J. Viscidi v. WCAB (Lagoon, Inc.) (Majority Opinion)

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IN THE COMMONWEALTH COURT OF PENNSYLVANIA Judith Viscidi, Petitioner v. Workers Compensation Appeal Board (Lagoon, Inc.), Respondent BEFORE: : : : : : : : : No. 2278 C.D. 2007 SUBMITTED: March 14, 2008 HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge HONORABLE DAN PELLEGRINI, Judge HONORABLE MARY HANNAH LEAVITT, Judge OPINION NOT REPORTED MEMORANDUM OPINION BY PRESIDENT JUDGE LEADBETTER FILED: May 22, 2008 Claimant Judith Viscidi petitions for review of the November 28, 2007 order of the Workers Compensation Appeal Board (Board) that affirmed the order of Workers Compensation Judge (WCJ) Makin denying Claimant s petition for penalties. We affirm. This matter has previously come before this Court on a petition to review a March 12, 2007, order of the Board that affirmed the order of WCJ Lorine granting in part Claimant s petition for penalty, which the WCJ also treated as a petition to reinstate workers compensation benefits. In that case, the WCJ found that while Inservco Insurance Services, Inc. (Inservco),1 the third party administrator responsible for administering Claimant s claim on behalf of the Security Fund,2 illegally stopped making indemnity payments to Claimant after assuming the handling of her file in July 2004, he was precluded from assessing penalties against either the Security Fund or Lagoon, Inc. (Employer). The Board affirmed, concluding that because the Security Fund was not an insurer under the Workers Compensation Act (Act)3 it was not subject to penalties, citing Luvine v. Workers Comp. Appeal Bd.(Erisco Industries), 881 A.2d 72 (Pa. Cmwlth. 2005). The Board also concluded that Employer was not subject to penalties due to the conduct of the Security Fund in handling Claimant s claim, citing Constructo Temps, Inc. v. Workers Comp. Appeal Bd. (Tennant), 907 A.2d 52 (Pa. Cmwlth. 2006), appeal granted, 593 Pa. 357, 930 A.2d 1250 (2007). On further appeal, this Court held that, given the fact that employer has no vicarious liability for the Security Fund s wrongful conduct and there is no indication of record that employer independently committed any impropriety, we conclude that the Board did not err in determining that employer should not be subject to penalties. Viscidi v. Workers Comp. Appeal Bd. (Lagoon, Inc.), (Pa Cmwlth., No. 643 C.D. 2007, filed January 30, 2008)(Viscidi I), Memorandum Opinion, at 8. In the meantime, and before our decision in Viscidi I had been 1 As we noted in our previous opinion, the Pennsylvania Workers Compensation Security Fund (the Security Fund) became responsible for administering claimant s workers compensation claim when employer Lagoon, Inc. s original workers compensation carrier became insolvent. Memorandum Opinion, at 1-2. 2 The Pennsylvania Workers Compensation Security Fund (Security Fund) was created by the Workers Compensation Security Fund Act, Act of July 1, 1937, P.L. 2532, as amended, 77 P.S. §§ 1051-1066. 3 Workers Compensation Act, Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1 1041.4, 2501-2708. 2 issued, Claimant and Employer executed a Supplemental Agreement which suspended Claimant s workers compensation benefits on January 23, 2006 because she had returned to work with no loss of earnings. Thereafter, Claimant filed a second penalty petition on April 18, 2006, alleging Employer violated the Act by failing to pay benefits under the Act and in violation of the orders of WCJ Lorine and WCJ Stokes.4 After Employer filed a timely Answer denying the allegations of Claimant s penalty petition, the matter was assigned to WCJ Makin. Employer submitted evidence of payments made by Inservco, Inc. to Claimant on or about May 22, 2006, totaling $2,329.90, representing Claimant s compensation benefits from July 1, 2004 through June 2, 2006. Claimant also submitted evidence of receipt of an additional check in the amount of $1,406.35. WCJ Makin made the following findings of fact: Commonwealth Court then held [in Luvine v. Workers Comp. Appeal Bd. (Erisco Industries), 881 A.2d 72 (Pa. Cmwlth. 2005)] that because the Pennsylvania Workers Compensation Security Fund is not expressly included in the definition of insurer in the Act, the Security fund cannot be penalized for violations under the Act. 4 Claimant initially sustained an injury to her right knee at work on August 25, 1999, while working as a bartender for Employer. On October 6, 1999, she filed a claim petition, alleging an average weekly wage of $650.00. Employer issued a Notice of Temporary Compensation Payable on or about October 15, 1999, acknowledging Claimant s injury as a right knee strain but stating an average weekly wage of $28.33. The matter was assigned to WCJ Stokes, who issued a decision on February 12, 2001, concluding that because Employer never rescinded the Notice of Temporary Compensation Payable, Claimant was entitled to continuing compensation as a result of her work-related knee injury and awarded Claimant benefits at the rate of $25.50 per week