An Overview of Neves v. WCAB and the Practical Implications for Employers

Robert Neves v. WCAB (American Airlines), No. 1431 C.D. 2018 (Pa. Cmwlth. 2020)

Administrative History

On May 3, 2016, Judge Joseph Stokes circulated a Decision (“the Stokes Decision”) granting a Claim Petition filed by Robert Neves (“Claimant”) and approving a 20 percent counsel fee for any benefits awarded.  Subsequently, the claimant filed Review and Penalty Petitions, alleging that the employer/insurer had refused to pay 20 percent counsel fees on any medical benefits awarded as part of the Stokes Decision.  As part of the evidentiary record, the claimant submitted an affidavit attesting to his understanding that 20 percent counsel fees would be payable on all past due indemnity and medical benefits awarded.  Claimant understood that medical providers may seek the 20 percent difference from him after the employer/insurer paid only 80 percent of the repriced medical bill.  The parties resolved the claim by way of a September 8, 2017 Compromise and Release Agreement, which left remaining for Decision the 20 percent fee issue.  By way of a November 6, 2017 Decision (“the Lawrence Decision”), Judge Geoffrey Lawrence denied the Review Petition and the levying of 20 percent counsel fees on any medical compensation awarded pursuant to the Stokes Decision, finding that counsel fees applied only to indemnity benefits.  He further found that the contingent fee based upon medical compensation awarded could not be approved unless the claimant demonstrated that it was reasonable based upon the amount of time and the complexity of issues involved in the legal work performed. 

Claimant appealed the Lawrence Decision to the Workers’ Compensation Appeal Board.  Upon review, the Appeal Board reversed the Lawrence Decision, ruling that the Stokes Decision applied to both indemnity and medical benefits awarded in the underlying litigation.  Employer then filed an appeal to the Commonwealth Court, which ultimately affirmed the Appeal Board’s Opinion.  

Commonwealth Court Decision

On appeal to the Commonwealth Court of Pennsylvania, the claimant argued that a 20 percent counsel fee is applicable to any awarded indemnity or medical benefits.  The Commonwealth Court reviewed the body of case law addressing the application of reasonable counsel fees to both indemnity and medical benefits based upon approved fee agreements.  Precedential Decisions of the Court made clear two  important tenets: (1) regardless of whether an award is for medical or indemnity compensation, or both, counsel fees are to be calculated against the entire award; and (2) the claimant must establish that he is aware that counsel fees will be applied to the entire award, including medical compensation.  

Here, the fee agreement explicitly set forth counsel fees of 20 percent on the entire award recovered from the claim, without regard for whether the payments were indemnity, medical, or both.  The fee agreement expressly addressed the claimant’s possible liability to medical providers for the remaining 20 percent of the repriced medical bills.  Claimant submitted an affidavit attesting to his understanding of this provision of the fee agreement.  As asserted by the claimant, the Court determined that a 20 percent counsel fee of any amount awarded, whether indemnity, medical, or both, is per se reasonable.  

In dicta, the Court noted that Act 44 established a repricing scheme based upon Medicare fee schedules, created the Medical Fee Review process for providers to challenge the amount or timeliness of payments, and expressly forbade the practice of “balance billing” -- billing claimants for the difference between the billed sum and the repriced sum paid by the employer or insurer.  

The Court addressed the apparent contradiction between the prohibition on balance billing and its determination that 20 percent counsel fees could be assessed on medical compensation awarded.  While the Court recognized that its Decision may promote balance billing, it placed responsibility for addressing this concern on the General Assembly.  The Court is responsible for interpretation of the plain language of the Act, not to be concerned with the wisdom of the outcome of that interpretation.  While the concern that applying 20 percent counsel fees to medical awards may serve to counteract the prohibition on balance billing, this is more appropriately addressed by the General Assembly by way of legislation, not by the Court in determining the appropriate interpretation of the plain language set forth in the Act.

Practical Implications

In practice, Neves will require employers and insurers to assess whether an approved fee agreement includes a 20 percent fee on medical payments, in addition to indemnity payments.  If the approved fee agreement has the requisite language, employers will be expected to withhold 20 percent of medical benefits awarded and forward that payment to the claimant’s attorney.  Most importantly, employers will not be responsible for the 20 percent balance of medical benefits that are paid to the claimant’s attorney, rather than to the providers.  Under Neves, claimants will be responsible for payment of the difference, which must be acknowledged by the claimant and counsel before the fee agreement is approved by the Workers’ Compensation Judge.  

The Court’s Decision is silent as to whether counsel fees should be deducted from any and all medical payments following approval of the fee agreement.  It is unclear whether, where medical bills were being paid appropriately prior to the initiation of any litigation, any and all medical bills following approval of a fee agreement would be subject to counsel fees.  It is possible that the only medical bills subject to fees would be those directly involved in the litigation where the fee agreement was approved.  Certainly, future litigation will lead to clarification.  

Employer counsel will need to be diligent in reviewing fee agreements submitted by claimants.  To avoid penalties, employers must be made aware of the fees to be deducted and remitted to claimant’s counsel.  Employer counsel will need to elicit testimony from claimants to ensure they are aware of the possible personal liability involved where attorney’s fees are deducted from medical compensation.  Eventually, this issue may be eliminated altogether by legislation declaring that attorney’s fees are applicable only to indemnity benefits.   As it stands, however, the Act now allows for counsel fees on both indemnity and medical benefits, so long as it is clearly enumerated in the fee agreement and the claimant is aware of the potential implications.

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