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Workers' Compensation

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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WCJ Improperly Refused to Conduct C&R Hearing and Erroneously Required Settlement of All Pending Petitions

In this case, the claimant sustained injuries in the course and scope of her employment as a registered nurse. The employer acknowledged the injury by a Notice of Compensation Payable (NCP).  Subsequently, a Workers’ Compensation Judge (WCJ) expanded the description of injury. The employer then filed a Termination Petition, alleging the claimant was fully recovered from the injuries. Providers filed Utilization Review (UR) Petitions, challenging UR determinations finding their chiropractic treatment to be not reasonable and necessary. A settlement of the claim was eventually reached, and the employer filed a Petition to Seek Approval of a Compromise and Release (C&R) Agreement. The C&R outlined that the agreement fully resolved all future workers’ compensation claims except for the termination and UR Petitions. Briefs were filed and one day later, the WCJ issued an Interlocutory Order which stated if instructions were not followed regarding filing of a C&R, a settlement hearing date would not be given. The employer complied with the order, and filed the C&R. Subsequently, the WCJ notified the parties that the C&R must resolve all issues in the petitions, or would not be entertained. A settlement hearing was never held, and the WCJ then issued a decision, granting the Termination Petition and dismissing the UR Petitions. The WCJ also said that the Petition for Approval of a C&R was dismissed without prejudice, as the issues in the Termination and UR Petitions went to a decision. The claimant appealed to the Workers’ Compensation Appeal Board (Board). The Board granted the claimant’s appeal, finding that the WCJ violated the requirement of Section 449 that an expedited hearing be held when a Petition for Approval of a C&R is filed.  The Board further held that it was legally incorrect for the WCJ to insist that the C&R resolve all issues raised by the pending Petitions. The Board remanded the case to a new WCJ, and Employer appealed to the Commonwealth Court. The court affirmed the Board and held that the WCJ erred, as a matter of law, by refusing to hold an expedited hearing within 30 days, once the Petition for Approval of a C&R was filed.  The court noted that the language of Section 449(b) is mandatory, and a settlement hearing is not discretionary or dependent on a party’s separate request for a stay, or whether the record has been closed. The court further rejected Employer’s argument that the case should not be remanded to a new WCJ for a new decision on the termination and and UR Petitions, as the Board passed no judgment on whether the C&R Agreement resolved the termination and UR Petitions, and left it for the WCJ to decide in connection with the Petition for Approval of a C&R.

Thought Leadership

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.

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In this case, the claimant sustained a work injury of January 6, 1994, which was acknowledged by Notice of Compensation Payable (NCP). After the claimant’s receipt of 104 weeks of temporary total disability benefits, the employer filed a Request for an Impairment Rating Examination (IRE). The IRE was performed in May 2023 and the IRE physician found that the claimant had a 5% whole person impairment, under the AMA Guides. The employer filed a Petition based on the IRE results, and the Petition was granted by the WCJ. During litigation, the claimant argued that the IRE provisions of Act 111 (Section 306(a.3) of the Act) were not applicable to her injury, since it predated June 24, 1996, the date Act 57 went into effect, and that the IRE provisions were unconstitutional. The Workers’ Compensation Judge (WCJ)) granted the Petition and the Board affirmed. On appeal to the Commonwealth Court, the claimant argued that Act 111 violated the nondelegation doctrine and that its retroactive application to the claimant’s injury was unconstitutional. The court rejected the arguments on the basis that they had already found the same arguments without merit in multiple, prior cases. The court also addressed an argument made by the claimant that Act 111 was procedurally defective under the Pennsylvania Constitution because it was only considered on two days in each House after having undergone amendments and reassignments. The court noted that the Pennsylvania Constitution requires every bill to be considered on three different days in each House. The claimant maintained that, according to the legislative history, the bill did not receive three separate days of consideration from each House when it was assigned a new bill number. The court pointed out, however, that the bill number, H.B. 1840 remained constant and was considered on three occasions by the House. Further, the court concluded that minor amendments to the bill were germane to its original subject, which was to modify the Act’s IRE process, in accordance with Protz II.

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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. 

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