Last fall, the Pennsylvania Supreme
Court handed down two long-awaited opinions addressing
the limited tort option available under the Pennsylvania Motor Vehicle
Financial Responsibility Law, 75 Pa.C.S.A. ?1701, et.seq. In Washington
v. Baxter (defended by Swartz, Campbell & LLC), the high
court answered whether a judge or jury should determine if a plaintiff
has suffered a "serious injury," and, further, how a "serious impairment
of body function" should be defined. In Donnelly v. Bauer (Swartz,
Campbell & LLC participated as Amicus Curiae counsel),
the Supreme Court answered whether a remedy exists for insureds
who are not provided notice
at the time of purchase of the cost differentials between premiums
for full tort
insurance and limited tort insurance.
Washington v. Baxter Jury Will Decide
Question of Serious
Injury In All But the "Clearest of Cases"
(a) Who Decides if the Plaintiff Suffered a Serious Injury?
The Pennsylvania Supreme Court, in
Washington v. Baxter, 719A.2d 733 (Pa.1998), addressed two issues
critical to most limited tort cases: (1) who (the judge or the jury)
should determine whether the plaintiff has suffered a "serious injury,"
within the meaning of 75 Pa.C.S.A. ?1705; and (2) how is a "serious
impairment of body function," as set forth in 75 Pa.C.S.A. ?1702,
to be defined. These issues had previously been decided by the Superior
Court in Dodson v. Elvey, 665 A.2d 1233 (Pa. Super. 1995).
In Dodson, the Superior Court held
that the trial judge must always make a threshold finding of whether
there has been a serious injury, in all cases where the parties
agree on the objective evidence relating to the nature and extent
of the plaintiff's injuries. In Washington, the Supreme Court disagreed.
The Washington court noted that the
legislature had specifically rejected attempts to insert specific
language into the limited tort statute which would have made the
question of serious injury one for the trial judge to decide, rather
than the jury . The Supreme Court also looked to Michigan's limited
tort statute, upon which the Pennsylvania limited tort option was
modeled, and the Michigan case law interpreting same. The leading
Michigan case, DiFranco v. Pickard, 427 Mich. 32, 398 N.W. 2d 896
(1986), held that the threshold question of whether the plaintiff
had suffered a serious injury was to be left to the jury. The Pennsylvania
Supreme Court expressly followed DiFranco in Washington, holding:
Upon review, we conclude that the legislative
history does not support the view that the threshold determination
of whether a serious injury has been sustained is to be made by
the trial judge. In fact, we find that the legislature, by following
the Michigan model, indicated that the traditional summary judgment
standard was to be followed and that the threshold determination
was not to be made routinely by a trial court judge in matters such
as the one before us now, but rather was to be left to a jury unless
reasonable minds could not differ on the issue of whether a serious
injury had been sustained.
719 A.2d at 740. Thus, summary judgment
is to be granted only in the clearest of cases. Further, in a footnote,
the Supreme Court went so far as to state:
Even when there is no dispute concerning
the facts, a motion for summary judgment should not be granted where
those facts can support conflicting inferences.
719 A.2d at 740n.10. Interestingly,
as discussed below, despite this strong wording, the high court
determined that the facts in Washington were among the "clearest
of cases," and ultimately affirmed summary judgment.
(b) How Is a Serious Impairment of
Bodily Function
Defined?
The Pennsylvania Supreme Court affirmed
the grant of summary judgment in favor of the defendant in Washington,
on the basis that the plaintiff had not sustained a "serious impairment
of bodily function," as set forth in 75 Pa.C.S.A. ?1702, the statutory
definition of "serious injury." In doing so, the Court re-examined
the definition of "serious impairment of bodily function." The Superior
Court had previously defined the phrase in Dodson v. Elvey, following
the Michigan model set forth in DiFranco v. Pickard, as follows:
The "serious impairment of bodily function"
threshold contains two inquiries:
(a) What body function, if any, was
impaired because of injuries sustained in a motor vehicle accident?
(b) Was the impairment of the body
function serious? The focus of these inquiries is not on the injuries
themselves, but on how the injuries affected a particular body function.
Generally, medical testimony will be needed to establish the existence,
extent, and permanency of the impairment . . . In determining whether
the impairment was serious, several factors should be considered:
the extent of the impairment, the length of time the impairment
lasted, the treatment required to correct the impairment, and any
other relevant factors. An impairment need not be permanent to be
serious.
The Supreme Court expressly adopted
this standard and found that the facts in Washington warranted summary
judgment.
In Washington, the plaintiff alleged
that he had suffered a serious injury to his right foot. He was
treated and released from a hospital emergency room on the day of
the accident, diagnosed with sprain or strain of the right foot.
Both of the plaintiff's jobs required him to be on his feet. He
missed 4 or 5 days of work at his primary job, where he worked 48
hours per week. He also missed approximately 1-2 months of work
at his second job, where he had worked approximately 3-4 hours per
week. Five months after the accident, the plaintiff began treating
with a doctor who diagnosed him with a joint arthritis or coalition
in his right foot. He was prescribed an orthotic heel lift and given
a cortisone injection. At deposition one year after the accident,
the plaintiff alleged pain in the right foot approximately every
other week and admitted that he was able to perform his work duties.
Apparently, the only change in his life that he noted was that he
could no longer push a lawn mower and had to use a riding mower.
The Court found that, pursuant
to the definition which it had adopted,
these facts were not sufficient to constitute a "serious impairment
of bodily function."
(c) Recent Decisions Following Washington
Following the issuance of the Supreme
Court's opinion in Washington v. Baxter, several courts have had
the opportunity to apply the holding. With rare exceptions, the
facts of Washington have proven to be the benchmark by which to
measure the summary judgment standard.
In Furman v. Shapiro, PICS Case No.
