.

Defense Digest

Penalties, Sanctions and Other Bad Employer Words

Defense Digest, Vol. 28, No. 3, October 2022

October 1, 2022

by Robert J. Fitzgerald

Key Points:

  • Permanency benefit awards must be paid in a timely manner.
  • The penalties awarded should be consistent the lateness of the payment, the amount of permanency benefits awarded and the possible bad faith of the parties.
  • The penalties awarded should be governed by permanency award factors, such as the amount of time it takes the litigation to resolve.

In Luis Ripp v. County of Hudson, 277 A.3d 1071 (N.J. Super. App. Div. 2022), the New Jersey Appellate Division addressed factors to be considered in awarding financial penalties for the late payment of permanency benefit awards. The petitioner worked for Hudson County as an assistant chief engineer/boiler operator. He sustained a work injury on February 11, 2013, and filed a claim petition. On January 26, 2021, he received an award of permanent/total disability. When the award was not paid within 60 days, the petitioner filed a Motion to Enforce.

The award was paid on April 12, 2021, 16 days after what the parties considered to be the due date. The respondent offered several excuses for the late payment, including that its third-party administrator failed to submit the payment request in time for the county commissioners meeting, that its third-party administrator was delayed due to the transfer of an adjustor and, of course, that there was delay due to the COVID-19 pandemic.

The Judge of Compensation noted in the underlying litigation that the petitioner needed to successfully make enforcement motions to obtain temporary disability benefits. The judge also noted that there were settlement discussions for a permanent/total award in August 2019, but the county did not authorize settlement until January 2021. She stated the petitioner was “without significant funding for quite a long time” and had written to the court on many, many occasions, sharing his dismay over the amount of time it was taking to resolve his claim. She said the petitioner was “anxious about money and the court was very sensitive to all of that.”

In granting the motion, the judge ordered the respondent to pay the petitioner an additional $43,370 within 60 days. The county appealed. In the subsequent written decision, the judge reiterated that the respondent agreed in early 2019 that the petitioner was totally disabled. She noted that the petitioner was receiving Social Security Disability benefits and that, because “Social Security is notoriously slow,” it delayed computation of the petitioner’s average current earnings, necessary so the order could be effectuated.

The judge also recognized that, given the size of the award, the county needed to involve its excess insurance carrier. The excess carrier’s authority to settle was not provided until December 2020.

However, the judge stated this delay “was to the dismay of [Ripp].” She cited “several letters” from the petitioner that she shared with counsel, detailing his emotional and financial distress as a result of not working. The judge cited the petitioner’s “life-altering injury,” lack of “wages for over four years,” and his “disabled child,” which left the judge very sympathetic. The judge also said the court had “bent over backwards to give the [county] the time to ‘get it’s ducks in a row,’” and it was “inconceivable” that payment was overdue. The judge found the county’s delay was “unreasonable” and concluded it was appropriate to impose the maximum additional assessment of 25% to enforce the order.

On appeal, the respondent argued the judge erred in her expansive application of Section 28.2 (Penalties and Sanctions) and, additionally, that she abused her discretion in imposing a manifestly excessive assessment under the circumstances. The court agreed and reversed the order. It first referenced Section 28.1 which provides:

If an . . . employer’s insurance carrier, . . . unreasonably or negligently delays or refuses to pay temporary disability compensation, or unreasonably or negligently delays denial of a claim, it shall be liable to the petitioner for an additional amount of 25% of the amounts then due plus any reasonable legal fees incurred by the petitioner as a result of and in relation . . .

Next, the court referenced the amendments to Section 28.2, which now provide:

If any employer . . . fails to comply with any order of a judge of compensation . . . , a judge of compensation may, in addition to any other remedies provided by law:

a.         Impose costs, simple interest on any moneys due, an additional assessment not to exceed 25% of moneys due for unreasonable payment delay, and reasonable legal fees, to enforce the order, statute or regulation;

b.         Impose additional fines and other penalties on parties or counsel in an amount not exceeding $5,000 for unreasonable delay, with the proceeds of the penalties paid into the Second Injury Fund

Additionally, the Division then adopted Rule 12:235-3.16(h)(1)(i), which allows a judge to impose an additional assessment not to exceed 25% on any moneys due if the judge finds the payment delay to be “unreasonable.” Unlike Section 28.1, which deals with delays in paying temporary disability benefits and defines a 30-day delay as presumptively unreasonable, the Legislature here chose not to specify what is a presumptively unreasonable delay in payment of settlement proceeds under an order entered under the statute.

