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Commonwealth Ruling Addresses Defendant Actions through a Compromise and Release Agreement

November 17, 2021
September 3, 2019

On August 7, 2019, the Commonwealth Court ruled that the defendant in a fully denied workers’ compensation claim cannot take certain actions through a no liability Compromise and Release Agreement, to prevent a medical provider from receiving payment for treatment where a fee review proceeding is in the process of being adjudicated, and the agreement contains language that it does not resolve the fee review proceeding.

Specifically, in Workers First Pharmacy Services, LLC v. Bureau of Workers' Compensation Fee Review Hearing Office (Cincinnati Insurance Co.), the claimant alleged via a claim petition that he injured his head, neck, back and left shoulder.  Thereafter, employer filed a notice of denial that claimant sustained a work injury.  During the course of treatment, claimant’s treating doctor prescribed several medications, including 177.2 units of Lidocaine 5% ointment and 300 units of Diclofenac 1.5% topical solution, on numerous occasions.  Payment for these prescriptions were denied by employer in light of the notice of denial.  The pharmacy that dispensed these prescriptions, Workers First Pharmacy Services, LLC, filed three fee review applications, which were denied by the Medical Fee Review Section except relative to one date.  

As to the prescription filled on June 8, 2017, the Medical Fee Review Section stated that employer owed the pharmacy $1,650.00, plus interest for untimely payment.  Employer appealed and prior to resolution of the issue, resolved the workers’ compensation claim for “past, present, and/or future indemnity and future health care benefit/medical benefits” via a no liability Compromise & Release Agreement.  The agreement provided that “…[Employer] vigorously denies and disputes any and all allegations that have been made by the Claimant in any of the Claimant’s Petitions.”  The Agreement went on to specifically address the pharmacy bills and the status of the fee review proceedings, indicating that the agreement did not resolve the issues in that proceeding and absolving claimant from any responsibility for payment of those bills.  After the agreement was approved, the employer informed the pharmacy that because employer had not accepted liability, the fee review proceeding should cease.  At the hearing on the fee review, the Hearing Office received evidence, including the agreement, ultimately vacating all three fee review applications, on the basis that the applications were premature, finding further that employer maintained its denial of liability in the agreement.

The Commonwealth Court acknowledged that a claimant is not responsible for medical treatment relative to a work injury.  The Commonwealth Court stated that in Nickel v. WCAB (Agway Agronomy), 959 A.2d 498 (Pa. Cmwlth. 2008), it held that an employer may deny liability for a work injury in a Compromise and Release Agreement but voluntarily agree to pay claimant’s medical expenses and, therefore, cannot contest a fee review determination based on denial of liability for the work-injury.  In Nickel, the court also held that the fee review process presupposes that liability has been established, as the fee review officer cannot determine liability.  The court pointed to the language in the instant agreement indicating that the fee review would continue and the specific questions to claimant regarding liability for payment.  The court specifically ruled that “Employer accepted ‘responsibility’ for the debt to Pharmacy when it released Claimant from any obligation to pay Pharmacy in the C&R Agreement.”  The Court vacated the Hearing Office order and remanded the matter for a hearing on the merits of all three fee review contests.

Defendants should be mindful of this matter when drafting Compromise and Release Agreements.  Although the agreement did not hold employer responsible for payment of any medical treatment, the language further addressed the fee review proceeding as separate from the agreement; moreover, claimant was specifically questioned about his responsibility on the outcome of the fee review proceeding.  Had this language not been present in the agreement and the claimant had not been questioned about his responsibility for payment, the result may have been different.