98-2573 (Pa. Super. Dec. 4, 1998), the Superior Court reversed a
trial court's grant of summary judgment for the defendant, holding
that reasonable minds could differ as to the seriousness of the
plaintiff's injury. In Furman, the plaintiff presented evidence
that she suffered a bulging disc, and alleged that she could not
walk for more than a block at a time, lift heavy objects, or bathe
her child. Further, the plaintiff alleged that she had reduced her
work to part-time as a result of her back pain. Moreover, the plaintiff's
doctor claimed that her injury was permanent. In light of the holding
in Washington, the Superior Court held that the determination of
the seriousness of her injury should have been left to the jury.
In Deak v. Hillen, PICS Case No. 98-2652
(Fayette Cty. Nov. 24, 1998), the plaintiff allegedly sustained
a herniated disc, was bed-ridden for one month, and underwent surgery.
She missed eight (8) months of work and claimed two (2) years of
stiffness, numbness and periodic pain, Under these facts, Judge
Solomon concluded that "reasonable minds could not disagree" that
the plaintiff received a serious injury, and granted summary judgment
in her favor.
Notwithstanding Washington, three trial
level judges have since granted summary judgment in favor of the
defendants. In Kollmer v. Eck, PICS Case No 98-2544 (Lehigh Cty.
Nov. 19, 1998), the plaintiff sustained a facial laceration resulting
in a small scar, other cuts and bruises, and occasional headaches.
Although the plaintiff argued that the scar would cause future embarrassment,
Judge Reibman held that this argument was too tenuous to support
a finding of "serious injury," and accordingly granted summary judgment.
In Little v. Rife, PICS Case No. 98-2477
(Franklin Cty. Nov. 17, 1998), the plaintiff sustained three fractured
ribs, a lacerated chin and a fractured fibula in his left ankle.
The plaintiff underwent surgery twice, walked on crutches for 2-1/2
months, and could not return to full duty work until 4-1/2 months
after the accident. However, because the plaintiff was able to resume
his normal occupational and recreational activities within 4-1/2
months after the accident, Judge Walder held that "reasonable minds
could not differ on the conclusion that the injuries were not serious,"
and granted summary judgment in favor of the defendant.
In Merriweather v. Kain, PICS Case
No. 98-2387 (Phila. Cty. Nov. 10, 1998), the plaintiff alleged headaches,
neck pain and back pain immediately after the accident, and received
chiropractic treatment for eight months. The only residual effects
were occasional aches and pains, and a decrease in athletic activities.
Although the plaintiff, a behavior treatment specialist, claimed
difficulty restraining his patients, he found alternative employment
as a counselor, a job he apparently admittedly preferred. Despite
the Washington decision, Judge Field could still find no "serious
injury," and granted summary judgment in favor of the defendant.
All four of these trial level decisions
acknowledge the new standard of Washington, although three of them
rule in favor of the defendant. Thus, although appellate courts
have emphasized the right of limited tort plaintiffs to have their
day in court, trial level judges remain willing to dispose of some
cases.
Donnelly v. Bauer
No Remedy For Failure To Provide Insureds
With Tort Option Cost Comparison
The Pennsylvania Motor Vehicle Financial
Responsibility Law sets forth various notice requirements upon insurers
to inform insureds of the limited tort and full tort options. Specifically,
?? 1705 and 1791.1 of the Act 6 amendments to the MVFRL, effective
July 1, 1990, require insurers to notify insureds of the meaning,
effect and availability of these tort options. These statutes contain
the precise language insurers are required to use in notifying insureds
in this regard. In addition, these statutes require insurers to
provide written comparisons to insureds between the cost of premium
for full tort insurance and limited tort insurance. Specifically,
?1705 provides, in pertinent part:
Each insurer, prior to the
first issuance of a private passenger motor vehicle liability insurance
policy on or after July 1, 1990, shall provide each applicant with
the notice required by paragraph 1. A policy may not be issued until
the applicant has been provided an opportunity to elect a tort option.
75 Pa.C.S.A. ?1705(a)(4).
The notice required by paragraph 1, subpart A, provides: The annual
premium for basic coverage as required by law under this "limited
tort" option is $_______.
Section 1705(a)(1)(A). Subpart
B further provides:
The annual premium for basic
coverage required by law under this "full tort" option is $_______.
75 Pa.C.S.A. ? 1705(a)(1)(B).
In contrast, ?1791.1 provides:
NOTICE OF TORT OPTIONS -
In addition to the invoice required under subsection (a), an insurer
must, at the time of the application for original coverage for private
passenger motor vehicle insurance and every renewal thereafter,
provide to an insured the following notice of the availability of
two alternatives of full tort insurance and limited tort insurance
described in ?1705(c) and (d) (relating to election of tort options).
75 Pa.C.S.A. ? 1791.1 (emphasis
added). The notice contained in ? 1791.1 is materially identical
to that contained in ?1705, except that ? 1791.1 does not mandate
any price comparison between full and limited tort premiums. Thus,
a question arose as to which statutory provision applied to policies
issued or renewed after July 1, 1990.
The Pennsylvania Supreme
Court addressed these issues in Donnelly v. Bauer, 720 A.2d 447
(Pa.1998). The Superior Court had previously ruled that the Pennsylvania
legislature never intended first time applicants and renewals after
July 1, 1990 to have received such forms. According to Judge Cirillo,
the purpose of Act 6 was to reduce the costs of insurance. The election
of limited tort had this effect. Those who elected limited tort
had "received the benefit of their bargain."
The Supreme Court, in a 4-2
decision, ruled that 75 Pa.C.S.A. ? 1705 does mandate that insurers
provide specific forms with premium cost comparisons between limited
and full tort to individuals purchasing an original insurance policy
after July 1, 1990. However, consistent with its ruling in Salazar
v. Allstate, 549 Pa. 658, 702 A.2d 1038 (1997), the Court found
that the MVFRL fails to provide a specific remedy for the failure
of an insurer to comply with the notice requirements. On this, the
Court stated:
While Section 1705(a)(3) clearly
governs an individual renewing his policy and his failure to make
a choice, the situation faced by appellants is markedly different.
