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Defense Digest

Commonwealth Court Paves the Way for Workers’ Compensation Fee Agreements Pertaining to Prospective Medical Benefits by Declaring the Same “Per Se Reasonable”

Defense Digest, Vol. 30, No. 2, June 2024

June 1, 2024

by Alana M. Staniszewski

Key Points:

  • A 20% Fee Agreement applicable to all workers’ compensation benefits, indemnity and medical, is per se reasonable and enforceable, regardless of whether the medical expenses have been incurred or will be incurred in the future. 
  • A health care provider is prohibited from billing an injured worker to recoup the 20% fee on medical bills paid to claimant’s counsel. 
  • Pennsylvania jurisprudence is silent on whether a health care provider may file a fee review against the employer or insurer, seeking to recoup the 20% fee reduction on its medical bills.

In Patrice Williams v. City of Philadelphia (WCAB), 312 A.3d 976 (Pa. Cmwlth. 2024), the Pennsylvania Commonwealth Court further expanded opportunities for claimants’ attorneys to obtain fees in workers’ compensation matters. Expanding upon its jurisprudence permitting attorney’s fees as a percentage of past due medical benefits in Neves v. WCAB (American Airlines), 232 A.3d 996 (Pa. Cmlwth. 2020) (en banc), the court’s latest decision also permits attorney’s fees as a percentage of future medical benefits.

The claimant, Patrice Williams, sustained a work injury on March 4, 2021, within the course of her employment as a correctional officer. She entered into a 20% fee agreement with her counsel, permitting a 20% fee to be taken from all workers’ compensation benefits paid to her—indemnity and medical. The workers’ compensation judge approved the fee agreement pursuant to wage loss, but denied it with respect to the medical benefits. The Workers’ Compensation Appeal Board affirmed the workers’ compensation judge’s decision, noting that, because the claimant’s future medical bills are unknown and speculative, she did not have sufficient understanding of the actual amount she could potentially be required to reimburse to her medical providers. As such, they could not affirm an attorney’s fee request that included 20% of future, unknown medical expenses. The claimant appealed the Board’s decision to the Commonwealth Court.

The Commonwealth Court reversed and remanded the Board’s decision with instructions to approve the entirety of the fee agreement, including the fee on prospective medicals. The court noted that its decision in Neves and its rule regarding fee agreements on medical benefits is broad and not limited to only those medical expenses that have been actually incurred or billed. The court emphasized that very few claimants (if any) would be able to have a complete understanding of their future medical treatment at the time they retain counsel and that to restrict the fee agreement to merely indemnity because of this is untenable. Furthermore, the court emphasized that Ms. Williams, similar to the claimant in Neves, testified as to her understanding of the fee agreement and its potential risks.

However, the court minimized the potential risks claimants could face by entering into a medical fee agreement and dismissed concerns that Ms. Williams would be responsible for payment to providers for the 20% taken by counsel. The court cited to Section 306(f.1)(7) of the Pennsylvania Workers’ Compensation Act, which prohibits “balance billing,” or health care providers billing a claimant for any costs related to care provided under the Act and any difference between the provider’s charge and the amount paid. 

Notably, in less explicit language than the court used to discuss the claimant’s rights pertaining to “balance billing,” the court appeared to imply that, while a provider can file a fee review to seek an additional amount on the gross amount billed, a fee review is not an appropriate vehicle to seek the 20% difference paid to claimant’s counsel. However, given the court’s less than unequivocal language, this issue remains unresolved and a subject for courts to address in the future.

What is unequivocal is the court’s conclusion that “[a] 20% counsel fee agreement applicable to all workers’ compensation benefits received by a claimant is per se reasonable.”

The court’s decision has practical implications. If the claimant’s bar were to take advantage of this decision and revise its typical counsel fee agreements to include a fee on medical benefits, providers will face a 20% decrease in their reimbursement rate. If health care providers are then unable to recoup the 20% difference from the injured workers, or even employers and insurers (though that remains to be seen), this decision could result in increased fee review litigation as health care providers seek to make up for the 20% loss by increasing reimbursements on the gross amount billed. Furthermore, this decrease in providers’ reimbursement rates will not prove to serve the quality or quantity of care for injured workers.

This decision could also affect the procedural posture of workers’ compensation claims. It may no longer be in claimant’s counsel’s interest to settle a claim quickly or close to the onset of litigation if they have a financial interest in the medical billing associated with the claim. And while this case permits claimant’s counsel the opportunity to obtain a fee on indemnity only cases, it does not resolve the issue as to how the providers will recoup that fee. As such, employers and insurers, and their counsel, should prepare to face additional fee review litigation until the court specifically addresses a provider’s vehicle (if any) to recoup the payment, as well as increased medical bill costs should the court not permit recoupment. 

