Reimbursement of Fees for Unreasonable Contest May Be Recovered

01.05.17

Category: Pennsylvania

When unreasonable contest attorney's fees are assessed and paid by the insurer to the employee's counsel, they may be recovered directly from counsel if ultimately found unwarranted upon appeal. This was the holding in County of Allegheny vs. WCAB (Parker), No. 82 C.D. 2016; filed December 20, 2016.

In Suspension Petition litigation, the employer's petition was initially denied and unreasonable contest attorney's fees were assessed against the employer in the amount of $14,750.00. When the employer's request for supersedeas pending appeal was denied, the fees were paid to the employee's counsel. Upon appeal, a retroactive suspension was granted and the award of attorney's fees was reversed. The employer was able to recover from the Supersedeas Fund the ongoing disability compensation payments made to the employee totaling $106,999.62. However, it could not recover the attorney's fees because they did not constitute "compensation" reimbursable by the Fund.

The employer then filed a petition seeking reimbursement from the employee's counsel for the unreasonable contest attorney's fees it was required to pay during the course of the litigation. The Commonwealth Court reasoned that recovery of erroneously awarded counsel fees from the employee's counsel was appropriate to avoid unjust enrichment, and there was no other remedy because recovery from the Supersedeas Fund was unavailable. The Court treated attorney's fees like other litigation costs which are reimbursable if an employer prevails upon appeal. The Court rejected the employee's argument that reimbursement against the employee's attorney would have a "chilling effect" upon the representation of employees and that such awards would create tax and administrative hardships.

Comment: This may not be the last word on the subject because we anticipate an appeal of this issue to the Pennsylvania Supreme Court. In the meantime, the availability of such reimbursement requests, while important, may be limited because supersedeas is often granted with regard to awards of penalties and unreasonable contest attorney's fees pending appeal such that those payments are never made. When such payments are made and later determined to be unwarranted, reimbursement from the employee's counsel is available under this decision.

For more information, please contact Stephen T. Potako at spotako@wglaw.com or 267.765.4132 or Peter J. Weber at pweber@wglaw.com or 215.972.7901.

Media Contacts

Sara L. De Long
267.295.3377
sdelong@wglaw.com

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