Williams v. Workmen's Compensation Appeal Board

646 A.2d 633, 166 Pa. Commw. 276, 1994 Pa. Commw. LEXIS 434

• Court: Commonwealth Court of Pennsylvania
• Decided: July 28, 1994
• Docket: 38 C.D. 1993
• Status: Published

Opinions

DELLA PORTA, Senior Judge.

Daniel Williams (Claimant) appeals from an order of the Workmen’s Compensation Appeal Board (Board) which reversed the referee’s decision awarding Claimant disability benefits.¹ The issues raised on appeal are threefold: (1) whether Claimant waived the objection to the timeliness of the answer of Realty Services Company (Employer) to his claim petition; (2) whether Employer was estopped from denying its liability for Claimant’s work-related injury due to its issuance of one indemnity benefit check, allegedly made by mistake; and (3) whether Claimant met his burden of proving a causal relationship between the work-related physical injury and the mental disability.

Claimant was employed by Employer as a maintenance man. On February 27, 1985, while at work, Claimant sustained an injury when he slipped on the floor and struck in the back of his head on a door. He was treated for the injury at the hospital as an outpatient. On March 12, 1985, Employer’s insurance carrier issued a timely notice of compensation denial on the basis of a lack of medical evidence of Claimant’s disability. Claimant thereafter received from Employer’s insurance carrier an indemnity benefit check in the amount of $386.26 for the period from February 28, 1985 to March 13, 1985. The check was dated March 22, 1985. Employer’s insurance carrier subsequently issued a second notice of compensation denial on April 4, 1985, alleging its inability to contact Claimant to investigate the claim and the lack of evidence to support Claimant’s disability.

On April 16, 1985, Claimant filed a claim petition, alleging that as the result of the February 27, 1985 accident, he sustained injury, consisting of “severe headache, scalp contusion, resulting cervical strain, lower back pains, temporary numbness to right arm, eoxisoitis [sic], muscle spasms in both legs and feet.” On July 1, 1985, Employer filed an answer denying the allegations in the claim petition.

At the first hearing held on April 18, 1987, Claimant testified that he returned to work in March or April, 1985, but after three or four days he stopped working due to the headaches and pain in his neck, shoulder and legs. He further testified that after the injury he was having depression and stress and was admitted to the Véterans Administration Medical Centers in May 1985, December 1985 and Decembér 1986, for psychiatric evaluations.

At a subsequent hearing, Claimant presented the deposition testimony of Eric W. Fine, M.D., board-certified in psychiatry, taken on May 4, 1989. Dr. Fine testified that Claimant had symptoms of depression, anxiety and increased dependency on alcohol and cocaine and that Claimant was disabled from a post-traumatic syndrome caused by the February 17, 1985 work injury.²

In opposition, Employer presented the September 18, 1989 deposition testimony of Dr. Timothy Michals, board-certified in psychiatry and neurology, who evaluated Claimant on June 23, 1988. Dr. Michals opined that Claimant did not sustain any psychiatric injury as a result of the February 27, 1985 injury. The adjuster for Employer’s insurance carrier testified that the check for the two-week indemnity benefits was issued by mistake and that the follow-up notice of compensation denial was subsequently issued on April 4, 1985.

The referee first of all rejected Claimant’s contention that the facts alleged in the claim petition were deemed admitted by Employer due to its failure to file the answer within fifteen days after the circulation of the claim petition on May 24, 1985, in violation of Section 416 of the Workers’ Compensation Act (Act), Act of June 2, 1915, P.L. 736, as amended, 77 P.S. § 821. The referee concluded that Claimant waived that issue due to his failure to timely raise it.