Here, appellants were purchasing original coverage, not renewing
existing policies . . . . Based on these clear differences between
appellants' situations and that contemplated by Section 1705(a)(3),
this Court finds that Section 1705(a)(3) of the MVFRL does not provide
a remedy to appellants. Moreover, this Court, like it did in Salazar,
finds no remedy in any other provision of the MVFRL which would
provide appellants who obtained coverage through the voluntary market
with a remedy for their failure to receive a Section 1705(a)(1)
notice with cost differentials from their insurers.
720 A.2d at 453-54. Additionally,
the Court found that the cost containment public policy goal behind
the enactment of Act 6 is furthered by its decision. On this, the
Court stated:
If this Court were to fashion
a remedy not expressly provided for in the MVFRL, this Court would
essentially contravene the cost containment policy behind the MVFRL
because allowing appellants the full tort coverage they seek would
result in giving appellants something for which no individual has
paid, which in turn, would result in insurance companies passing
on this extra costs to all other insureds.
720 A.2d at 454. Therefore,
the Supreme Court held that no remedy could be granted.
Following on the heels of
the Donnelly decision, a class action styled Booze v. Allstate Ins.
Co. has been filed in the Court of Common Pleas of Philadelphia
County, seeking a ruling that the lack of disclosure of cost premium
differentials for limited and full tort constituted a "deceptive
practice" under the Pennsylvania Consumer Protection Law, and bad
faith under 42 Pa.C.S.A ?8371. Thus, the class action plaintiffs
hope to create a statutory remedy for a first party carrier's failure
to provide premium differentials. The action also includes allegations
of bad faith based on insurers' denial of coverage for non-economic
damages. Booze thus seeks to shift potential liability from the
tortfeasor's insurance carrier (from which no remedy is available
after Donnelly) to the victim's.
JAMES C. HAGGERTY, ESQUIRE
CHRISTINE PELLEGRINI BUSCH, ESQUIRE
Philadelphia
U.S. SUPREME
COURT TO REVIEW
CONSTITUTIONALITY OF URO PROCESS
On September 29, 1998,
in a rare grant of its power of discretionary review, the U.S. Supreme
Court issued a writ of certiorari in the case Sullivan v. Barnett,et
al, 139 F.3d 158 (3rd Cir. 1998). In Sullivan, the U.S. Court of
Appeals for the Third Circuit held that the automatic supersedeas
provision, designed to protect Pennsylvania employers from "unreasonable
and unnecessary" medical services in the care of accepted workplace
injuries, was unconstitutional. The Supreme Court's agreement to
review the Third Circuit's ruling marks the first time that a provision
of the 1915 Pennsylvania Worker's Compensation Act has received
this level of review. The Court will address conflicting rulings
on constitutional due process issues and whether a private insurance
carrier can be held liable as a "state actor" under an entirely
state-created, self-contained public benefit system. Oral argument
is anticipated in late January or early February 1999 with decision
expected at the end of the Court's term in June or July 1999.
While the Supreme Court
reviews the Sullivan decision, the Bureau's utilization review provision
(newly modified to allow for both notification to claimants and
an opportunity for them to be heard) will remain in effect. There
is reasonable expectation that the Bureau may hold in abeyance existing
penalty petitions, filed for non-payment of outstanding medical
bills after the March 13, 1998 Third Circuit decision, pending final
determination by the Supreme Court.
MICHAEL T. DOLAN, ESQUIRE
Philadelphia
ACT 57 Update
Act 57 was signed into
law on June 26, 1996. It contains a provision which can limit the
length of time during which a claimant receives compensation. Section
306(a.2) authorizes the insurer to request a claimant to submit
to a medical evaluation to determine the degree of permanent impairment
due to the compensable injury. The degree of permanent impairment
is based upon the most recent edition of the AMA Guides to the Evaluation
of Permanent Impairment. Section 306 (a.2) applies to all injuries
suffered on or after June 24, 1996.
Insurers initially applauded
this section as a way to cap the length of time that a claimant
can receive workers' compensation benefits - unless a claimant is
seriously and permanently injured, total disability benefits are
limited to 104 weeks and partial disability benefits are limited
to 500 weeks.
However, a threshold question
to be addressed is whether the insurer should schedule the claimant
for an IRE. The foreword to the AMA Guides states that the book
applies only to permanent impairments, which are defined as adverse
conditions that are stable and unlikely to change. In many cases,
such as with soft tissue injuries such as strains and sprains and
tendinitis, the insurer should not concede permanency. In soft tissue
injury cases, the claimant should be scheduled for a medical evaluation
under ?314 of the Act long before 104 weeks of total disability
benefits have been paid. Section 306 (a.2) has not replaced Section
314.
When a claimant with a
soft tissue injury is scheduled for an IRE, the insurer or attorney
must make sure that the physician does not give an impairment rating.
It is certainly better to get an opinion of full recovery than an
opinion that the claimant has even a minimal impairment. It is important
to remember that an impairment rating of anything other than 0%
may preclude the insurer from filing a Petition for Termination.
In cases involving more
serious injuries, where the claimant has been receiving total disability
benefits for approximately 90 weeks, an IRE should be scheduled.
In setting up the evaluation, be sure to make the examining physician
aware that the report should not indicate an impairment rating.
If the doctor finds that the claimant is not fully recovered, the
insurer/attorney should ask if the disability will be permanent
after 104 weeks. If the doctor opines that the disability will not
be permanent, do not schedule the claimant for an IRE.
The Act specifically states
that the degree of impairment is calculated for the compensable
injury. Neither the Act nor the regulations discuss how the IRE
physician is to know what pathology should be considered in the
rating. In light of this fact, the insurer should file an amended
Notice of Compensation Payable to add any pathology which the insurer
has admitted is causally related to the compensable injury shortly
before the IRE. Record documents such as the NCP, Amended NCP, Supplemental
Agreement and/or WCJ Decision should be sent to the IRE physician.
