Law Offices of Christian Petrucci

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Workers' Compensation Cases: Settlement Valuation Revisited | The Legal Intelligencer Since there is almost no way to force a lump sum settlement in the workers’ compensation arena, the most effective way to achieve such a result is through convincing the defendants that they will save money in the long run by settling the case. It is really that simple.

https://twitter.com/thelegalintel/status/1619003111183376385?s=20&t=9Ow8mi6ThFjn0V3ckxgVPQ

Lorino Revisited

By Christian Petrucci | November 21, 2022 at 10:12 AM

As is well known, the Pennsylvania Workers' Compensation Act has always been interpreted to allow attorney fees charged against the employer/insurance carrier only if the employer failed to demonstrate the contest of the litigation was "unreasonable"—thus the term “unreasonable contest attorney fees.”

Almost a year ago, the Pennsylvania Supreme Court decided the matter of Lorino v. Workers’ Compensation Appeals Board (Commonwealth of Pennsylvania), 266 A.3d 487 (Pa. 2021), which directed that attorney fees “shall” be awarded when an injured worker prevails in a litigated matter. As is well known, the Pennsylvania Workers’ Compensation Act has always been interpreted to allow attorney fees charged against the employer/insurance carrier only if the employer failed to demonstrate the contest of the litigation was “unreasonable”—thus the term “unreasonable contest attorney fees.” To put it mildly, the award of attorney fees assessed against the insurance company was the exception to the rule. Even in the most unreasonable of contests, attorney fees were traditionally assessed in nominal amounts and were always stayed by the Workers’ Compensation Appeals Board, in the few cases where they were awarded.

The tide began to shift, ever so slightly with cases like Gabriel v. Workers’ Compensation Appeals Board (Procter and Gamble Products), 242 A.3d 956 (Pa. Cmmw. Ct. 2020), which allowed for the mere failure of an employer to file a bureau document in a timely manner to be considered an unreasonable contest. Gabriel was followed by the Pennsylvania Supreme Court case that completely upended the status quo that had been in place from time immemorial. In Lorino v. Workers’ Compensation Appeals Board (Commonwealth of Pennsylvania), the Supreme Court expanded employer-funded attorney fees, even where the employer establishes a reasonable basis for the contest. Unbeknownst to almost anyone, apparently the appellate courts of Pennsylvania have consistently misconstrued Section 440 of the act in failing to award attorney fees to a claimant when an employer had established a reasonable basis for its contest. Lorino turned on the meaning of the terms “shall” and “may” found in Section 440.
It was suspected in this space that the Supreme Court’s order granting the claimant’s petition for allowance of appeal tipped its hand when it framed the issue in constitutional terms according to the claimant’s statement:

Whether the Commonwealth Court’s decision on this question of first impression should be reversed for violating the separation of powers doctrine, since it improperly exercised legislative power by replacing the word “may” with the word “shall” in Section 440 of the Workers’ Compensation Act; its opinion even states, “ … despite the General Assembly’s use of the word ‘may,’ this court has always …” required an unreasonable contest before assessing attorney fees against an insurer.
A review of Section 440 of the act is warranted to understand the genesis of the dispute over the terms “shall” and “may.” The section provides in pertinent part:

In any contested case where the insurer has contested liability in whole or in part … 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 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. See Pa. Stat. Ann. tit. 77, Section 996(a).

Amazingly, the Commonwealth Court in Lorino all but admitted it was wrong in what it was doing when it acknowledged its own substitution of the word “shall” for “may” as follows:
Despite the General Assembly’s use of the word “may,” this court has always interpreted Section 440 to mean that “attorney fees shall be awarded unless a reasonable basis for the employer’s contest has been established; or otherwise expressed, the award of attorney fees is the rule and their exclusion is the exception to be applied in cases where the record establishes that the employer’s … contest is reasonably based.

Of course, the Supreme Court was not going to countenance the Commonwealth Court’s acknowledgment that the plain reading of the act was irrelevant, long-standing precedent notwithstanding. From Lorino on, when a contested case is resolved in favor of a claimant, an award for a reasonable sum for attorney fees is mandatory. The language in Section 440 indicating that when an employer has established a reasonable basis for the contest, an award of attorney fees may be excluded simply confers discretion on the WCJ to award of attorney fees or not. WCJs should treasure this newfound discretion, as it dramatically enhances the all-encompassing, all-pervasive, yet oft-ignored humanitarian purposes of the act.

A year after Lorino was decided, we need to assess what effect the decision has had on the practice. It has always been the case that Lorino’s impact will depend on the individual attitudes each WCJ in every case. While every WCJ clearly has the discretion to award attorney fees regardless of whether a reasonable basis for a contest exists, many WCJs simply default to the reflexive position that attorney fees are not warranted without an unreasonable contest. While there has been some effort to afford those claimants who only receive medical payments the benefit of Lorino’s holding in order to allow for representation in what would otherwise be a nonfee-generating situation, Lorino’s impact should go a bit further.

While it is true that “Lorino fee requests” are relatively few and far between, it may simply be due to contentment with the status quo, a lack of creativity or even general ignorance of the law. Whatever the case, if the opportunity to utilize Lorino fee requests in matters other than cases where the claimant is not receiving wage-loss benefits or the indemnity portion of the claim has already been resolved is not seized upon, the moment will be lost. If you need convincing, when is the last time you heard the term “special supersedeas hearing” and how many practitioners even know what it means?

My last article of 2022 from the Legal Intelligencer

Revisiting 'Lorino' and Its Effect on Attorney Fees in Workers' Comp Cases | The Legal Intelligencer As is well known, the Pennsylvania Workers' Compensation Act has always been interpreted to allow attorney fees charged against the employer/insurance carrier only if the employer failed to demonstrate the contest of the litigation was unreasonable—thus the term “unreasonable contest attorney fe...

US Dept. of Labor Voices Concerns on Future of Workers’ Compensation US Department of Labor points to a number of trends highlighted in a new report that are creating concern for the future of workers' compensation.

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