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Defense Digest

The $30,000 Oops! An Insurer’s Costly Overpayment

Defense Digest, Vol. 31, No. 4, December 2025

December 1, 2025

by Elias R. Hassinger

Key Points: 

  • Commonwealth Court held that pharmacy was not a party in the underlying UR litigation and could not be made a party to the insurer’s review billing petition since there is no equitable remedy in the Workers’ Compensation Act that would allow recoupment of overpaid medical bills by the insurer. 
  • Accordingly, insurer had to forfeit $30,000 overpayment.

Unlike most Commonwealth Court cases addressing workers’ compensation issues, Pioneer Construction Co., Inc., Eastern Alliance Insurance Company, and Employers Alliance, Inc. v. Insight Pharmaceuticals, LLC (d/b/a Insight Pharmacy), 338 A.3d 234 (Pa. Cmwlth. 2025), was an appeal of a Court of Common Pleas decision, not a Workers’ Compensation Appeal Board opinion. 

The insurer, Eastern Alliance Insurance Company, mistakenly overpaid Insight Pharmacy over $30,000. In a 2020 decision, a workers’ compensation judge granted a petition to review medical treatment or billing and ordered the pharmacy to reimburse the insurer the overpaid amount. However, the Commonwealth Court ultimately ruled that the insurer could not be reimbursed and had to forfeit the money.

This case started with a March 2015 Utilization Review (UR), which found that, as of December 2014, certain compound creams were no longer reasonable or necessary treatment for the claimant’s work injury. The UR was not challenged by the claimant; therefore, the insurer was no longer responsible for payment of the compound creams.

However, in October 2018, the pharmacy submitted bills for the unreasonable and unnecessary compound creams to the insurer, which processed those bills. The insurer mistakenly paid the pharmacy $30,767.14. (Yikes!)

Upon realizing its $30,000 error, the insurer asked the pharmacy to refund the payments. The pharmacy declined. The insurer then filed a workers’ compensation petition to review medical treatment or billing and a petition to join the pharmacy to the proceedings. 

In response to the petitions, the pharmacy argued that the workers’ compensation judge lacked jurisdiction to order reimbursement because the pharmacy could not be a party to the judge’s proceedings and the Workers’ Compensation Act contains no reimbursement remedy for insurers who overpay providers. The pharmacy argued that equity was not available to the insurer and the underlying judge’s proceedings violated its right to due process because it could not be a party to that proceeding.

In an October 2020 decision, the workers’ compensation judge found that the insurer had overpaid the pharmacy, granted the billing review and joinder petitions, and ordered the pharmacy to reimburse the insurer the $30,000 overpayment. The pharmacy did not appeal this decision. 

In January 2021, the insurer filed a praecipe in Common Pleas Court, requesting that the $30,000 judgment ($30,767.14 plus $475.41 in statutory interest) be entered against the pharmacy. 

In a February 2021 letter to the insurer, the pharmacy demanded that the insurer withdraw the praecipe or the pharmacy would seek sanctions against the insurer on the bases that:

  • the insurer falsely identified the pharmacy as a party to the judge’s proceedings,
  • the pharmacy could not appeal the judge’s decision because it was not a party to the workers’ compensation litigation, and 
  • the insurer did not properly serve the praecipe on the pharmacy. 

The insurer responded by arguing that, because the pharmacy participated in the judge’s proceedings and did not take an appeal from the judge’s October 2020 decision and order, the pharmacy was bound by that decision.

In April 2021, the pharmacy filed a motion to open the default judgment and a motion for sanctions in the Court of Common Pleas and a brief in support. The insurer filed a response opposing the petitions and a supporting brief. 

Only weeks later, in May 2021, by order and without a hearing, the Court of Common Pleas denied the pharmacy’s petitions. On May 27, 2021, the pharmacy appealed from the Common Pleas Court’s order to the Commonwealth Court of Pennsylvania.

