When there is a Refusal to Disclose the Amount of a Third Party Settlement, Can You Obtain Relief from a Workers' Compensation Judge?


This was the issue in Joseph Reed, deceased, Donna Palladino, Executrix of the Estates of Joseph Reed and Alice Reed deceased, v. WCAB (Allied Signal, Inc. and its successor in interest Honeywell et. al.), No. 879 C.D. 2014, filed April 21, 2015. Reed, during his lifetime, filed a claim petition for lung disease including asbestosis. The claim was granted. However, disability benefits were suspended by the Workers' Compensation Judge (WCJ) because neither the employee nor counsel had disclosed the amount recovered in a third-party action and that prevented a subrogation calculation. The Workers' Compensation Appeal Board (WCAB) and the Commonwealth Court affirmed the decision. The Pennsylvania Supreme Court denied a petition for allowance of appeal. Shortly after this first round of litigation ended, the executrix for the now deceased employee and his wife filed reinstatement, modification and review petitions which, in effect, sought to re-litigate issues determined in the first round of litigation. The Court rejected the argument that it was the employer's burden to establish the amount of the third party recovery. Section 319 only requires that the employer establish that it paid benefits for an employee's work related injury that was the result of the negligence of a third party and that the employee received recovery from the third party. The WCJ properly found that the employer met this burden of proof through docket entries indicating a settlement took place, testimony from a defense attorney about asbestos group settlements with a division of funds to be determined by counsel and a letter from the employer's counsel requesting information about the third party case. The WCJ properly found that the Joint Tort Release "for the sole consideration of $1, and other valuable considerations…" failed to establish the amount of the third party recovery. The WCJ presiding over the new round of litigation rejected the testimony of the executrix claiming no knowledge of the amount of the recovery and rejected the notion that the release for $1 was the actual settlement amount. The Court concluded that the previous WCJ was correct in placing the burden on the executrix to prove the amount of the recovery and that the suspension of benefits would remain in effect until that information was provided. Comment: Although the litigation in this case was initiated by the executrix of the decedent's estates, there is nothing to prohibit an employer/carrier from initiating such litigation to suspend benefits for the employee's failure to provide the amount of the third party recovery. You must be prepared to prove that the employee is receiving benefits; that a third party action alleges a party is responsible for the injuries the employee sustained at work and that a recovery or settlement of that action has occurred. In this case, the attorney representing the estate in the asbestos litigation was also counsel in the workers' compensation cases. The Court, in a footnote, revealed its annoyance with the attorney and suggested he read numerous sections of the Rules of Professional Conduct.

By: Peter J. Weber

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