*Alana works in our Pittsburgh, Pennsylvania, office. 


 

Defense Digest, Vol. 30, No. 2, June 2024, 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. © 2024 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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Thought Leadership

Appeals Court Reverses Trial Court Order Awarding Attorney’s Fees Due to Lack of Evidence to Support Fee Awarded

The Fourth District Court of Appeal reversed the trial court’s order awarding appellate fees to People’s Trust Insurance Company based upon a lack of evidence to support the attorney’s fee award in RM & Assocs. Consulting, Inc. v. People's Trust Ins. Co., 2026 Fla. App. LEXIS 4654 (Fla. 4th DCA 2026). People’s Trust was the insurer of a residential property that had sustained water damage. RM & Associates Consulting was hired by the homeowner to perform mitigation services at the property. The homeowner assigned post-loss benefits to RM and RM subsequently filed suit against People’s Trust alleging that it had not been paid the money it was owed for the mitigation services. People’s Trust defended the lawsuit on the ground that the policy required the insured to notify the insurer before authorizing repairs so People's Trust could elect to use its preferred contractor. Because the owner did not comply with that provision, People's Trust asserted its liability was limited to the amount that its preferred contractor would have charged for the work, which People's Trust contended was $2,000. People's Trust paid that amount to RM before RM filed suit. People’s Trust filed a motion for summary judgment which was granted. RM appealed the summary judgment ruling and the ruling was upheld by the Fourth District Court of Appeal. The appellate court also granted People’s Trust’s entitlement to appellate attorney’s fees, subject to the trial court’s determination of the amount of fees, based upon an offer of judgment made by People's Trust. On remand, the trial court held an evidentiary hearing to determine the amount of attorney’s fees People’s Trust was entitled to. At the hearing, People’s Trust presented testimony from it’s fee expert, supervising trial counsel and appellate counsel. People’s Trust sought recovery of $24,866.17 for work performed by appellate counsel. The request primarily consisted of work performed in preparation of the answer brief. The fee expert testified that more than ninety hours spent preparing the answer brief was reasonable given the complexity and significance of the underlying issue. The appellate court found that the fee expert’s testimony fell short of meeting the necessary standard of demonstrating that the hours expended were necessary. The appellate court found that the billing records did not serve to cure the deficient testimony, as the billing records did not contain adequate details regarding the specific tasks performed. Rather the records contained entries such as “answer brief” which the appellate court found to be insufficient. The appellate court noted that neither the fee expert or counsel addressed how the prior research and briefing in the parallel litigation informed the work in the instant matter. The appellate court noted this was significant in that a court's attorney's fees award must exclude excessive, redundant, or otherwise unnecessary hours, citing Florida Patient's Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985). Based upon the record failing to support the finding of the trial court, the 4th DCA remanded the case to the trial court for a reconsideration and redetermination of reasonable appellate attorney’s fees supported by competent substantial evidence. The 4th DCA reiterated that the fee expert’s focus on the quality of the work and the importance of the work to People’s Trust did not make up for the perceived deficiencies in the position that spending over ninety hours on a single answer brief was reasonable. Whether moving for attorney’s fees or challenging the amount of fees being sought by an opposing party, practitioners should be mindful of the evidence being used to support the claims being made. Parties should pay close attention to whether the hours being sought may be impacted by prior litigation either party may have engaged in. A party must be prepared to address how prior litigation efforts did or did not impact the amount of hours being claimed in current litigation. Lastly, billing records must be sufficiently detailed so as to support any potential future fee claim.

Thought Leadership

United State District Court for the Middle District of Florida finds Evidence of Replacement Cost Value is Admissible and Recoverable Even When Repairs Have Not Been Made