Based on these provisions, the court reasoned that the plain and unambiguous language of Section 28.2 limits imposition of a penalty to situations justifying the court’s enforcement of its order fixing the moneys due a petitioner pursuant to that order only if there is an “unreasonable payment delay.” In this case, the order was not entered until January 26, 2021. Therefore, it was not an “unreasonable payment delay” prior to March 26, 2021.

Accordingly, it was legal error for the judge to consider, for example, the length of time it took to resolve the petition after the parties agreed the petitioner was totally disabled. No payments were due the petitioner until the order was entered, and no payments were delayed for the first 60 days after that. Further, the judge recognized that there were ample, legitimate reasons why it took until January 2021 to enter the order finally settling the matter, and that those delays were not “unreasonable.”

Having said that, however, the county did not contest that it failed to pay the petitioner the moneys due under the order in a timely fashion. Rather, it offered various excuses for the delay, which the judge considered and, to some degree, accepted as reasonable. Nevertheless, the judge imposed the maximum statutory penalty for a 16-day payment delay.

In reversing the order, the court noted there was no reported case defining the appropriate standard of appellate review of a penalty awarded pursuant to a motion seeking enforcement of an order entered under the statue. In remanding the case, the court instructed that it would be appropriate to consider the length of the delay, the size of the late payment, and the effect a sizeable payment that is delayed beyond its due date would undoubtedly have upon a petitioner and his or her family.

Notably, a judge cannot consider delays in the litigation that predated entry of the order. Further, the court insinuated that an award of the maximum penalty under the statute, even though the delay in payment was only 16 days, and the certain extenuating circumstances that reasonably delayed payment in this case, would be struck down. Additionally, the court also suggested the lack of presence of bad faith, if any, would be factor to consider. Interestingly, the court indicated that the proceedings on remand could be conducted by a different judge.

This is the first case that addresses the factors to be considered in awarding penalties and sanctions for the late payment of a permanency benefit award. It is also very timely, given that many respondents are struggling to hire and retain claims professionals in the aftermath of the COVID-19 pandemic and The Great Resignation over the past couple of years. In its decision, the court confirms the long-standing requirement that workers’ compensation awards are required to be paid on a timely basis. When that fails to happen, Section 28.2 allows for various penalties, sanctions, etc., but maximum monetary punishments should not be awarded reflexively. Accordingly, respondents should continue to strive for full compliance in the timely payment of awards, or unnecessary and possibly substantial additional financial losses could result.

Firm Highlights

Thought Leadership

Vendor Cyber Attack Compromises PII of More Than 3 Million Hunting and Fishing License Holders in Texas

The Texas Parks & Wildlife Department (TPWD) announced earlier this month that one of its vendors which handles the sale of state hunting and fishing licenses was the victim of a cybersecurity attack. The threat actor appears to have exfiltrated personal driver’s license information, passport numbers, email addresses, phone numbers and addresses of over 3 million hunting and fishing license holders.  The State Parks Department advised that the attack did not compromise social security numbers, dates of birth or financial information. Texas Cyber Command, the state’s new cybersecurity authority formed to protect critical infrastructure and coordinate threat responses across state and local government, reportedly assisted in detecting and containing the attack. TPWD has already set up free credit monitoring for those impacted through Kroll.  According to press reports, no specific group has yet been identified as the perpetrator of the theft. TPWD also advised that business has not been interrupted and license sales were continuing. This incident once again demonstrates that cybersecurity is only as strong as the weakest link in the supply chain. Businesses must prioritize security across their own environments and those of their vendors and contractors as well.

