.

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.

Firm Highlights

Thought Leadership

The Search-Incident-to-Arrest Doctrine Does Not License Strip Searches

In Beatty v. Gardner, No. 25-2860 (3d Cir. Sept. 16, 2026), Kyle Beatty sued police officers Clinton Gardner and Calvin Irvin under 42 U.S.C. § 1983 after they stopped, arrested, and searched him three times during a drug investigation in Williamsport, Pennsylvania. The officers initially smelled marijuana coming from the car in which Beatty was sitting and observed marijuana residue, giving them probable cause to arrest him. Beatty consented to the first pat-down, and the second search was conducted incident to his lawful arrest; neither search uncovered weapons or contraband. The officers then transported Beatty to the police station solely to strip-search him, but the strip search also revealed nothing. The District Court granted the officers summary judgment, concluding that the initial stop, arrest, and first two searches were reasonable and that qualified immunity protected the officers from liability for the strip search. The Third Circuit affirmed, but held that the strip search itself violated the Fourth Amendment. The court concluded that the search-incident-to-arrest doctrine does not automatically permit officers to strip-search an arrestee outside the jail or prison setting. Because strip searches are highly intrusive and the traditional justifications for searches incident to arrest (officer safety and preservation of evidence) did not justify the search of Beatty, the officers generally needed either the arrestee’s consent, exigent circumstances, or a warrant supported by probable cause to believe that a search beneath the clothing would reveal weapons, contraband, or evidence. Here, the officers had none of those justifications. Nevertheless, the court held that qualified immunity barred damages liability because, at the time of the search, the right against a warrantless strip search of an arrestee outside the institutional setting was not clearly established by Supreme Court or Third Circuit precedent. The court likewise upheld qualified immunity on Beatty’s First Amendment retaliation claim and affirmed summary judgment for the officers.

Thought Leadership

Pennsylvania Supreme Court to Review Whether Legal Malpractice Claims May Be Recast as Breach of Contract Claims

The Pennsylvania Supreme Court recently granted allowance of appeal to consider whether a plaintiff may pursue a breach of contract claim against an attorney based on allegations that the attorney failed to provide competent legal services. The issue is significant in professional liability litigation because it concerns whether a plaintiff may avoid the statute of limitations applicable to professional negligence claims by characterizing the alleged misconduct as a breach of contract. Antoine Poteat retained attorneys Gary Asteak and Nino V. Tinari to represent him in a criminal matter. After his conviction was subsequently overturned through a Post Conviction Relief Act proceeding, Poteat filed suit against his former attorneys alleging that they breached their retainer agreements by failing to provide competent legal services. The attorneys argued that the claims sounded in professional negligence, rather than breach of contract, and were therefore time-barred. The trial court dismissed Poteat’s complaint, but the Superior Court, sitting en banc, reversed. The Superior Court held that the gist-of-the-action doctrine did not bar Poteat’s breach of contract claim because the alleged failure to provide competent legal services could constitute a breach of the parties’ agreement. The Court further held that a legal-services agreement contains an implied duty requiring an attorney to provide competent legal services, even where the agreement does not contain an express provision requiring such services. The Pennsylvania Supreme Court granted review in July 2026 and will consider whether the Superior Court’s decision conflicts with Pennsylvania precedent distinguishing contract and tort claims, including Bruno v. Erie Insurance Co. The Supreme Court will also address whether a plaintiff may maintain a breach of contract claim based on an implied duty to provide competent legal services without identifying a specific contractual provision that was breached. The Supreme Court’s decision could have significant implications for professional liability litigation in Pennsylvania, particularly where plaintiffs seek to characterize claims arising from alleged professional negligence as contractual claims.