In its opinion, the Commonwealth Court reviewed a discussion of the pharmacy’s arguments and its holdings, which ultimately were unfavorable to the insurer. The pharmacy first argued that the Court of Common Pleas lacked jurisdiction because the pharmacy “was never properly served with the judgment.” The Commonwealth Court did not accept that argument—that the trial court lacked jurisdiction because the judgment was not properly served—and held that it lacked merit.

Second, the pharmacy argued that the insurer filed the praecipe in the Court of Common Pleas despite the fact that the pharmacy was not a party to the prior UR and judge’s proceedings that gave rise to the judgment; thus, the trial court violated its due process rights and erred by entering judgment against it. The Commonwealth Court held that, because the Workers’ Compensation Act provides no reimbursement remedy for insurers that overpay providers, the pharmacy’s counsel participated before the judge solely to assert that there was no basis under the Act for the judge to join the pharmacy or order it to reimburse the insurer. The Commonwealth Court held the judge had no valid equitable basis to join the pharmacy to the insurer’s billing review petition; therefore, the pharmacy was not, and could not, be a party to the UR and the judge’s proceedings. The Commonwealth Court held that, because the pharmacy was not a party to the UR and judge’s proceedings, the trial court erred as a matter of law by not striking the judgment against the pharmacy. 

Third, the pharmacy argued that the trial court erred by denying the pharmacy’s petition to open the default judgment where Section 428 of the Act authorizes only employees or dependents deprived of compensation to recover from an employer or insurer in default of payment. The Commonwealth Court held that, without precedential supporting legal authority, the trial court disregarded the plain language of Section 428 of the Act to allow the insurer to become an entity requesting judgment against an entity not statutorily liable (an employee or dependent). The Commonwealth Court held that the pharmacy was not statutorily able to be liable for a default judgment and the Court of Common Pleas erred by not striking the judgment against the pharmacy on that basis.

Ultimately, the Commonwealth Court held that the pharmacy was not a party in the underlying UR litigation and, therefore, cannot be made a party to the insurer’s review billing petition since there is no equitable remedy in the Act that would allow recoupment of overpaid medical bills by the insurer. Accordingly, the insurer was out of luck and had to forfeit the $30,000 overpayment. 

Going forward, insurers and employers should pay attention to Utilization Review determinations to avoid similar situations. After obtaining a favorable UR determination that finds treatment to be unreasonable and unnecessary, follow-up with the insurer’s billing or payment departments so they, too, know that further provider payments should not be made. Unfortunately, if they are paid mistakenly, they cannot be recouped. 

Defense Digest, Vol. 31, No. 4, December 2025, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2025 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

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Florida Supreme Court Rules Florida Statute §627.70152 Does not Apply Retroactively

