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January 2018

Fifth Edition


We hope you are having a good New Year!


1. The U.S. District Court for the Western District of Pennsylvania recently decided the case of American Builders Ins. Co. v. Custom Installations Contracting Services, Inc., Civil Action No. 3:15-295 (U.S. W.D. Pa., filed August 18, 2017).  In that case, the Insurer (American) alleged that by mistake or fraud, the Employer (Custom) had misrepresented a material fact regarding the preclusion of roofing work for covered employees under the Workers’ Compensation policy.  The Claimant involved had been seriously injured in a roofing accident.  In said Action, American requested rescission of the policy and damages against the Employer for fraud.  The Federal Court ordered rescission of the policy by default against the Employer.  After subsequent litigation to enforce the Federal Court Order before the Workers’ Compensation Judge, the Federal District Court ruled that the rescission Order secured by American was null and void because, inter alia, the rescission of said policy between the Insurer and Employer was purely a Workers’ Compensation matter and within the exclusive jurisdiction of the Pennsylvania Workers’ Compensation system.  Therefore, the Insurer had to present its rescission claim to the Workers’ Compensation Judge for decision on the merits.  It is noted that the Court did not dismiss the fraud claim vs. the Employer as potential damages for same were outstanding.  In addition, the Court noted that the Commonwealth Court of Pennsylvania had also permitted the rescission of a Workers’ Compensation policy by way of a hearing and proceedings before a Workers’ Compensation Judge.  See SWIF v. WCAB (Hering et al.), 833 A.2d 343 (Pa. Cmwlth. 2003).  American Builders is currently on appeal to the U.S. Third Circuit Court of Appeals.  However, if you have such a potential coverage issue in your cases, it appears that the proper Court and jurisdiction for rescission of the Workers’ Compensation policy is before the Workers’ Compensation Judge, not Federal Court.  While Federal Court practitioners may disagree, I believe this is better for all concerned because of less cost to the parties and securing a more expeditious determination from a Workers’ Compensation Judge as opposed to Federal Court.  It is evident from this Opinion and Order that this Federal Court did not want to get involved in Workers’ Compensation issues of this nature at this time.  We will keep you advised if the U.S. Third Circuit Court of Appeals alters or affirms this Opinion and Order.


2. In CMR Cons. Of Texas v. WCAB (Begly), 165 A.3d 69 (Pa. Cmwlth. 2017), the Commonwealth Court held that an out-of-state Employer who was uninsured at the time of Claimant’s work injury was subject to penalties for non-payment of ordered disability benefits for serious injuries to Claimant, even though the Employer was insolvent and the Uninsured Employer’s Guaranty Fund (UEGF) failed to make timely payments to Claimant in this case.  For whatever reason, attorney’s fees for unreasonable contest were denied to the Claimant.  (The Employer dodged a bullet in this regard.)  Please note that such penalties are not the responsibility of the UEGF, because they are not an Employer or Insurer under the Act.  As penalties could amount to additional liability of up to fifty percent (50%) of the compensation awarded, it is extremely important the Employers make sure that their Workers’ Compensation coverage on all workers is proper and up to date whether they are working in or out of state.


3. With respect to the County of Allegheny v. WCAB (Parker), 151 A.3d 1210 (Pa. Cmwlth. 2016) regarding the Claimant’s attorney’s obligation to repay unreasonable contest attorney’s fees after an appellate Court ruling that such fees were not in fact due and payable, the Court has still not issued an Opinion and Order in this case.  We shall keep you advised.











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