Presenting potentially significant exposure to employers, the Pennsylvania Supreme Court just decided Vincent Lorino v. WCAB (Commonwealth of Pennsylvania), addressing the issue of awarding attorney’s fees to a claimant in litigated matters. The issue of attorney’s fees awardable in litigated matters is governed by Section 440 of the Act (77 P.S. § 996). Our top Court’s interpretation of this statute (and in its unanimous decision) emphasized that the language of Section 440 requires that attorney’s fees “shall” be awarded when the litigation is decided in whole or in part in favor of the claimant. The Court further highlighted the language of Section 440 stating attorney’s fees “may” be excluded when a reasonable contest is determined. Note the difference here between the two keywords, “shall” being more mandatory and “may” being more discretionary.
Section 440 states in pertinent part as follows:
- In any contested case where the insurer has contested liability in whole or in part, including contested cases involving petitions to terminate, reinstate, increase, reduce or otherwise modify compensation awards, agreements or other payment arrangements or to set aside final receipts, the employee or his dependent, as the case may be, in whose favor the matter at issue has been finally determined in whole or in part shall be awarded, in addition to the award for compensation, a reasonable sum for costs incurred for attorney's fee, witnesses, necessary medical examination, and the value of unreimbursed lost time to attend the proceedings: Provided, That cost for attorney fees may be excluded when a reasonable basis for the contest has been established by the employer or the insurer.
In typical practice, Section 440 has been interpreted to allow a workers’ compensation judge to award attorney’s fees to claimants in situations when the employer’s contest was deemed unreasonable. An unreasonable contest was thought to be a necessary precondition to permit the workers’ compensation judge to consider awarding attorney’s fees. In other words, employers assumed that if there was sufficient evidence submitted to support a reasonable contest, the exposure to the claimant’s attorney’s fees would be avoided. The significant change here is that the Pennsylvania Supreme Court’s interpretation of Section 440 now changes this assumption to the detriment of employers.
In Lorino, the claimant’s work injury was accepted in a medical-only capacity, and the employer filed a petition to terminate after obtaining a full recovery independent medical evaluation. The claimant opposed this assertion via his own testimony along with medical records of his treating physician demonstrating ongoing treatment for the injury. The workers’ compensation judge ultimately found in favor of the claimant, denying the petition to terminate. The workers’ compensation judge found the employer presented a reasonable contest and, therefore, the employer was not responsible for any attorney’s fees incurred by the claimant. The claimant appealed alleging Section 440 still allowed for attorney’s fees to be awarded. However, the Workers’ Compensation Appeal Board affirmed the workers’ compensation judge’s holding, as did the Commonwealth Court.
The matter was appealed to the Pennsylvania Supreme Court, and the Court emphasized the language of Section 440 stating attorney’s fees shall be awarded when the litigation is decided in whole or in part in favor of the claimant, but that such fees may be excluded when a reasonable contest is determined. As such, the Court ultimately concluded claimant attorney’s fees may be awarded even in the event of a reasonable contest at the discretion of the workers’ compensation judge. That is what is meant by the word “may.” It is a purely discretionary word.
Comment: Based upon this interpretation of Section 440, employers may see decisions from workers’ compensation judges in the future granting claimant’s attorney’s fees, even when a reasonable contest has been established. Of course, this determination will be within the discretion of the workers’ compensation judge, but no longer will employers enjoy the safe harbor assumptions of a reasonable contest based on submitted evidence as a bar to paying a claimant’s attorney fees. When assessing exposure and risk associated with litigating cases to a decision, employers should now also account for costs of claimant’s attorney’s fees, even when evidence has been submitted into the record to establish a reasonable contest, so that the best risk management decisions can be made. Under no circumstances should this case be considered as a detriment to taking the appropriate case to decision, and all defense attorneys must be hyper vigilant to ensure that the Judge does not invoke his or her discretion to award fees under the, shall we say, “may” doctrine.