With respect to the merits of the claim petition, the referee concluded that Employer was estopped from denying liability for Claimant’s disability resulting from his physical injury because it initially recognized the liability by making an indemnity payment for the two-week period. The referee stated that “[i]n essence, [Employer] seeks to revoke an initial recognition of liability on the basis of error "without filing a petition to review its de facto acceptance of the claim.... ” Referee’s Decision, p. 7. Consequently, the referee treated Employer’s answer to the claim petition as a petition for review or termination, and the claim petition as an answer to the petition for review or termination. The referee found that Employer failed to present any medical testimony or evidence to satisfy the burden of establishing its entitlement to termination of the disability benefits related to the work-related physical injury. As to the mental injury claim, the referee found Dr. Fine’s testimony credible and concluded that Claimant met the burden of establishing that the alleged mental injury was related to the February 17, 1985 injury.

The referee accordingly dismissed the “petition for termination” and awarded Claimant weekly benefits beginning February 28, 1985, giving Employer credit for the two-week compensation previously paid and for wages earned by Claimant in March 1985. The referee also ordered Employer to pay litigation costs incurred by Claimant, except the copying costs. Both parties appealed the referee’s decision to the Board.

On appeal, the Board reversed the referee’s award of benefits, concluding that the doctrine of estoppel was inapplicable under the facts in this case and that Claimant failed to present sufficient evidence to establish the causal relationship between the physical injury and the mental disorder.³

Claimant first contends that he did not waive the issue of the timeliness of Employer’s answer to the claim petition. The record establishes, however, that Claimant never objected to Employer’s presentation of evidence at the hearings. Further, Claimant did not raise the issue of the timeliness of the answer until after the referee closed the record, almost six years after the claim petition was filed. Hence, Claimant failed to preserve the issue for our review. Smith v. Workmen’s Compensation Appeal Board (Dep’t of Labor & Industry), 159 Pa.Commonwealth Ct. 171, 632 A.2d 1033 (1993).

Next, Claimant contends that Employer was estopped from denying its liability and therefore was not allowed to unilaterally discontinue payment of benefits without seeking a termination of benefits by filing a petition for review or termination of benefits pursuant to Section 413(a) of the Act, 77 P.S. §§ 771-772. If Employer’s liability for Claimant’s disability resulting from the February 27, 1988 injury is established under the doctrine of estoppel, as Claimant urges, Employer would have the burden of proving the necessary elements for termination of benefits. Thus, the ultimate issue on appeal is the proper burden of proof applicable to this matter.

The doctrine of equitable estoppel is applicable where one party through its acts negligently misrepresents material facts knowing or having reason to know that the other party will justifiably rely upon the misrepresentation to its detriment and the other party so relies. ' Fahringer, McCarty & Grey, Inc. v. Workmen’s Compensation Appeal Board (Green), 107 Pa.Commonwealth Ct. 597, 529 A.2d 56 (1987). In a worker’s compensation case, the application of equitable estoppel must be restricted in light of statutory constraints. Swartz v. Workmen’s Compensation Appeal Board (Dutch Pantry Restaurant), 117 Pa.Commonwealth Ct. 47, 543 A.2d 201 (1988), appeals denied, 522 Pa. 580, 581, 559 A.2d 40, 41 (1989).

Under Section 406.1 of the Act,⁴ an employer must promptly investigate the claim and commence payment of compensation within twenty-one days after its notice or knowledge of an employee’s disability (1) pursuant to the parties’ agreement establishing the compensation payment or (2) if no such agreement has been entered into, pursuant to a notice of compensation payable unilaterally acknowledging, its liability. If the employer controverts its liability for the injury, the employer must issue a notice of compensation denial within twenty-one days of its notice or knowledge of the employee’s disability. Section 406.1 of the Act and 34 Pa.Code § 121.13.⁵ Further, the Act sets forth the specific procedures for the employer who commences the payment without agreement on the compensation payable. Section 407 of the Act, 77 P.S. § 731, provides in relevant part:

Where payment of compensation is commenced without an agreement, the employer or insurer shall simultaneously give notice of compensation payable to the employe or his dependent, on a form prescribed by the department, identifying such payments as compensation under this act and shall forthwith furnish a copy or copies to the department as required by rules and regulations. (Emphasis added.)