based on an average weekly wage of $28.33. Decision of WCJ Makin, October 23, 2006, Findings of Fact Nos. 1 and 2, Claimant s Exhibit C-1, Reproduced Record (R.R.) at 29a. 3 This [WCJ] also finds that . . . since the instant Employer purchased workers compensation insurance for its employees, penalties cannot be directly imposed against the Employer. Therefore, this [WCJ] finds that . . . Security Fund is not an insurer under the Workers Compensation Act and therefore, is not subject to penalties. Additionally, an insured employer is not subject to penalties. However, the Security Fund is responsible for Claimant s benefits. Since the Security Fund and Employer are not subject to penalties, Claimant s Petition for Penalties must be denied. This [WCJ] finds that Claimant has not met her burden on the Penalty Petition of proving that the Employer/Insurer violated the terms of the Workers Compensation Act and/or Regulations based on Commonwealth Court s holding in Luvine and Section 305(a)(1) of the Act. Accordingly, the Petition for Penalties filed by the Claimant is denied. At all times the Employer s contest in this matter was reasonable. Decision of WCJ Makin, October 24, 2006, Findings of Fact Nos. 14-16, R.R. at 32a-33a. After Claimant s timely appeal, the Board affirmed on the basis Constructo Temps, Inc., which held that an employer could not be vicariously penalized for conduct attributable to the Security Fund. In her petition for review before this Court, Claimant argues that because the Security Fund is not an insurer under the Act and thus cannot be penalized for violations of the Act, the Employer is therefore left uninsured, with no third party to assume its liability for penalties that may be assessed against it. Claimant asserts that since there is nothing in Section 3055 of the Act to preclude 5 77 P.S. § 501. 4 an uninsured employer from being assessed penalties thereunder, at the very least, the burden must shift to Employer to assume the liabilities for the Security Fund s failure to pay benefits.6 We addressed this precise issue in Viscidi I and held that given the fact that employer has no vicarious liability for the Security Fund s wrongful conduct and there is no indication of record that employer committed any impropriety, we conclude that the Board did not err in determining that employer should not be subject to penalties. Similarly, as the WCJ herein made no findings of fact regarding any wrongdoing or impropriety on the part of Employer,7 we conclude that the Board did not err in affirming the WCJ s denial of the imposition of penalties against Employer. 6 Claimant also argues that the humanitarian purposes of the Act would be defeated if neither the Security Fund nor the Employer is subject to penalties and that the Security Fund could conceivably refuse to pay benefits in every case indefinitely without any consequences whatsoever. Claimant s Brief, p. 9. While the inability in this case to level a penalty is unfortunate, it is not encumbent upon this Court to rectify the perceived deficiencies in the Act to protect an innocent claimant. As we stated in Viscidi I, any perceived deficiency in that regard must be addressed by the legislature. Memorandum Opinion, at 7. Furthermore, as the court noted in Constructo Temps, Inc., [p]enalties, thus, do not work to make the claimant whole they are not workers compensation benefits themselves but are to be used against a party that is not complying with the applicable statutes and regulations as a means of bringing that party into compliance, and to penalize avoidable wrongful conduct. 907 A.2d. at 57-58. Moreover, as there was no finding by the WCJ either that Employer was not in compliance with the Act or that it evidenced some avoidable wrongful conduct and given the fact that the award of penalties is a sanction for wrongful conduct and, further, is within the discretion of the WCJ, we can discern no error in the WCJ s decision to deny Claimant s petition for penalties against Employer. 7 Whether an employer has violated the provisions of the Act or such rules or regulations is a question of fact for the WCJ to determine. Dworek v. Workmen s Comp. Appeal Bd. (Ragnar Benson, Inc.), 646 A.2d 713 (Pa. Cmwlth. 1994). Furthermore, the assessment of penalties must be made by the WCJ based on some discernible and avoidable wrongful conduct, attributable to either the employer or the insured. Snizaski v. Workers Comp. Appeal Bd. (Rox Coal Co.), 586 Pa. 146, 164, 891 A.2d 1267, 1278 (2006). 5 Accordingly, we affirm. _____________________________________ BONNIE BRIGANCE LEADBETTER, President Judge 6 IN THE COMMONWEALTH COURT OF PENNSYLVANIA Judith Viscidi, : : : : : : : : Petitioner v. Workers Compensation Appeal Board (Lagoon, Inc.), Respondent No. 2278 C.D. 2007 ORDER AND NOW, this 22nd day of May, 2008, the order of the Workers Compensation Appeal Board in the above captioned matter is hereby AFFIRMED. _____________________________________ BONNIE BRIGANCE LEADBETTER, President Judge

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