The plaintiff filed a claim for damage as a result of Hurricane Ian. It claimed damages were over $24 million, but the carrier accepted partial coverage and paid $8,307.49 for secondary components. The carrier found hurricane damage to the building, but it was below the insurance policy’s $3.6 million deductible. The plaintiff sued for breach of the insurance policy. The carrier argued in a motion for summary judgment that plaintiff could not recover replacement cost value (RCV) because the property repairs had not been effectuated. The policy provided for RCV, but only after the repairs were completed. The carrier argued that because the repairs were not completed, the plaintiff was not entitled to RCV damages. The plaintiff argued the carrier could not withhold the actual cost value (ACV) due, which was the main allegation of the lawsuit, then fault it for not making the repairs to unlock the RCV. The United States District Court for the Middle District of Florida rejected the carrier’s argument, finding that when an insurer allegedly breached the policy by withholding coverage, it could not hide behind a repair-contingent provision to block the insured from RCV damages at trial. The court found the issue to be whether the contractual language designed to preclude certain coverage until after repairs are completed barred an insured from seeking those damages at trial when repairs were not complete. The court noted the Eleventh Circuit had not resolved this issue and neither side pointed to a definitive answer from the Florida Supreme Court. The court reasoned that it must look to the Sixth District Court of Appeal (6th DCA), which is the court which would have heard this case if it was in state court. The court noted the 6th DCA recently addressed this issue in Universal Prop. & Cas. Ins. Co. v. Rodriguez, 427 So. 3d 676 (Fla. 6th DCA 2026). The Rodriguez Court found that a breach of contract action is designed to adjudicate not only whether the contract was breached, but also evaluate the damages incurred had the breach not occurred, which the Rodriguez court found to be recovery of the RCV. This court also noted basic Florida contract principles compelled the same result, as a material breach frees the nonbreaching party to suspend its own performance and can demand the full benefit of its bargain, including RCV damages. Finally, the court found the distinction between a full denial and partial denial did not compel a different result. It found the policy required the carrier to acknowledge coverage and pay ACV for all covered damages, and the failure to do that is a material breach, entitling the insured to all of the damages available under the contract, which included the RCV.

Thought Leadership

First DCA Reverses Excessive Jury Award Unsupported by the Evidence

In December 2019, the plaintiffs filed a claim with Universal for damages caused by a water and sewage back up through the plumbing system and existing through multiple fixtures including the washing machine drain, kitchen sink, dishwasher, bathtub and toilet. Universal investigated the claim, issued payment for resulting water damage totaling $7,000.00 in actual cash value ($12,000.00 in replacement cost value). The plaintiffs sought additional benefits for work needed to access the below-slab cast iron plumbing system due to the failure of the system from rust, deterioration, corrosion and breaks in the line. Universal denied any additional benefits for access. In 2021, the plaintiffs filed suit. During litigation, Universal sent a plumber to inspect the home and the plumber concluded the pipes were clogged but could be cleaned. The plaintiffs’ plumber testified that the plumbing system needed to be replaced due to holes and openings in the pipes. The plaintiffs introduced two estimates prepared by Triad Restoration services totaling $79,680.22 in replacement cost value and $50,219.97 in actual cash value and an executed contract with another company for repairs with the amounts of repair redacted. Since the insurance policy did not provide coverage for repair or replacement of the plumbing system, the jury only had to decide whether the plumbing system needed to be replaced, and if it did, Universal would owe for the access costs; the jury verdict form required the jury to determine both the replacement cost value and actual cash value amounts. The jury asked if it had to rely on the Triad estimates for their amounts. The trial court advised the amount awarded had to be based on the evidence presented at trial and the law given by the trial court. The jury awarded $335,000.00 in replacement cost value or $305,000.00 in actual cash value. Universal motioned for a new trial arguing the amount awarded was unsupported by the evidence and then moved for remittitur. The trial court denied both motions and this appeal followed. The court found that while a jury’s verdict should only be disturbed with caution and discretion, the trial court must give the properly challenged award close scrutiny and determine whether it bears a reasonable relation to the damaged provided, is supported by the evidence, and could have been reached in a logical manner by reasonable means §768.74(3), (5)(d)-(e), Fla. Stat. The court found the trial court did consider the statutory requirements at the hearing on Universal’s remittitur motion and was concerned about a reasonable relation to the amount of damages proved and injury suffered and whether the award was supported by the evidence, but ultimately denied the motion, reasoning that the jury had been properly instructed to fairly and adequately compensate the plaintiffs. The court noted the only evidence providing the basis for the jury verdict was Triad’s estimates and those valued the plaintiffs' claimed loss at $79,680.22 in replacement cost value and $50,219.97 in actual cash value; no valuation evidence reasonably supported the jury verdict. The plaintiffs argued that the jury was entitled to consider more than the estimates, but the court conveyed the evidence provided did not give the jury a way to reach the amounts they awarded. The court was also not swayed by the plaintiffs’ argument regarding inflation and later price increases, but the court noted that no evidence via the contract, nor testimony regarding increase in labor, material, fuel or construction costs were entered into the record.  The court concluded the jury may draw reasonable inferences from the evidence, but it may not supply a damages number by speculation. The court did not find any of the plaintiffs’ remaining argument persuasive either. The court reversed the denial of Universal’s remittitur motion and motion for new trial as to damaged and remanded the case. The court ended its opinion with advising the trial court must determine whether replacement cost value or actual cash value is the property measure of damages under the policy and order remittitur in an amount consistent with that determination and the evidence.