Congratulations to our 2026 Florida Super Lawyers & Rising Stars: Elizabeth Ferguson, A.C. Nash, Taylor Naughton, Sophia Philor, Amara Rodriguez

News

Marshall Dennehey Announces 2026 Florida Super Lawyers & Florida Rising Stars

Result

Unanimous Verdict Obtained in a Medical Malpractice Matter in Bergen County, New Jersey

Result

Summary Judgment Secured, Preserving $750,000 in Coverage for Insured in Major Trucking Liability Dispute

Ray Freudiger and Michael A. Roberts (both of Cincinnati) successfully obtained summary judgment on behalf of their client in a coverage dispute arising from a May 19, 2022, motor vehicle accident. A permissive driver operated a box truck for an interstate trucking company and caused severe injuries to two tort victims. Prior to the accident, the insured had procured a commercial auto policy for the trucking company with stated limits of $1,000,000. Following the accident, the insurer initiated a declaratory judgment action asserting that only reduced bodily injury limits of $25,000/$50,000 applied and later counterclaimed, alleging it would not have insured the driver had he been properly submitted for approval under the policy. After extensive discovery, briefing, and oral argument, the court rejected the insurer’s attempt to shift responsibility for the $750,000 in coverage it was legally required to provide for permissive drivers under Ohio law, granting summary judgment in favor of the insured and preserving $750,000 in liability exposure.

Thought Leadership

The Enforceability of Online Arbitration Agreements Remains Unresolved in Pennsylvania, But the Pennsylvania Superior Court has Provided Substantive Guidance on the Issue

