A New Can of Worms?

One of the key features of the Pennsylvania Workers’ Compensation Act is that it provides the exclusive remedies for work-related injuries so that employers, co-employees and carriers are immune from civil liability for damages arising out of personal injury in courts of law. Employers, of course, may be sued for discrimination, wrongful discharge and related causes of action not covered by this article. But these causes of action are distinct from tort lawsuits seeking damages for personal injury, which are discussed here.

Since the law was amended in 1966 to specifically include carrier immunity, the state Supreme Court has upheld this principle (with one very limited exception discussed below).

The leading case is Kuney v. PMA Insurance Co., 578 A.2d 1285 (Pa. 1990). In Kuney, the Supreme Court held that an action against the workers’ compensation carrier for fraudulent refusal to pay benefits was barred by the exclusivity provisions of the Pennsylvania Workers’ Compensation Act. The essence of the suit was that the claimant’s workers’ compensation claim was fraudulently and deceitfully denied for no good reason, subjecting the claimant to extreme financial hardship and mental stress. He sought money damages, including pain and suffering, from the workers’ compensation carrier. The Supreme Court, upholding carrier immunity, noted that under the Workers’ Compensation Act, attorney’s fees for unreasonable contest, and penalties, were available to redress the wrongs alleged in the lawsuit. The court held that “the comprehensive system of substantive, procedural, and remedial laws comprising the workers’ compensation system should be the exclusive forum for redress of injuries in any way related to the workplace —. When the allegations of a claim have as their ultimate basis an injury compensable under the Workmen’s Compensation Act, the claim must be considered within the framework of the statute.”

The Supreme Court revisited the issue two years later in Alston v. St. Paul Insurance Cos., 612 A.2d 421 (Pa. 1992). The allegations were similar to those in the Kuney case, but this time the plaintiff also sued Vocational Rehabilitation Services, which provided a rehabilitation nurse at the carrier’s request, and an IME physician, John Williams. The essence of the suit was the allegation that St. Paul, VRS and their nurse, and Williams conspired to trick the claimant into attending an IME that he thought was a treatment consultation. The defendants then fraudulently produced an affidavit of recovery. Thereafter, the claimant alleged, St. Paul tried to force the claimant into settling his claim for an inadequate amount. When the claimant refused to agree to a settlement, St. Paul stopped his benefits and litigated a termination petition. Under the procedure then available under Section 413 of the law, benefits being paid pursuant to a notice of compensation payable could be stopped with the filing of an affidavit of recovery and a termination petition.

Eventually, the petition was denied, but the result was that the claimant was without benefits for 19 months. Although the referee awarded unreasonable contest attorneys fees, the Workers’ Compensation Appeal Board reversed that aspect of the award and no further workers’ compensation appeal was taken by either party. Alston’s suit against St. Paul, VRS and Williams sought compensatory and punitive damages for conspiracy, misrepresentation and fraud. The trial court granted summary judgment on behalf of the defendants.

The Superior Court in Alston affirmed, writing, “We also dismiss Alston’s claim that the trial Court erred when it held Williams and Vocational Rehabilitation Services immune from suit. The social policies underpinning the grant of immunity to employers and their compensation insurers apply equally to those individuals employed by the insurer to review the case. To hold otherwise would thwart the clear legislative mandate of providing workmen’s compensation benefits as the employee’s exclusive remedy.”

In affirming the Superior Court, the Supreme Court concluded that its holding in Kuney also encompasses individuals or entities, acting as agents or employees of the carrier, who assist the insurance carrier in handling workers’ compensation claims. The court said that Alston attempted to distinguish his case from Kuney “on the basis that the defendant was not a physician or vocational rehabilitation service, and that no penalties are prescribed in the Workmen’s Compensation Act for third parties. This attempted distinction blatantly disregards the agency relationship existing between the insurance carrier and the vocational rehabilitation service and the physician.”

As in Kuney, the crux of the Alstons’ lawsuit was that the insurance carrier and its agents wrongfully delayed the receipt of compensation benefits, the high court pointed out.

“The Worker’s Compensation Act provides the exclusive forum for resolving disputes regarding the employee’s right to compensation and the delay or discontinuance of benefits, whether they arise from actions taken by the employer, the employer’s insurance carrier, or the insurance carrier’s employees or agents. Only the employer or the employer’s insurance carrier may seek to terminate an employee’s benefits. Therefore, it is of no significance that no penalties are prescribed for the employees or agents of the insurance carrier, for such penalties are available against the employer or its insurance carrier.”

The holding in Kuney, expanded in Alston, that there is no tort relief for negligent or intentional mishandling of a workers’ compensation claim by a carrier and its agents, has been followed in a number of other cases. For example, in Santiago v. PMA Insurance, 613 A.2d 1235 (Pa. Super. 1992), the Superior Court held that the carrier and an agent of the carrier (apparently a structured settlement agent) were entitled to immunity for mental injury caused by alleged fraudulent bad faith in negotiating a settlement. Apparently, the agent represented to the claimant, who had developed reflex sympathetic dystrophy and mental problems, that he had authority to settle the case with “open medical” but, after the settlement was agreed to, the carrier stated that it could not settle the case unless the claimant agreed that the carrier was not liable for ongoing medical benefits for psychiatric treatment. This action, the claimant alleged, aggravated his mental anguish.

Similarly, in Fry v. Atlantic States Inc., 700 A.2d 974 (Pa. Super. 1997), the carrier was held to be immune against a claim for negligent refusal to authorize back surgery. The claimant alleged that a five-month delay in authorizing the operation allegedly resulted in permanent nerve damage and permanent disability. The court held that the essence of the suit was the mishandling of an otherwise valid workers’ compensation claim and, therefore, immunity existed under the act, citing Kuney.

A Narrow Exception

The plaintiff in Fry tried to invoke the one area in which the employer is not entitled to immunity: fraudulent misrepresentation that aggravates a work-related condition. Martin v. Lancaster Battery Co., 606 A.2d 444 (Pa. 1992). In a classic case of bad facts making bad law, the defendant employer in Martin fraudulently concealed blood tests for lead levels over a number of years, exacerbating the plaintiff’s chronic lead poisoning condition far beyond what it would have been with prompt treatment and an alternative job outside of a lead environment. The Supreme Court ruled that the state General Assembly “could not have intended to insulate employers from liability for the type of flagrant misconduct at issue herein by limiting liability to coverage provided by the Workman’s Compensation Act.”

The Fry court noted that Martin has been strictly limited to fraudulent misrepresentation that aggravates a work-related condition. The Superior Court panel did not feel that the conduct at issue in the Fry case rose to that level.

The Superior Court did, however, find that the employer’s conduct in Urban v. Dollar Bank, 725 A.2d 815 (Pa. Super. 1999), rose to the level of fraudulent misrepresentation. In Urban, a co-worker falsely reported that the plaintiff, a bank supervisor, commented that she was glad she was going on vacation because otherwise she would have no problem bringing a gun in and killing someone. According to the Superior Court opinion, bank personnel knew that the statement was false. In an apparent attempt to build a case for firing the claimant, they had the claimant involuntarily committed to a mental institution. Shortly after arrival at the mental institution and upon interview by a staff psychiatrist, the plaintiff was released, as there was apparently no basis for the commitment. The plaintiff sued the bank for malicious abuse of process. Citing Martin, the Superior Court held that immunity did not apply to this case because it involved fraudulent misrepresentation.

Outdated Case Law Makes A Comeback?