Similarly, diagnostic studies and reports of any surgical procedures
should be sent to the IRE physician.
If the compensable injury
involves more than one body system, evaluation by more than one
specialist is required. The initial IRE physicians refers the claimant
to other appropriate specialists. It is the initial physician who
must make a determination of whole body impairment following all
of the evaluations. To reach a determination of whole body impairment,
the numbers are not just added together. The Guides provide either
a chart of an algebraic formula for calculation of whole body impairment.
If the evaluating physician
determines that the claimant's impairment rating is equal to or
greater than 50%, then the claimant is presumed to be totally disabled
and will continue to receive total disability benefits. If the evaluating
physician determines that the impairment is less than 50%, the claimant's
status changes from total disability to partial disability.
It must be remembered that
although the status of the claimant's disability can change as a
result of an IRE of less than 50%, the compensation rate does not
change. For injuries occurring on or after June 24, 1996, the compensation
rate can be changed by demonstrating earning power at any time either
during the 104 weeks of total disability benefits or the 500 weeks
of partial disability benefits.
The Guides recognize that
a second evaluation may reach a different percentage because a change
may have occurred even though the impairment was thought to be permanent.
The claimant can challenge the IRE rating by filing a Petition to
Review with the Bureau at any time during the 500 weeks of partial
disability benefits. In order to meet his burden, the claimant must
prove an increased impairment rating by presenting evidence from
a physician with the qualifications specified in the regulations.
Before scheduling the claimant for an impairment rating, the file
should be thoroughly reviewed and discussed with your attorneys.
CATHERINE B. HERRMANN, ESQUIRE
Philadelphia
ACT 57 & LIGHT DUTY
Is There
Any Reason for Employers to Maintain Light Duty Programs?
Through passage of Act 57
on June 24, 1996, the Pennsylvania legislature dramatically reformed
the Pennsylvania Workers' Compensation Act. The effects of this
sweeping reform continue to be analyzed by the courts and by the
participants in the workers' compensation system. To adapt to these
changes and to effectively manage workers' compensation claims under
these reforms, employers and insurers may need to reconsider their
past programs and approaches. Specifically, the usefulness of employer-sponsored
light duty programs under Act 57 has come into question.
Prior to the enactment
of Act 57, the standards for achieving modification or suspension
of an injured worker's benefits were determined by the guidelines
set forth by the Supreme Court in its landmark decision of Kachinski
v. W.C.A.B. (Vepco Construction), 532 A.2d 374 (Pa. 1987). Kachinski
and its progeny imposed a heavy burden on an employer seeking modification
or suspension. To establish modification or suspension of a claimant's
benefits under this regime, an employer was required to prove the
claimant had medical clearance to return to work and referral of
an actual job within such medical clearance. The requirement of
finding an actual job for a claimant essentially placed the pre-injury
employer in the position of either being a guarantor of employment
to workers with a continued residual or face the consequence of
providing unlimited ongoing compensation benefits. In order to meet
the requirements of Kachinski, and thereby effectuate a modification
of an injured worker's benefits, many employers were forced to create
their own light duty programs. These light duty programs were often
costly and provided little overall economic benefit to the employer.
Amendments to ?306(b) of
the Pennsylvania Workers' Compensation Act under Act 57 removed
the burdensome Kachinski requirements concerning referral of actual
jobs. Pursuant to these amendments, actual job referrals need not
be made for claimants who have sustained an injury after June 23,
1996. Instead, "earning power shall be determined by the work the
employee is capable of performing and should be based upon expert
opinion evidence which includes job listings with agencies of the
department, and private job placement agencies and advertisements
in the usual employment area." Pennsylvania Workers' Compensation
Act, ?306(b)(2), as amended by Act 57. In other words, an employer
may now base a Petition for Modification or Suspension on testimony
from a vocational expert premised on a job market survey. Presumably,
these changes will increase the probability of obtaining a suspension
or modification on the basis of outside alternative employment opportunities
and thereby reduce the need for employer-provided light duty programs.
While the burden on the
employer is generally reduced in connection with obtaining a suspension
or modification, ?306(b)(2) does appear to provide an interesting
pre-condition to proceeding with a suspension or modification petition.
In particular, ?306(b)(2) provides that "if the employer has a specific
job vacancy that the injured employee is capable of performing,
the employer shall offer such job to the employee." This provision
does not require that the employer create a position for an injured
worker to suit his/her medical clearance. However, an employer might
be required to offer an injured worker a job in a light duty work
program which historically accepted individuals without consideration
of (business necessity). Elimination of such a light duty program
would, thus, serve to obviate this requirement.
In summary, the relevant
provisions of Act 57 decrease the need for a continuation of a light
duty program for workers injured on the job, as a reduction in their
compensation can be achieved through demonstration of increased
earning power through job market surveys rather than actual placement
in an available position. Furthermore, failure to eliminate a light
duty program may give rise to a claimant's argument that referrals
to such positions are a necessary prerequisite to pursuing a modification
of benefits based on earning capacity.
Of course, the favorable
change in the Workers' Compensation Act is only one factor to consider
in eliminating light duty programs. The employer must also take
into consideration its collective bargaining agreements, employee
morale, and other relevant employment laws, including the Americans
with Disabilities Act. Employers should contact their legal counsel
before decreasing their light duty workforce.
WILLIAM T. SALZER, ESQUIRE
JOHN J. MULDOWNEY, ESQUIRE
Philadelphia
PENNSYLVANIA
SUPREME COURT-
RECOGNIZES WRONGFUL DISCHARGE REMEDY FOR RETALIATORY DISCHARGE OF
WORKERS' COMPENSATION CLAIMANT
The permissible scope of
employment law litigation continued to expand following a recent
decision of the Pennsylvania Supreme Court, Shick v. Shirey, 552
Pa. 590, 716 A.2d 1231 (1998), in which the Court held that an at-will
employee who alleges retaliatory discharge for the filing of a workers'
compensation claim, states a cause of action for wrongful discharge.