Key Points: The Pennsylvania Supreme Court confirms that an order compelling arbitration is not immediately appealable as collateral orders. The outcome of Chilutti II has generally left the substantive enforceability issues with browsewrap agreements unresolved in Pennsylvania. Until this issue is resolved by the Pennsylvania courts, companies operating in the Commonwealth should strive to ensure that their registration websites and/or application screens conspicuously present arbitration agreements in manners which ensure their users and consumers assent to the terms of the agreements by following the standards set forth in Chilutti I. Browsewrap agreements have been defined as agreements “‘in which a website offers terms that are disclosed only through a hyperlink and the user supposedly manifests assent to those terms simply by continuing to use the website,’ and typically do not require an electronic signature.” See, Cobb v. Tesla, Inc., 2026 WL 458470, at *1 n. 2 (Pa. Super. Feb. 18, 2026) (citation omitted). They are largely regarded as the “if you keep using this, you agree to everything buried in this link” terms embedded into almost every online agreement consumers and users sign before proceeding with purchases of goods and/or services. While consumers are generally aware of them, many almost never click on the link, nor read them in their entirety. This leaves many consumers and users ignorant of the terms and impact of such agreements. However, one’s ignorance of the otherwise neatly-tucked-away terms rarely renders them unenforceable. The issue of the enforceability of browsewrap agreements has been up for debate for some time in many jurisdictions, including Pennsylvania. Indeed, Pennsylvania had a brief grip on this issue for a period in time. Specifically, in 2023, an en banc Superior Court set forth heightened standards for companies to meet in order to secure assent and enforce browsewrap arbitration agreements. See Chilutti v. Uber Techs., Inc., 300 A.3d 430 (Pa.Super. 2023) (en banc) (“Chilutti I”) Chilutti I involved a husband and wife who sued Uber and its subsidiaries after the wife, a wheelchair bound passenger using Uber’s rideshare service, fell, struck her head, and lost consciousness due to her uber driver failing to provide a seatbelt and making an aggressive turn during the trip. The Chilutti’s filed a negligence lawsuit against Uber and its subsidiaries. In response, the defendants moved to compel arbitration, arguing that “the couple’s conduct on the company’s website and application — when they registered for the ridesharing service — signified that they agreed to be bound by the mandatory arbitration provision found in the hyperlinked terms and conditions.” The trial court granted the defendants’ petition and stayed the proceedings pending the results of arbitration, and the Chilutti’s appealed. On appeal, the Superior Court addressed two issues. First, it addressed the issue of whether it had jurisdiction to hear the appeal. A divided Superior Court determined that it did, with its basis for the holding being that the order from which the Chilutti’s appealed was a collateral order. Next, the Superior Court set out to address the merits of the Chilutti’s substantive claim. The Superior Court concluded that the parties lacked a valid agreement to arbitrate. Its rationale was that Uber’s website and application did not provide reasonably conspicuous notice of the terms to the Chiluttis. In reaching this decision, the en banc Superior Court held that browsewrap arbitration agreements are enforceable in Pennsylvania only if the registration website and application screens explicitly inform consumers that they are waiving the right to a jury trial, the registration process cannot be completed until the consumer is fully informed of this waiver, and, when the agreement is available via hyperlink, the waiver appears at the top of the first page of the terms in bold, capitalized text. Since the ruling, Pennsylvania courts have applied Chilutti I to determine if browsewrap agreements are enforceable.  For instance, the Allegheny County Court of Common Pleas invoked Chilutti I to reject an agreement that lacked an express jury-trial waiver on the assent screen.  See Miller v. Festival Fun Parks, LLC, 92 WDA 2025 (C.P. Alleg. Cnty. Mar. 24, 2025). Similarly, the Superior Court has held that notice which failed to explicitly state the consumer was waiving a jury-trial right did not “me[e]t the strict burden set forth by our en banc Court in Chilutti I.” Pierce v. FloatMe Corp., 348 A.3d 1077, 1088 (Pa. Super. 2025). While the issue of enforceability of browsewrap agreements appeared to have been resolved by Chilutti I, Pennsylvania courts’ grip on this issue has been slackened by the Pennsylvania Supreme Court’s January 21, 2026, opinion in Chilutti II. See Chilutti v. Uber Techs., Inc., 349 A.3d 826 (Pa. 2026) (“Chilutti II”). Therein, the Supreme Court did not address the merits of the Chiluttis’ substantive claim, but rather the issue of whether the Superior Court had appellate jurisdiction to immediately review the orders staying litigation pending arbitration. The Court ultimately vacated the en banc opinion on jurisdictional grounds, holding that the Superior Court did not have appellate jurisdiction because the trial court’s order from which the Chiluttis appealed did not qualify as a collateral order and, thus, the Superior Court erred in holding to the contrary and lacked jurisdiction to entertain the merits” of the Chiluttis’ substantive claim. As such, Chilutti II has rendered Chilutti I nonbinding, and the issue of enforceability of online arbitration agreements remains unresolved. However, in light of the fact the Supreme Court did not address or comment on the merits of the Chiluttis’ appeal, Chilutti I is still meaningful. Specifically, it provides guidance as to the standards a company should strive to meet to ensure they have obtained users’ assent so that they are able to enforce online arbitration agreements. Additionally, it may serve as persuasive authority in judges’ evaluations of petitions and/or motions to compel browsewrap arbitration agreements until this particular issue is properly put before our appellate courts. Keanna works in our Pittsburgh, PA office. She can be reached at (412) 803-1174 or KASeabrooks@MDWCG.com.

News

Veteran Trial Attorney Joseph M. Toddy Joins Marshall Dennehey’s Casualty Department in Philadelphia

Thought Leadership

Featured Conversations... Key Takeaways from A.M. Best’s Webinar on the Misuse Defense in Product Liability Claims, Featuring Michael Salvati

