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When Custom Trumps the Law in the Workers’ Compensation System, Injured Workers Suffer

Attorneys, as creatures of precedent and habit, can be lulled into believing that a way to do something is the way to do it simply because that’s the customary way it has been done. It’s one thing when support for such a custom can be found in a statute, regulation, or case law. It’s a different story when the only support for a custom is that other people have done the same thing previously without pushback or consequence.

Unfortunately, the players in Pennsylvania’s workers’ compensation system seem to be following the latter, problematic, path. Today, much of what is happening in that system is based on custom, not the law or even best practices. Injured workers are suffering because of it.

Settlements follow custom, not best practices

For a while now, it has been customary for claimants’ attorneys to settle a workers’ compensation case in exchange for a certain number of years of workers’ compensation benefits without taking into consideration a claimant’s current or medical bills, the nature of their injuries, their age, or any other factors that go into valuing a case.

This custom is one that claimants’ attorneys who want to maximize the value of their clients’ cases—and who understand what the maximum value of a case looks like—have to overcome. Perhaps it is no surprise that this custom has been adopted by, and cleverly propounded by, insurers and their defense counsel.

Rarely awarding unreasonable contest attorneys’ fees is the norm

It has become a custom that rarely are penalties awarded or awarded in an amount that would deter defendants’ bad behavior in the future, such as unreasonable contest attorneys’ fees. This is problematic because it is the burden of a defendant to show their contest was reasonable, yet few if any defendants do so. While this custom may be changing, as I noted in a recent column regarding the Pennsylvania Supreme Court’s decision in Lorino v. Workers’ Compensation Appeal Board (Commonwealth of Pennsylvania), it is one that has developed despite it being contrary to the language of the Pennsylvania Workers’ Compensation Act (as the Lorino decision made clear).

The inappropriate use of documents is now customary

It is customary for an employer and their insurer to issue a Temporary Notice of Compensation Payable (TNCP), even though that’s a bastardization of a document that should be issued if there’s a clear injury and the claimant is disabled, that is, losing wages because of that injury. When this is the case, there’s no reason for the continuing investigation contemplated by a TNCP since an insurer and their counsel have everything they need to issue a Notice of Compensation Payable (NCP).

Nevertheless, this has become a customary practice. Why? Because if an insurer and their counsel can control the medical investigation during the first 90 days after a claimant’s injury, with the expiration of the TNCP, they can then stop the claimant’s benefits.

This type of behavior must be deterred. Our firm frequently files, and we encourage other claimants’ firms to file, penalty positions concerning the misuse of Pennsylvania Bureau of Workers’ Compensation documents. The TNCP is obviously not the right Bureau document to use in this situation. Yet, there are no consequences to insurers for doing so because the use of TNCPs has, through custom, become the prevailing procedure. Despite the clear error in doing so, in the vast majority of cases we bring, we see insurers using TNCPs instead of NCPs. That poses a danger to the health and well-being of injured Pennsylvania workers.

Additionally, claimants’ attorneys are rarely given an opportunity to cross-examine the party-opponent to prove the penalty and possible fraud. Consequently, the behavior continues to harm injured workers who gave up a constitutional right to sue their employer for damages caused by injuries they suffered on the job in exchange for workers’ compensation—the so-called GRAND BARGAIN—which has not turned out to be much of a bargain for citizens of the commonwealth.

The failure to award attorneys’ fees in connection with medical bills is supported by custom, not the law

It has become customary to not award attorneys’ fees when an attorney secures payment of their client’s medical bills even though there’s no consequence to an injured worker when a Workers’ Compensation Judge orders a 20 percent attorney fee in that situation. To the contrary, there’s a consequence to an injured worker of not having their attorney secure payment of their medical bills.

I’ve yet to see one client who had to pay a 20 percent attorney fee out of their pocket in a case where such a fee had been ordered pursuant to the Pennsylvania Commonwealth Court’s decision in Neves v. Workers’ Compensation Appeal Board (American Airlines), or even before the case was decided in May 2020. It just doesn’t happen. Yet, that’s the custom—but not the law.

Medicare set-asides were created by policy, not a statute or regulation

Perhaps the biggest custom-over-law boogeyman out there is the Workers’ Compensation Medicare Set-aside Arrangement, better known as a “Medicare set-aside” (MSA). In the past, entrepreneurial defense attorneys have presented to employer and insurance company industry groups about MSAs, scaring both into thinking they had to have MSAs on their workers’ compensation settlements.

The fact is MSAs are not legally required by a statute or a regulation. They are merely guidance, created by the Centers for Medicare & Medicaid Services (CMS). The most recent edition of the Workers’ Compensation Medicare Set-aside Arrangement Reference Guide, published by the CMS, states that “submitting [an MSA] for review is never required.” They may apply in some cases, but not all.

That’s mainly because the CMS will only review MSA proposals concerning settlements greater than $25,000 in certain cases, and greater than $250,000 in other cases. Those figures have been in place for many years and do not factor in inflation. Yet over that time, we’ve seen the average weekly wage compensation rate increase and the value of cases also increase.

MSAs are now being used as an artificial cap on the value of cases by insurers, their counsel, and mediators. They’re using the threat of having to submit an MSA as a weapon to convince claimants’ attorneys that their clients’ cases are worth less than $250,000, despite all known factors suggesting the values of those cases are north of that.

Ironically, this MSA game is costing employers tens of millions of dollars every year by causing a delay in settling cases. While this already slow-moving process should normally take about 30 days, thanks to vendors that are neither aggressively nor adequately pursuing CMS’s approval for an MSA, the timeframe often balloons to six months.

This is a cost of the system, which all employers bear. This custom could be easily fixed if people acted confidently, understood the interplay between custom and law, were willing to stand up for the latter, and most importantly, held the feet of the vendors handling MSAs to the fire to get them done in 30 to 60 days. Nevertheless, an MSA should not and cannot get in the way of adequately compensating an injured worker.

The workers’ compensation system must be a system of laws and regulations, not customs

It should surprise no one that the customs I’ve highlighted above inure to the benefit of insurers, employers, and their counsel. Left on the outside looking in are injured workers. The same injured workers who have agreed to the Grand Bargain—a bargain that is much less grand when customs eat away at the processes and benefits it provides them.

I implore all players within the Pennsylvania workers’ compensation system, but especially the claimants’ bar, to step up and do the right thing for their clients by eliminating their blind reliance on customs over the clear letter of the law. Injured workers may bear the brunt of this reliance, but as I noted above, employers suffer as well.

Thanks to the Pennsylvania Workers’ Compensation Act, and interpretive decisions from the Pennsylvania Commonwealth and Supreme Courts, the Pennsylvania workers’ compensation system is carefully calibrated to balance the interests of injured workers and employers. A reliance on customs instead of the law destroys that balance, but more significantly it erodes and possibly destroys the rule of law. That is a very dangerous place for us to be. We are well past the time to restore the balance of the Grand Bargain. Doing so would be simple—apply and follow the law.

​​Samuel H. Pond is the managing partner of Pond Lehocky Giordano LLP, the largest workers’ compensation and social security disability law firm in Pennsylvania. He can be reached at spond@pondlehocky.com.

Reprinted with permission from the January 17, 2023 edition of The Legal Intelligencer © 2023 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.

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