PA Insurers File Memo Supporting Workers’ Comp Consent Decree Reversal

June 21, 2001

A group of Pennsylvania workers’ compensation insurers has filed a memorandum in U.S. District Court supporting efforts to vacate the 1984 consent decree in the case of Richard Baksalary, v. Smith, which made it more difficult to suspend benefits. The action, supported by the American Insurance Assn., claims that changes in the law now require that the order be nullified.

The original decree found that the insurers were “state actors,” and couldn’t suspend benefits to injured workers, even if their treating physician determined that the had made a full recovery, without a prior hearing, as such actions by a state would violate the 14th Amendment’s “Due Process” clause.

Bruce Wood, AIA asst. general counsel, summed up the insurers’ dilemma as follows: “Under the Baksalary decree, insurers have no authority to suspend benefits for workers who have fully recovered and are ready to return to work, or have actually returned to work already. The unnecessary costs for insurers can be substantial because under Pennsylvania law insurers cannot recover benefit payments once they have been made, despite the fact that they should have been suspended in the first place.”

New case law from two Federal Courts has rejected the arguments that insurers are involved in a “state action” by suspending benefit payments without a prior hearing.

If the court renders a favorable decision, insurers would then seek to introduce legislation to change Pennsylvania law, which has incorporated the decree’s mandate in current statutes.

Companies joining in the memorandum include ACE , AIG, CNA, Kemper, Fireman’s Fund, The Hartford, Liberty Mutual, OneBeacon Insurance Group, PMA, Royal & Sun, St. Paul, Travelers and Zurich North America. Together they write more than half of Pennsylvania’s workers compensation coverage.

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