The Shick decision is the first authoritative opinion from the Court
on the scope of the wrongful discharge remedy since the 1974 opinion
in Geary v. U.S. Steel Corporation, 456 Pa. 171, 319 A.2d 174 (1974).
In Schick, the plaintiff
had received worker's compensation benefits pursuant to a Notice
of Compensation Payable for approximately four months. After being
released to return to work by his physician, the plaintiff alleged
that his employer told him that "he no longer had a job due to his
pursuit of his workers' compensation claim." He then filed suit,
alleging that his termination was in retaliation for his exercise
of protected rights under the Workers' Compensation Act and, therefore,
violated Pennsylvania public policy.
In overruling the demurrer
to the Complaint, the Pennsylvania Supreme Court reasoned that the
fear of being discharged would have a deleterious effect on the
employee's statutory right to seek benefits. The Court commented
that the "historical balance" struck between employer immunity to
tort suits and the exclusive no-fault remedies of the Workers' Compensation
Act, would be upset if employees could be intimidated by the fear
of loss of employment, into forgoing filing compensation claims.
The Shick decision greatly
increases the risks to employers who decide not to re-employ a claimant
who has obtained a full or partial release to return to work. Although
an employer need not defer the decision to fill a vacant position
created by the absence of the injured worker, the employer must
establish that its motivation was business driven, and not retaliatory.
Further caution is necessary in order to secure a negotiated compromise
and release of a workers' compensation claim which requires the
employee's resignation. All settlement communications should be
expressly characterized as privileged and non admissible for purposes
of litigation in the event that the release is not secured. It is
likely that Shick does not apply to the unionized work force because
the wrongful discharge remedy extends only to at-will employees.
CHARLES S. KATZ, JR.,
ESQUIRE
Philadelphia
THE PROS AND CONS OF ACT 57
IMPAIRMENT RATING
Act 57 of the Pennsylvania
Worker's Compensation statute requires an employee to submit to
a medical examination after he has been paid 104 weeks of total
disability benefits to determine the employee's degree of permanent
impairment, if any, caused by the compensable injury.
If the employee's impairment
rating is less than 50%, he then receives payment of partial disability
benefits, rather than total disability benefits. Although the employee's
benefit rate is not altered, the change in status from total to
partial disability means that the employee can receive no more than
500 additional weeks of disability benefits.
Since the employee is entitled
to receive maximum partial disability benefits, his benefit rate
will not be altered because of the impairment rating. In order to
alter the rate, it is necessary to file a petition to modify and
to present evidence of a change in disability status as well as
the availability of work via a labor market survey. Impairment rating
is a back-up to, not a substitute for, proof of earning power.
The adjustment of disability
status via the impairment rating will only be retroactive to the
end of the 104 week period of payment of total disability benefits
if the IRE is initially scheduled to occur within 60 days of receipt
of the 104 weeks. The procedures for scheduling and obtaining an
IRE are somewhat cumbersome. Represented employees will seldom agree
to attend an IRE with the physician chosen by the employer. The
evaluation will, therefore, ordinarily be done by a physician appointed
by the Bureau.
IRE's are only appropriate
where the permanency of the injury is conceded. It appears that
once a permanency rating is assigned, the employer will be bound
by the determination of permanency so that any future petition for
termination would, in effect, be barred. Thus, cases which should
not be referred for IRE are those in which permanency is not conceded,
e.g., a petition for termination has been filed or the employer
hopes to file petition for termination based on full recovery in
the future.
The best procedure is probably
to obtain an independent medical evaluation shortly before payment
of 104 weeks of total disability has been completed in order to
obtain an opinion with respect to whether any significant permanency
is expected to result from the compensable injury.
How does the IRE physician
know what pathology should be considered in the permanent impairment
rating? There is no regulation nor procedure of the Bureau which
will provide that information to the IRE physician.
How does the IRE physician
obtain the appropriate records to review? There is no regulation
nor procedure of the Bureau to provide medical records and/or diagnostic
studies to the IRE physician.
These voids can be filled
by the insurer. Shortly before the IRE, the insurer should file
an amended notice of compensation payable, if necessary, to add
any pathology which the insurer admits is causally related to the
compensable injury. A copy of the notice or amended notice should
be sent to the IRE physician. The insurer should also provide records,
at least diagnostic studies and surgical reports, to the IRE physician.
CHARLES S. KATZ, JR.,
ESQUIRE
Philadelphia
SUPERIOR COURT RE-EXAMINES PRO SYSTEM
Recently, the Pennsylvania
Superior Court had an opportunity to re-examine the peer review
organization ("PRO") provisions of the Pennsylvania Motor Vehicle
Financial Responsibility Law, in Henninger v. State Farm Ins. Co.,
719 A.2d 1074 (Pa.Super. 1998). The Pennsylvania legislation enacted
the PRO system to allow for a cost-efficient review of the reasonableness
or necessity of a course of medical treatment, where bills are paid
or payable by first party benefits under a policy of auto insurance.
See 75 Pa.C.S.A. ?1797.
The viability of the PRO
provisions, however, was called into question by the Pennsylvania
Supreme Court, in Terminato v. Pennsylvania Nat. Ins. Co., 645 A.2d
1287 (Pa. 1994). Specifically, the Supreme Court held that the peer
review process was inherently biased in favor of the insurer.
In Henninger, the Superior
Court visited the same subject, post-Terminato. There, the plaintiff
presented a claim for first party medical and wage loss benefits
to her auto insurance carrier. The insurer denied benefits, relying
on a PRO report which determined that the plaintiff's course of
treatment was unreasonable and unnecessary. The plaintiff then filed
a Complaint for improper denial, later amended to include a count
for bad faith. The insurer filed a Motion for Summary Judgment,
on all counts, relying entirely on the conclusions of the PRO physician.