The 1993 amendment to Section 406.1, which was not applicable at the time of the proceedings before the referee, allows the employer to issue a notice of temporary compensation payable within twenty-one days after the notice or knowledge of the disability and commence the compensation payment for a period not exceeding six weeks without prejudice and without admitting liability. The Act is silent, however, as to the legal effect of the employer’s payment made after the timely notice of compensation denial but after the twenty-one day period.

The referee relied upon Mosgo v. Workmen’s Compensation Appeal Board (Tri-Area Beverage, Inc.), 84 Pa.Commonwealth Ct. 316, 480 A.2d 1285 (1984), to support the application of the doctrine of estoppel to this matter. In Mosgo, the employer did not issue a notice of compensation payable or denial within twenty-one days after its notice of the injury. Instead, thirty-six days after the notice, it agreed to pay the weekly benefits, while reserving the right to deny the claim based upon a future medical reports. The employer continued to pay the weekly benefits for five weeks. Then, after receiving a medical report indicating that the claimant’s injury was not work related, the employer filed a notice of compensation denial. The claimant filed a petition to review, alleging that the employer unilaterally suspended the payment of benefits in violation of the Act.

This Court reversed the Board’s order affirming the referee’s dismissal of the claimant’s petition, holding that the employer’s reservation of the right to deny its liability was null and void under the Act and that the employer was therefore deemed to have agreed to make the compensation payment without reservation. The Court reasoned:

[S]ince Respondents may not profit by their delinquency in failing to carry out the mandates of Sections 406.1 and 407, they are estopped to disavow their acceptance of liability and must, therefore, be held bound by agreement to pay compensation with the same legal effect as would apply if they had formally complied with the Act and the applicable Rules and Regulations of the Department; and, accordingly, the referee and the Board erred in placing the burden of proof on the Claimant; rather the burden was and is on the Respondents.

Id. at 325, 480 A.2d at 1289.

The facts in the matter sub judice are distinguishable from those in Mosgo. Unlike in Mosgo, Employer complied with the requirements of Section 406.1 and 34 Pa.Code § 121.13, by filing the notice of compensation denial within twenty-one days of the date of the injury. It also issued the second notice of compensation denial immediately after the payment. There is no evidence in the record suggesting that Employer attempted to deny the liability after the payment on the basis of any medical report or its investigation of the claim as in Mosgo. At the hearing, Claimant stated that he could not remember the date or month the insurance carrier’s adjuster contacted him. He stated only that “it was after the notice of denial.” April 8, 1987 Hearing, N.T., p. 24. Thus, Employer’s actions in this matter do not support the conclusion that when the indemnity check was sent to Claimant, it intended to commence the compensation payment without agreement.

Mosgo does not stand for the proposition, as Claimant asserts, that an employer accepts the liability once it issues one compensation check, notwithstanding its denial of liability in the timely notice of compensation denial and another notice filed immediately after issuing the check. Rather, the Mosgo Court held only that where an employer agrees to pay compensation but reserves the right to deny its liability in the future, without filing a notice of compensation payable or denial within twenty-one days, the employer is estopped to disavow its acceptance of liability.

Since Employer complied with the requirement of the Act by issuing the timely notice of compensation denial, and denied its liability in the two notices sent to Claimant, the Mosgo holding does not support the referee’s application of the doctrine of estoppel. Hence, after a careful examination of the facts in this matter, we conclude that the doctrine of estoppel is inapplicable to this matter and that the referee, therefore, committed an error of law in placing the burden upon Employer to establish its entitlement to termination of benefits.

