Workers' Compensation Defense

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.

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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. 

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_{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.}