The Court of Common Pleas of York County granted summary judgment
and dismissed the case. On appeal, the Superior Court, Judge Hudock,
reversed, and relied upon Terminato in holding that a PRO is not
a neutral body, but, rather, is biased in favor of the insurer.
Thus, the Henninger court held, summary judgment should not be granted
where the credibility of the witnesses are in question. The Superior
Court stated:
Here, with regard to Henniger's
claim for first party medical benefits, State Farm relied solely
upon the PRO reports in support of the Summary Judgment Motion.
While the two PRO doctors are not, strictly speaking, witnesses
of State Farm, they are not independent witnesses either. Consequently,
we believe that Terminato requires us to accord PRO doctors a status
akin to that of the insurer's own witnesses.
The Superior Court concluded
that the credibility of the PRO doctors is a factual issue that
should be decided, under Pennsylvania law, by a jury.
DELAWARE
LAW UPDATE
SUPREME COURT LIMITS SCOPE
OF BOARD DECISION-MAKING IN WORKERS'
COMPENSATION CASES
A recent Delaware Supreme
Court opinion has limited the Industrial Accident Board's ability
to rely on its institutional experience to evaluate expert medical
testimony. In Turbitt v. Blue Hen Lines, Inc., 711 A.2d 1214 (Del.
Supr. 1998), the Delaware Supreme Court, en banc, concluded that
the Board, "when presented with uncontroverted expert medical opinion,
may not use its administrative expertise as a basis for rejecting
competent medical evidence."
Bryan Turbitt, the employee,
injured his low back in a work related accident which resulted in
surgery. After filing a petition for permanent partial impairment,
a hearing was held where the employee presented the only medical
testimony. The medical expert testified the employee had a 34% permanent
partial disability. The expert testified that this figure was based
upon his own clinical experience, the Manual for Orthopedic Surgeons
is no longer published, that he did not use either of the models
in the AMA Guide, rather than the more recent fourth edition. In
its decision, the Board concluded that the employee had a 15% permanent
partial impairment. In reaching this decision, the Board stated
that the medical expert's opinion was not credible due to his reliance
on the outdated Manual and AMA Guide, and his failure to use either
of the models contained in the fourth edition of the AMA Guide.
The Board also relied on a previous case where it awarded a 23%
permanent partial impairment, a case which the Board considered
to be a more severe injury.
On appeal, the Superior
Court of the State of Delaware affirmed, and the employee appealed
to the Delaware Supreme Court. At the outset, the Supreme Court
noted this was not a case where the Board was presented with differing
medical opinions, where the Board is permitted to weigh the conflicting
testimony. Nor was it a case in which the expert medical opinion
was based solely on the employee's subjective complaints, where
the Board could reach different underlying facts and, therefore,
reject the expert's opinion.
Ultimately, the Supreme
Court reversed the decision of the Board stating that the "[r]ejection
of evidence on the basis of credibility must be supported by specific
references to the evidence of record which prompts disbelief...[g]eneral
observations concerning outdated material will not suffice to provide
an independent basis for fixing a different percentage of disability...The
Board may set a permanency rating different from that established
by a physician, provided that the Board articulates a factual basis
for so doing." The Board is "not free to select a different figure
based simply on its general institutional experience."
The Supreme Court provided
some guidance to the Board for the manner in which their experience
may be applied. In the future, the Board may use "institutional
experience" or "administrative expertise" as a tool for evaluating
evidence, "but not as a source for creating evidence." Lastly, the
Supreme Court stated that since the Board was not a judicial body,
it "should refrain from using cases from its own experiences for
factual comparison, unless invited by the parties to do so."
KEITH E. DONOVAN, ESQUIRE
MARK T. HURFORD, ESQUIRE
Wilmington, DE
REVERSE BAD FAITH IN PENNSYLVANIA
In Pennsylvania, the cause
of action for bad faith by an insured against an insurer is by now
well settled. The legislature has provided a vehicle, by statute,
for such claims. See 42 Pa.C.S.A. section 8371. This statute is
designed to deter and punish unfair or malicious conduct by an insurer.
A question arises as to whether the insurer has any means by which
to deter bad faith conduct by an insured.
Every contract in Pennsylvania
imposes on each party the duty of good faith and fair dealing. See
Bethlehem Steel Corp. v. Litton Indus. Inc., 488 A.2d 581, 600 (Pa.
1985); Creeger Brick & Bldg. Supply, Inc. v. Mid State Bank
& Trust Co., 385 Pa.Super. 30, 560 A.2d 151, 153-54 (1989).
This premise is embodied in the Restatement (2d) of Contracts ?
205, which has been expressly adopted by the Pennsylvania courts.
This is true in the insurance context as well. Pennsylvania courts
have also declared that a contractual common law duty of good faith
and fair dealing runs from an insurer to its insured. See, e.g.,
Dercoli v. Pennsylvania Nat'l Mut. Ins. Co., 520 Pa. 471, 554 A.2d
906, 907-909 (1989); Gray v. Nationwide Mut. Ins. Co., 433 Pa. 500,
223 A.2d 8, 11 (1966); See also Gideon v. State Farm Mut. Auto.
Ins. Co., 410 Pa. 55, 188 A.2d 320, 322 (1963); Creeger Brick, 385
Pa.Super 30, 560 A.2d at 153-54.
The Pennsylvania state
courts have not specifically addressed whether an insured owes a
duty of good faith to its insurer. However, several trial level
decisions in the United States District Court for the Eastern District
of Pennsylvania have held that an insured does indeed owe such a
duty.
In Greater New York Mut.
Ins. Co. v. North River Ins. Co., 872 F.Supp. 1403 (E.D.Pa. 1995),
the Eastern District held that an insured owes a duty of good faith
and fair dealing to its insurer. In addition, the court held that
the absence of the statutory right of an insurer to punitive damages
does not preclude its claim against an insured for the breach of
a contractual duty of good faith and fair dealings. The court explained:
The absence of a statutory
right of an insurer to punitive damages does not preclude an insurer's
claim against an insured for breach of a contractual obligation
of good faith with the right to recover whatever common law contract
damages, if any, it may have suffered.