Michael Salvati, shareholder in our Philadelphia office, was a panelist for the April A.M. Best webinar, “The Misuse Defense: Strategic Approaches to Defending Product Liability Claims for Insurers.” During the program, Michael and his fellow panelists offered practical, jurisdiction‑specific guidance on how misuse and failure‑to‑warn theories intersect in modern product liability litigation. Michael emphasized the unique challenges these claims present—particularly in states like Pennsylvania, where evidentiary rules diverge sharply from those applied in many other jurisdictions. Failure to Warn as the “Flip Side” of Misuse Salvati explained that failure‑to‑warn allegations often arise as a direct counter to a misuse defense. As he noted, “If our misuse defense is that the plaintiff didn't use a product properly or safely, then the failure to warn claim is that we didn't tell them how to use it properly.” He emphasized that these claims can stem from either the absence of warnings or criticisms of existing warnings, such as insufficient specificity or lack of clarity about risks. Pennsylvania’s Unique Evidentiary Landscape One of Salvati’s most notable points was the stark difference in how Pennsylvania treats evidence of compliance with industry standards. He highlighted that Pennsylvania is “one of the only states…where that evidence is not admissible” in strict liability cases. Manufacturers cannot rely on compliance with ANSI, UL, ISO, or even federal safety standards to defend the product against a strict liability claim—because the focus is solely on the product itself, not the manufacturer’s conduct. Salvati acknowledged the challenge this creates for defense counsel and clients who expect such compliance to carry weight. Understanding the Three Defect Theories Salvati also walked through the three primary defect theories recognized in many jurisdictions: - Design defect – a flaw in the product’s intended design - Manufacturing defect – a deviation affecting a specific unit - Failure to warn – inadequate instructions or warnings He noted that warnings claims are increasingly significant and sometimes stand alone when design or manufacturing theories are weak. As he put it, plaintiffs often default to warnings claims because “the default position seems to be, ‘If I got hurt, there must be something wrong.’” Warranties and State‑by‑State Variations Salvati addressed how breach‑of‑warranty claims fit into the broader framework, explaining that implied warranties—such as merchantability—often overlap with strict liability in Pennsylvania. He emphasized the importance of understanding local nuances, as warranty law and admissibility rules vary widely across states. Looking Ahead: The Growing Importance of Warnings In his closing remarks, Salvati stressed that warnings should never be treated as an afterthought in product liability defense. He observed that warnings‑only claims are becoming more common and urged manufacturers and insurers to continually evaluate the clarity and completeness of their instructions and warnings. His takeaway: “We should always be talking about what are the instructions that come with our products…to bolster a misuse defense.” Listen to the complete webinar here: https://www3.ambest.com/conferences/events/eventregister.aspx?event_id=WEB1074.

Casey Alan Coyle Joins Marshall Dennehey's PA Appellate Practice as a Shareholder in Harrisburg and Philadelphia

News

Marshall Dennehey Expands Leading Pennsylvania Appellate Practice With Addition of Shareholder Casey Coyle

Result

No-Cause Jury Verdict Secured in Wrongful Death Trial

We successfully obtained a no-cause jury verdict in a 13-day wrongful death trial. The decedent, a 59-year-old man, was admitted to the emergency room on February 15, 2019, with complaints of abdominal pain, decreased appetite, and constipation, despite the use of laxatives. The patient did not complain of any nausea, vomiting, or diarrhea. He had a significant medical history including diabetes, hypertension, prior coronary artery stenting, morbid obesity (with past gastric bypass surgery), longstanding ventral hernia, and back pain. A CT scan revealed multiple hernias and a potential closed-loop bowel obstruction, leading to a surgery consultation. Our client, an emergency general surgeon, interpreted that the patient did not have a closed loop or any significant obstruction and recommended non-surgical management. The patient was approved to have clear liquids, and had a vomiting incident shortly after, but our client was not notified. The patient was returned to NPO status, and after improving overnight, he was returned to “clears” and additional medical and renal consults were ordered. Our client did not receive any communications from the residents/nurses of any changes in the patient’s condition. On February 18, 2019, two rapid responses were called due to increased heart rate and vomiting. It is believed that the vomiting resulted in aspiration, causing sepsis, ultimately leading to the patient’s death. During the trial, the plaintiff’s sole medical expert highlighted imaging on the wrong hernia, which called into question all of his opinions in the case. We made key objections related to the expert testimony, limiting what the allegations were, and preventing new allegations from being made. After approximately two and a half hours of deliberating, the jury returned a no-cause verdict. 

blue facade of a hospital sign against blue sky

Result

Defense Verdict in Complex Medical Malpractice Trial