In a decision that resolves years of appellate uncertainty and confirms that insurers and insureds alike can rely on the legal framework in place when a policy is issued, the Supreme Court of Florida last week found that Florida Statute §627.70152, which involves an insured’s requirement to provide an insurer with pre-suit notice before filing a suit, cannot be applied retroactively. In Universal Property & Casualty Insurance Company v. Hughes, the Court was presented with the issue of whether the statutory pre-suit notice requirement applied retroactively and whether it would apply to a breach of contract of an insurance policy that was issued before the statute went into effect. Before the Court was an appeal from a homeowner, Ms. Hughes, who sued her insurance carrier, Universal Property & Casualty Insurance Company (Universal) for breach of contract under an insurance policy that was in effect from April 24, 2019 through April 24, 2020. During the policy period, Ms. Hughes suffered a loss and, on May 29, 2019, made a claim for water damage. The carrier investigated the loss and issued payment; Ms. Hughes disputed the payment, finding the amount insufficient for repairs. On July 1, 2021, Florida Statute §627.70152 went into effect, which required insureds to provide notice of intent to initiate litigation against the carrier prior to filing a lawsuit; if an insured filed the lawsuit without complying with §627.70152, a court must dismiss the case without prejudice. On August 4, 2021, Ms. Hughes filed her lawsuit against Universal for breach of contract. Universal moved to dismiss based on her failure to comply with §627.70152. Ms. Hughes contended the notice requirement could not be applied retroactively. The trial court disagreed and dismissed the lawsuit without prejudice, and Ms. Hughes appealed. During the appeal, the Fourth District Court of Appeal, in Cole v. Universal Property & Casualty, 363 So. 3d 1089 (Fla. 4th DCA 2023), ruled that Florida Statute §627.70152 did apply retroactively to policies issued before the effective date of §627.70152. However, the Sixth District Court agreed with Ms. Hughes and overturned the trial court’s ruling, finding the statute could not retroactively apply to policies issued prior to the statute effective date. Thereafter, the other district courts weighed in, with the Third District Court agreeing with the Fourth District Court, and the First, Second and Fifth District Courts agreeing with the Sixth District Court. In resolving the conflict amongst the district courts, the Supreme Court advised “as a general rule, ‘the statute in effect at the time an insurance contract is executed governs substantive issues arising in connection with that contract.’ Hassen v. State Farm Mut. Auto. Ins. Co., 674 So. 2d 106, 108 (Fla. 1996). The Court applied the two-step test when deciding whether a statute has retroactive application: “First, the Court must ascertain whether the Legislature intended for the statute to apply retroactively. Second, if such an intent is clearly expressed, the Court must determine whether retroactive application would violate any constitutional principles.” Menendez v. Progressive Exp. Ins. Co., 35 So. 3d 873, 877 (Fla. 2010). In analyzing the Legislature’s intent, the Court must determine whether the Legislature has manifested a clear command for retroactivity in the statutory text.  In review of the statutory text, the Court found nothing in the language of the statute to indicate that the phrase “all suits” was serving another purpose of expanding its reach to suits based on policies that both predate and postdate the enactment of the statute. Buis v. Universal Prop. & Cas. Ins. Co., 394 So. 3d 738, 741 (Fla. 2d DCA 2024). Further, the Court noted the statute has an effective date, which has long been considered to be evidence against retroactive application of a statute. The Court concluded that, on its face, no provision of §627.70152 speaks to application of the statute to insurance policies issued before the statute’s effective date and therefore, the Legislature did not clearly command retroactivity of the statute to include insurance policies issued prior to the enactment of the statute. The Court briefly reviewed Universal’s argument that the presuit notice requirement was procedural, not substantive, and therefore should be applied retroactively; however, the Court agreed with the Sixth District Court’s finding that, in its entirety, §627.70152 transformed an insured’s ability to sue an insurance company under a property insurance policy and an insurer’s obligations to respond to and pay insurance claims, thus making the requirement a substantive change. The Court thereby upheld the decision of the Sixth District and disapproved the decision of the Fourth District in Cole.

Thought Leadership

New Jersey Appellate Division Affirms Recreational Immunity for County Under Landowners' Liability Act