This court concludes that
Pennsylvania would apply the duty to act in good faith to "each
party" to an insurance contract, including the insured. Such a holding
is in conformity with the language of ? 205 of the Restatement (2d)
of Contract and is not inconsistent with Pennsylvania precedence.
Moreover, we can find no cogent reason why such an implied contractual
duty should not be reciprocal under an insurance policy. An insured
should not have license to act in bad faith towards its insurer.
Undoubtedly, the nature and extent of any duty necessarily depends
on the specific circumstances involved . . . .
North River, 872 F.Supp.
at 1408. Thus, the court appeared to recognize a cause of action
in contract for an insured's breach of contractual obligation of
good faith and fair dealing. However, the insurer is precluded from
recovering any extra-contractual damages in this regard. The United
States Court of Appeals for the Third Circuit affirmed the result
without reaching this question. See 85 F.3d 1088.
The North River case was
followed and expanded upon by the United States District Court for
the Eastern District of Pennsylvania in Garvey v. National Grange
Mut. Ins. Co., no. 95-0019, 1995 WL 461228 (E.D.Pa. Aug. 2, 1995).
There, the insured was the owner of a deli and catering business
destroyed by a fire. The property was insured by a policy issued
by National Grange. After an extensive investigation, National Grange
denied coverage. The insured then instituted an action in the District
Court for breach of contract, bad faith and deceit. In response,
National Grange filed an Answer and counterclaims for breach of
the duty of good faith and fair dealing. In its counterclaim, National
Grange specifically averred that the insured breached his duty of
good faith and fair dealing by acting "intentionally, recklessly,
willfully, wantonly, deceitfully, outrageously and/or fraudulently
by materially misrepresenting those elements by pursuit of same
in this litigation". This duty allegedly arose from the policy itself,
which requires insured to aid the insurer in its investigation,
and not to make any misrepresentations or intentionally conceal
materials back. Based on the North River holding, the Court held
that National Grange had sufficient legal basis to proceed on its
counterclaim in this regard. Other jurisdictions have likewise adopted
this rule. See, e.g., Snap-On Tools Corp. v. State Ins. Co., 175
Wis.2d 622, 502 N.W.2d 282 (Table), 1993 WL 91563 (Wis.App. Mar.
31, 1993), Orient Handle v. United States Fid. & Guar. Co.,
192 Cal.App.3rd 684, 237 Cal.Repr. 667 (1987)(California Court of
Appeals recognizing theory of reverse bad faith).
Recently, the Eastern District
reiterated that there is a cause of action for reverse bad faith.
After recognizing the existence of a potential split in authority
on this point, the court concluded:
There is a cause of action
under Pennsylvania law for breach of the contractual duty of good
faith and fair dealing. Jung, 949 F. Supp. at 358; see also New
Concept Beauty Academy v. Nationwide Mutual Ins. Co., No. Civ. A.
97-5406, 1997 WL 746203, *2 (E.D.Pa. Dec. 1, 1997). I thus find
that as concerns a contract claim for breach of duty of good faith
in an insurance contract, Pennsylvania would recognize such a duty.
Defendant has adequately alleged such a claim: that plaintiff failed
to act in good faith by repeatedly failing to provide certain requested
medical documents while at the same time demanding that defendant
pay the policy limits. Accordingly, the plaintiff's motion for judgment
on the pleadings as to this claim is denied.
Keefe v. Prudential Property
and Casualty Ins. Co., 1998 WL 409011 (E.D. Pa.), at 3. Thus, the
theory of reverse bad faith may be viable in Pennsylvania.
SCOTT J. TREDWELL, ESQUIRE
Philadelphia
THE PENNSYLVANIA
STATE COURTS HAVE NOT SPECIFICALLY ADDRESSED WHETHER AN INSURED
OWES A DUTY OF GOOD FAITH TO ITS INSURER. HOWEVER, SEVERAL TRIAL
LEVEL
DECISIONS IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT
OF PENNSYLVANIA HAVE HELD THAT AN INSURED DOES
OWE SUCH A DUTY.
"AN INSURED
SHOULD NOT HAVE LICENSE TO ACT IN BAD FAITH TOWARDS ITS INSURER.
UNDOUBTEDLY, THE NATURE AND EXTENT OF ANY DUTY NECESSARILY DEPENDS
ON THE SPECIFIC CIRCUMSTANCES INVOLVED . . . ."
CAPITOL NEWS
*As of June 9, 1998, the
House and Senate passed a single managed care reform bill which
was rapidly signed into law by Governor Ridge. This legislation
has received a great deal of attention. The regulations under it,
which will be promulgated by both the Insurance and Health Departments,
are anxiously awaited by providers, consumer groups, and the general
business sector. Implementation of the sweeping reforms by regulations
is considered crucial, and a great deal of time, effort, comment,
and lobbying dollars are being expended on the effort. Both the
Insurance and Health Departments have announced very aggressive
efforts to respond quickly to the regulatory requirements, and promise
proposed regulations before the end of the year.
*In another development,
the Attorney General's office for the Commonwealth has asked the
United States Supreme Court to review the Sullivan v. Barnett case
out of the Third Circuit Court of Appeals, which ruled that the
utilization review organization ("URO") process under the Pennsylvania
Workers' Compensation Act, was, in part, unconstitutional. The Supreme
Court has granted certiorari in a rare exercise of its discretionary
review, and will consider the constitutionality of the URO process
(addressed more fully in this issue of Sidebar,
*On a related financial
issue, the Pennsylvania Insurance Department has reported that workers'
compensation costs in the Commonwealth have gone down 43% over the
last four years and, incidentally, that workplace injuries were
down 25% over the last two years. The Insurance Department has acknowledged
that a good deal of the reduction in workers' compensation costs
can be attributed to the medical cost containment provisions enacted
in 1993 including the utilization review process at issue in Sullivan
v. Barnett.