Thought Leadership

Two Tracks, No Preclusion: Ohio Supreme Court Preserves Separate Damages Claims After Chapter 2506 Appeals

The Supreme Court of Ohio has clarified that an administrative appeal under Ohio Revised Code Chapter 2506 does not bar a separate action for damages and declaratory relief that could not have been pursued in the administrative appeal. The Ohio Supreme Court considered Sheetz, Inc. v. Centerville (2026-Ohio-3531) as a result of a certified question from the Southern District of Ohio. The question was whether Sheetz, the gas station/convenience store brand, was barred from seeking damages in a separate action since damages were not sought in their administrative appeal. Ultimately, the Ohio Supreme Court ruled that res judicata does not bar a separate action for damages after ruling on an administrative appeal because R.C. Chapter 2506 is limited to judicial review and cannot grant affirmative relief. The case arose after Centerville’s city council rejected a site plan proposed by Sheetz, Inc. that had received unanimous approval from the City’s planning commission. Sheetz filed an administrative appeal pursuant to R.C. 2506 in the Montgomery County Court of Common Pleas, and two months later filed a complaint for damages and declaratory relief under 42 USC § 1983 as a takings action with the city, city council, and other objectors as improper takings and a violation of due process, as well as interference with business and contractual relationship. The city and city council removed the § 1983 action for damages to federal court. Montgomery County Court of Common Pleas reversed the city council’s denial, and allowed the Sheetz project to move forward. Upon that ruling, the federal court issued a show-cause order questioning whether the § 1983 action was barred by the doctrine of res judicata via claim preclusion (which includes all theories of recovery).  Sheetz argued that Ohio courts of common pleas do not have authority to award damages or declaratory relief as party of the R.C. Ch. 2506 appeal, therefore res judicata could not be triggered to apply to the § 1983 action. Additionally, Sheetz moved to certify the issue to the Ohio Supreme Court, citing differing results between the second and sixth districts on this same issue. Centerville approached the question, not from a claim preclusion standpoint, but from the holding in Grava v. Parkman, Twp which states that a final judgment rendered on the merits bars all subsequent action based on the same transaction or occurrence.  In yet another approach, an objector argued that claim preclusion was satisfied because Sheetz could have raised its damages claims in the administrative appeal – Sheetz disagrees. In their analysis, the Supreme Court of Ohio broke down the elements of a claim preclusion analysis: 1) a prior final, valid decision on the merits by a court of competent jurisdiction; (2) a second action involving the same parties, or their privies, as the first; (3) a second action raising claims that were or could have been litigated in the first action; and (4) a second action arising out of the transaction or occurrence that was the subject matter of the previous action. The Court held that R.C. Ch. 2506 does not permit a party to argue damages as R.C. Ch. 2506 limits the common pleas jurisdiction as if it were sitting on appeal, and therefore can only affirm, reverse, vacate, or modify the appealed order, or can remand the case to the administrative body. Further, the Court held that Grava’s conclusion that a final judgment precludes additional litigation for different relief is inapplicable under this fact pattern because it was meant only to apply to those matters in which the plaintiff brings the exact same case twice, but for new relief. The Court found Grava was inapplicable because Sheetz could have requested damages or declaratory relief in the R.C. 2506 appeal. Therefore, Grava would be nothing more than dicta if it even did apply. Going further, the Ohio Supreme Court disavowed Sixth Circuit precedent which, in reliance on Grava and other district court decisions, permitted an owner to seeking relief under 42 U.S.C. § 1983 alongside an administrative appeal. See Moore v Hiram Twp., 988 F.3d 353 (6th Cir.2021). The Ohio Supreme Court found that the Sixth Circuit had disregarded a critical decision in Community Concerned Citizens, Inc. v. Union Twp. Bd. of Zoning Appeals, 1993-Ohio-115, which clearly held that a R.C. Ch. 2506 appeal cannot be combined with a complaint seeking other claims for relief. Id. at ¶ 11. To that end, the Ohio Supreme Court has determined that the decisions Moore relied on (outside of Grava) are no longer good law, and that Moore was wrongly decided. The decision draws a clear procedural boundary: Chapter 2506 provides judicial review of an administrative decision, not a forum for independent claims seeking affirmative relief. Although Grava may place claims arising from a single transaction within the potential scope of claim preclusion, those claims are not barred unless the complete claim-preclusion test is satisfied. Because Sheetz could not have pursued damages or declaratory relief in its Chapter 2506 appeal, the separate action was not precluded. The remaining question for practitioners looking to apply or defend against this exception is when does the statute of limitations begin to run on damages and declaratory relief claims related to an administrative decision on appeal? A takings action in federal court has a 2-year statute of limitations, or as a state claim, 4 years (like the other tortious claims raised therein). Correlating this case with others, an administrative appeal will not likely toll the statute of limitations on claims based on a final decision by a municipal authority. Therefore, practitioners should look for these cases to be brought simultaneously.