a pre-existing condition. Again, since the definition of an injury under the act includes aggravation of pre-existing conditions, this too is not the basis of a reasonable contest. If pressed to present evidence of the reasonableness of its contest, employers may find it hard to meet their burden.
While the act places the burden of establishing a reasonable basis for the contest squarely on the employer, and the judge is charged with awarding fees unless the employer meets its burden, the failure of the system to take this issue seriously may fall hardest on claimants’ attorneys. In short, claimants’ attorneys rarely present evidence upon which the judge could support an award of unreasonable contest fees. In every disputed claim or reinstatement petition, claimant’s counsel should press the issue of unreasonable contest attorney fees by submitting an affidavit of experience to support the hourly fee request and an itemization of time spent on the litigation. Briefs should include a finding of fact detailing how an employer failed to submit evidence of the reasonableness of its contest, as well as a conclusion of law that an employer failed to establish a reasonable basis for its contest. Appeals should be filed when the judge’s decision lacks factual support or sufficient explanation for a finding of reasonable contest.
The issue of unreasonable contest adds value to a claim. Claimants’ attorneys should consider this when assessing the value of a case when submitting a settlement demand. Demands should factor in the value of a possible attorney fee award on the pending litigation. Resolution of petitions by stipulation should include a demand for attorney fees. An award of unreasonable contest attorney fees can significantly benefit claimants. Given the benefit to claimants, it is counsel’s obligation to pursue this remedy zealously.
The landscape for pursuing attorney fees may presently seem pointless since judges rarely make awards. However, pressing the issue, not just at the judge level but also on appeal, will have an impact. Employers and carriers will take notice when even a few judges award fees and those awards are upheld on appeal. Employers and carriers will adjust their analysis of a claim to consider the likelihood of unreasonable contest attorney fees when deciding whether to accept or deny claims. As a result, the true purpose of the act will be served by claimants receiving benefits without needless litigation.
Marianne Henry Saylor, a partner in the workers’ compensation practice at Willig, Williams & Davidson, is one of fewer than 100 lawyers in Philadelphia certified in workers’ compensation law by the Pennsylvania Bar Association workers’ compensation law section. She is deeply knowledgeable about the Pennsylvania Workers’ Compensation Act and has represented injured workers throughout eastern Pennsylvania.