Lastly, Claimant’s claim was based mainly upon his psychological disability resulting from the alleged work-related physical injury. A claimant must prove all the necessary elements to support an award of compensation. Haney v. Workmen’s Compensation Appeal Board, 65 Pa.Commonwealth Ct. 461, 442 A.2d 1223 (1982). “[P]sychological disorders such as suicidal tendencies and depression are not the ‘immediate and direct’ or ‘natural and probable consequences’ of a [physical injury].” Hilton Hotel Corp. v. Workmen’s Compensation Appeal Board (Totin), 102 Pa.Commonwealth Ct. 528, 533, 518 A.2d 1316, 1319 (1986). Therefore, Claimant had the burden of establishing not only the disability caused by the physical injury, but also the causal relationship between the physical injury and his psychiatric disability by unequivocal medical testimony.⁶

The referee accepted the testimony of Claimant’s medical witness and found that Claimant met the burden of establishing a psychiatric disability caused by the February 27, 1985 physical injury. In so concluding, however, the referee assumed that Claimant’s physical disability has been established, but this assumption had been reached under the improper allocation of the burden of proof. Where, as here, the referee incorrectly placed the burden of proof, neither this Court nor the Board can determine whether the referee would have reached the same credibility determination and conclusion under the correct allocation of the burden of proof. Tunstall v. Workmen’s Compensation Appeal Board (St. Clair Memorial Hosp.), 107 Pa.Commonwealth Ct. 345, 528 A.2d 719 (1987).

Accordingly, we vacate the Board’s order and remand this matter to the referee for further proceedings and a determination of Claimant’s claim petition under the correct allocation of the burden of proof.⁷

ORDER

AND NOW, this 28th day of July, 1994, the order of the Workmen’s Compensation Appeal Board in the above-captioned matter is vacated, and this matter is remanded for further proceedings on the claim petition filed by Daniel Williams consistent with this opinion, including presentation of any additional testimony or evidence by the parties and the referee’s determination.

Jurisdiction relinquished.

1 . This case was reassigned to the authoring judge on April 28, 1994.

2 . Claimant did not present any medical testimony to establish his disability resulting from the physical injury sustained on February 27, 1985. Although the record failed to reveal amendment to the claim petition to allege a mental injury, at the March 15, 1989 hearing, Claimant’s counsel indicated that the claim was based upon Claimant’s disability caused by both the physical and mental injury-

3 . Our scope of review is limited to determining whether necessary findings of fact are supported by substantial evidence, whether an error of law was committed or whether constitutional rights were violated. Russell v. Workmen's Compensation Appeal Board (Volkswagen of America), 121 Pa.Commonwealth Ct. 436, 550 A.2d 1364 (1988).

4 . Added by Section 3 of the Act of February 8, 1972, P.L. 25, 77 P.S. § 717.1. Section 406.1, effective at the time relevant to this matter, provided in pertinent part:

The employer and insurer shall promptly investigate each injury reported or known to the employer and shall proceed promptly to commence the payment of compensation due either pursuant to an agreement upon the compensation payable or a notice of compensation payable as provided in section 407,.... The first installment of compensation shall be paid not later than the twenty-first day after the employer has notice or knowledge of the employe’s disability. (Emphasis added.)

5 . Section 406.1 further provides in relevant part:

If the insurer controverts the right to compensation it shall promptly notify the employee or his dependent, on a form prescribed by the department, stating the grounds upon which the right to compensation is controverted and shall forthwith furnish a copy or copies to the department.

The regulation promulgated under Section 406.1 provides at 34 Pa. Code § 121.13:

If compensation is controverted, Notice of Workmen’s Compensation Denial, Form LIBC-496, shall be sent to employe or dependent fully stating the grounds upon which the right to compensation is controverted, with a copy to the Department, no later than 21 days after notice or knowledge to the employer of employe’s disability or death.

6 . See also School District of Philadelphia v. Workmen’s Compensation Appeal Board (Coe), 163 Pa.Commonwealth Ct. 89, 639 A.2d 1306 (1994) (even when the claimant’s total disability resulting from the work-related slip and fall injury was established by a notice of compensation payable, the claimant still had the burden of proving a causal connection between the physical injury and the resulting psychiatric disability alleged in the petition to set aside the final receipt).

7 . The issues raised by Claimant concerning his entitlement to attorney’s fees and reimbursement of copying costs need not be addressed because we vacate the Board's order and remand for further proceedings.