GREGORY GEISS, ESQUIRE
Harrisburg
FIRM NOTES
Drew Salaman recently persuaded
the Superior Court of Pennsylvania to reverse Philadelphia Court
of Common Pleas Judge Pamela Dembe, and strike a judgment transferred
from New Jersey for want of containing a certified copy of the New
Jersey docket entries as required by 42 Pa.C.S.A. ?4306. As a result,
monies were recovered which were subject to garnishment.
James C. Haggerty recently
successfully defended an uninsured motorist claim brought on behalf
of a plaintiff who was rendered a quadriplegic in a motor vehicle
accident. The plaintiff contended that the actions of an unidentified
driver caused his injuries. The arbitrators ruled that the actions
of the unidentified driver were not a proximate cause of the severe
injuries sustained by the plaintiff.
Curtis P. Cheyney, III,
managing partner of Swartz, Campbell & LLC, and Drew Salaman,
head of the firm's new Collection Unit, recently served as featured
co-speakers on the topic of Fair Debt Collection Practices, avoiding
liability and defending claims under the Federal Fair Debt Collection
Practices Act and the Pennsylvania Debt Collection Trade Practices
Regulations promulgated by the Bureau of Consumer Protection.
Keith E. Donovan successfully
obtained a defense verdict from a Wilmington, Delaware jury in a
case involving a minor rear-end impact with a claim of permanent
soft tissue injuries.
William A. Jones recently
obtained a successful result following a two week asbestos trial
in Philadelphia. The plaintiff's wife had sought $34,000,000.00
prior to trial to settle her suit arising from the death of her
husband. During the trial, plaintiff's multi-million dollar economic
claim was aggressively challenged and successfully eliminated as
too speculative. Additionally, the claim that the plaintiff had
mesothelioma related to asbestos was disputed through the use of
two nationally renowned experts. Just prior to the jury's deliberations,
a favorable settlement was reached.
James C. Haggerty recently
obtained an award in favor of the defendant insurer in an underinsured
motorist arbitration hearing involving the death of a minor plaintiff.
The plaintiffs sought recovery of underinsured motorist benefits
under an antique auto policy. The arbitration panel determined that
the underinsured motorist benefits were not recoverable under the
antique auto policy where the injuries did not arise from the use
of the insured automobile.
John A. Wetzel has received
a certificate in Estate Planning from Temple University School of
Law Graduate Tax Program. Mr. Wetzel handles all matters with respect
to Wills, Trusts and Estate Administra-
tion.
Michael A. Cognetti of
the West Chester office, recently obtained a dismissal in a slip
and fall case which resulted in the death of plaintiff's decedent.
The slip and fall was an unwitnessed fall down allegedly caused
by a defective condition on the premise of our client. The judge
granted defendant's motion in limine to preclude plaintiffs' expert
engineer from testifying as to causation and defendant's motion
for summary judgment prior to the time of trial was granted.
James C. Haggerty recently
obtained a successful result in the United States District Court
for the Eastern District of Pennsylvania in a declaratory judgment
action arising out of an underinsured motorist dispute. The insured
sought to reform the limits of UIM coverage from $150,000.00 to
$900,000.00. The insured asserted that the election of lower limits
of underinsured motorist coverage was not knowing and voluntary.
Following trial in federal court, the court entered a decision in
favor of the insurer, precluding reformation of the coverage limits
and barring any claim for the additional coverage amount.
After a three day UIM
hearing, Michael A. Cognetti of the West Chester office obtained
a favorable result on behalf of the firm's client. The plaintiff,
a twenty-seven year old machinist, was involved in a serious head
on collision motor vehicle accident which resulted in numerous injuries.
The plaintiff obtained social security disability as a result of
the motor vehicle accident and had not worked in the last five years.
Liability was not contested. The demand prior to the UIM hearing
was Five Hundred Thousand Dollars ($500,000.00), the policy limits.
The defense presented live testimony of a psychologist, orthopaedic
surgeon and psychiatrist/neurologist. The panel awarded Forty Thousand
Dollars ($40,000.00).
James C. Haggerty recently
encountered Raymond Bauso of the Pennsylvania Insurance Guaranty
Association on 17th Street in Philadelphia. Mr. Bauso was accompanied
by four young female members of the Riverdance Dance Company. No
further information is available at the time of this printing.
SC& D Welcomes
New Associates
Garrett W. Brindle attended
Lehigh University as a National Merit Scholar, graduating with a
B.A. in History and a minor in Government in 1995. He received his
Juris Doctor from the Villanova University School of Law in 1998.
Mr. Brindle is admitted to the Pennsylvania and New Jersey bars
and will focus his practice in the Workers' Compensation Department.
Anthony Febbo graduated
Magna Cum Laude with a B.A. in Political Science from Temple University
in 1987. He received his Juris Doctor from the Temple University
School of Law in 1992. After law school, Mr. Febbo spent three years
on active duty with the U.S. Army as a JAG attorney, practicing
criminal law, international law, and handling liability claims against
the Army. He served overseas in Germany, Bosnia, and Hungary, and
was awarded two Meritorious Service Medals, an Army Commendation
Medal, an Airborne badge, and a NATO medal. Thereafter, from 1996-1998,
Mr. Febbo served as an Assistant District Attorney in Delaware County.
He will be focusing his practice in the legal malpractice defense
unit.
Brian K. Hanstein received
a bachelors degree in the History and Sociology of Science (with
a concentration in the History of Medicine) from the University
of Pennsylvania in 1984. He received his Juris Doctor degree from
Temple University in 1991. Mr. Hanstein's areas of professional
practice are class action litigation, professional liability, insurance
coverage and product liability.
Sidebar is published by
the law firm of Swartz, Campbell LLC. Requests for additional copies
or copies of the cases cited in the articles may be addressed to
the individual authors or to:
SCOTT J. TREDWELL, ESQUIRE
EDITOR