In a recent unpublished decision in Matthew Kuzma, etc. v. Middlesex County Parks Department, et al., the New Jersey Appellate Division affirmed summary judgment in favor of Middlesex County Parks Department, holding that the county was immune from liability under New Jersey's Landowners' Liability Act (LLA), notwithstanding its failure to plead the immunity as an affirmative defense in its answer to the Complaint. The case arose from injuries sustained by fourteen-year-old plaintiff, Matthew Kuzma, while playing basketball at Spring Lake Park in South Plainfield on August 23, 2019. The plaintiff observed a crack in the basketball court before beginning to play but did not consider it dangerous. During the game, his foot became caught in the crack, causing him to fall and suffer a significant ankle injury. The plaintiff alleged that the injury resulted in ongoing physical limitations and deprived him of the opportunity to play collegiate basketball. The plaintiff filed suit alleging that the defendants negligently maintained the basketball court. Although the county did not assert LLA immunity as an affirmative defense in its answers, it later moved for summary judgment on that basis. The plaintiff opposed the motion, arguing that the county had waived the defense by failing to plead it. The county maintained that the plaintiff had received sufficient notice of its intent to rely on the LLA through discovery and therefore suffered no unfair surprise or prejudice. The trial court agreed and granted summary judgment, concluding that the county should be permitted to invoke statutory immunity notwithstanding its failure to formally plead the defense. Relying heavily on the New Jersey Supreme Court's guidance in Arias v. Cnty. of Bergen, holding a county park was subject to the immunity of the LLA, the Appellate Division affirmed, holding that the county's failure to plead LLA immunity did not preclude reliance on the defense under the circumstances presented. The court determined that the plaintiff had received adequate notice of the immunity claim through discovery and that permitting the defense furthered the public-policy objectives embodied in the LLA. In affirming dismissal, the Appellate Division acknowledged the seriousness of the plaintiff's injury and the general societal interest in maintaining parks and recreational facilities in a safe condition. However, the court emphasized that both the legislature and the New Jersey Supreme Court have expressed a clear policy choice to limit liability for public and private landowners who make recreational property available for public use. The decision reinforces the courts' continuing adherence to the Landowners' Liability Act and the principle that recreational lands and facilities should be broadly protected from liability exposure, even in cases involving significant personal injuries.

Thought Leadership

The Tolling Trap: Filing Alone Will Not Toll the Statute Without Good-Faith Service

The Eastern District of Pennsylvania recently reinforced a critical limitation on bad faith claims, holding that a timely filing alone will not preserve a cause of action absent a good-faith effort to serve the original process. The plaintiff had presented a claim for underinsured motorist benefits to his auto insurer. The insurer evaluated the claim and determined that the plaintiff’s accident-related damages did not exceed the bodily injury liability insurance limits of the at-fault driver and denied his claim. Among other claims, the plaintiff sought to present a claim for insurance bad faith under 42 Pa. C.S.A. § 8371, to which a two year statute of limitation applies. He first filed a praecipe for writ of summons before the expiration of the statute of limitation. However, the plaintiff did not attempt to serve the praecipe or writ until after the statute of limitations had expired. Additionally, the service failed as the plaintiff had mailed the original process to an incorrect address. Despite receipt of the Postal Service’s failure to deliver the original process, the plaintiff did not attempt to re-serve the writ. Two months later, the plaintiff filed a complaint and then successfully served that complaint. The insurer sought to dismiss the plaintiff’s bad faith claim as time-barred by the statute of limitations. The district court agreed. Though the plaintiff had filed a praecipe for a writ of summons prior to the expiration of the statute of limitations, the statute is only tolled if there is a good faith effort to serve that original process. In this case, the court determined that the plaintiff had failed to perform a “good faith effort to serve the original process”. Additionally, though the filing and service of a complaint can serve as alternative original process when the lawsuit is commenced by the filing of a praecipe for a writ of summons, the plaintiff filed his complaint after the statute of limitations had expired. The plaintiff’s bad faith claim was therefore determined to be barred by the statute of limitations and dismissed by the court, with prejudice. A key takeaway for the defense is not to assume that the statute of limitations has been successfully tolled by a plaintiff merely because a praecipe for a writ of summons or complaint has been filed prior to the expiration of the statute. A filed complaint or writ is only part of the equation. The defense should carefully review the docket and filings to confirm that the plaintiff also performed the requisite good faith effort to serve that original process. A thorough review of the docket may reveal that the plaintiff failed to make the good-faith service efforts necessary to toll the statute of limitations.

Defense Victory Obtained in Workers’ Compensation Case

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Allison joins three insurance industry leaders to discuss how cyber coverage disputes, the growing impact of social inflation on bodily injury claim valuation, and the use of artificial intelligence are reshaping the bad faith landscape. The panel will examine emerging sources of extra-contractual exposure, including evolving cyber insurance coverage issues and the challenges of accurately valuing bodily injury claims. Practical approaches to claim evaluation using AI, along with defense strategies designed to help prevent or successfully defend against bad faith litigation, will also be addressed.