The Pennsylvania Supreme Court has ruled that, when a workers' compensation claimant recovers from a third-party tortfeasor, the amount left over after the employer is reimbursed for previously paid compensation applies as credit only toward future disability benefits, not medical expenses.

The issue came down to the court's interpretation of the phrase “installments of compensation” in the Pennsylvania Workers' Compensation Act.

In a June 19 opinion in Whitmoyer v. Workers' Compensation Appeal Board (Mountain Country Meats), the justices unanimously reversed a Commonwealth Court decision that had held that the phrase referred to both disability benefits and medical expenses.

Justice Christine Donohue, writing for the high court, said the Commonwealth Court's reading of the statute was “unreasonable.”

“We recognize that the word 'compensation,' as used elsewhere in the WCA (including elsewhere in Section 319), refers variously to one or both of these types of benefits,” Donohue said. “'Installments of compensation,' however, is a more specific term. As discussed herein, we find that it means what it says: compensation that is paid in installments. Under the WCA, disability benefits are required to be paid in this manner, namely, 'in periodical installments, as the wages of the employee were payable before the injury.' Medical expenses are not.”

“Accordingly,” Donohue continued, “when a workers' compensation claimant recovers proceeds from a third-party settlement (following repayment of compensation paid to date) as prescribed by Section 319, the employer (or insurance carrier) is limited to drawing down against that recovery only to the extent that future disability benefits are payable to the claimant.”

Donohue was joined by Chief Justice Thomas Saylor and Justices Max Baer, Debra Todd, David Wecht, Sallie Updyke Mundy and Kevin Dougherty.

The foundation for the Supreme Court's reasoning was Merriam-Webster's dictionary, which defines “installment” as ”one of the parts into which a debt is divided when payment is made at intervals.”

“While a dictionary definition is not dispositive as to the plain meaning of a statutory term, an examination of the overall statutory scheme confirms that the legislature intended 'installments of compensation' to be limited to compensation that is paid at 'periodical' intervals (e.g. weekly or bi-weekly) in the same way that an employee's wages were paid,” Donohue said. “Disability benefits, but not medical expenses, are payable in this manner.”

Donohue said this rationale is further supported by the fact that Section 306(f.1)(1)(i) of the WCA provides that “'the employer shall provide payment in accordance with this section for reasonable surgical and medical services … as and when needed.'”

“Notably, this section does not speak in terms of installments or periods, but instead recognizes that medical expenses arise unpredictably, based upon the individualized and changing needs of an injured employee,” Donohue said.

Donohue rejected the employer's argument that the amount of a third-party recovery that is in excess of the employer's accrued subrogation lien is given to a claimant “conditionally.”

“Nothing in Section 319 indicates that the employee is receiving his or her recovery 'conditionally,'” Donohue said. “The plain language provides that the employee is receiving an 'advance payment.'”

And the common usage of the term “advance payment” refers to money that is distributed upfront in lieu of future payments, Donohue said.

“The employee has simply been paid in advance for outstanding instalments owed to him, and the money is his to do with as he chooses,” Donohue said. “The logical corollary is that the employee will not receive any additional disability compensation from the employer (up to the amount of the recovery) nor is he obligated to reimburse the employer for any amount. To that end, this court has explained that dividing the balance of recovery by the weekly compensation rate results in what is known as the employer's 'grace period.'”

Whitmoyer's attorney, Adam Levin of Liever, Hyman & Potter in Reading, said he was pleased that his firm's work will benefit not only his client in this case but claimants across Pennsylvania.

“We have always taken the position that employers and their workers' compensation insurance carriers were not entitled to a credit against future medical expenses following a third-party settlement and that they should be 100 percent responsible for an employee's future medical benefits,” Levin said. “It's an issue that we have felt very strongly about and we were always looking for the opportunity to have the courts address this issue.”

Counsel for Mountain Country Meats, Thomas Miller of Zirulnik Sherlock & Demille in Mount Laurel, New Jersey, also could not be reached.

(Copies of the 20-page opinion in Whitmoyer v. Workers' Compensation Appeal Board (Mountain Country Meats), PICS No. 18-0768, are available at http://at.law.com/PICS.)