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Court Rejects Employer's Theory for Payment Credit in Workers' Comp Awards That Are Increased on Appeal

When a worker in Maryland suffers an accidental injury that results in a permanent partial disability, his or her award is expressed by a number of dollars per week for a fixed number of weeks. But, how is the employer to be credited for what has been paid when the award is increased or decreased on appeal - that's the question recently answered by Maryland's Court of Special Appeals.

Andrew Swedo injured his right shoulder and left leg in a fall from a ladder on November 2002. He worked for W.R. Grace. The Workers' Compensation Commission found that Swedo had a 70 percent permanent partial disability under "other cases," industrial loss of use of the body, 40 percent of which was attributable to the injury at W.R. Grace. This computed to a total of $46,800 ($234 x 200 weeks).

However, Swedo filed a petition for judicial review in the Circuit Court for Baltimore County in which he claimed the award was low. The jury agreed, increasing the 40 percent finding to 50 percent. The change increased the award to $525 a week for a period of 333 weeks. It took 148 weeks before the trial court action was concluded and the Commission passed a new order. During that time, Swedo received $34,632 ($234 x $148). The higher percentage of disability would have entitled Swedo to $525 per week for 333 weeks or $174,825.

The problem that arose was: How to calculate the credit that the employer/insurer should receive for the 148 payments it made between the initial award and the time that the Commission passed a new order based on the jury award -- does Labor and Employment Law Section 9-633 require the Commission to issue credits in dollars or weeks in those situations where a trial court has reversed the Commission's first ever permanent partial disability award? The circuit court ruled that the "weeks credit" position favored by the employer was legally correct. Swedo appealed.

Swedo argued that the employer/insurer should receive a dollar credit (the "dollar credit" theory). Under the dollar credit theory, the claimant, after giving the employee credit for the $34,632 paid would be entitled to receive new money of $140,193.

The employer, W.R. Grace & Co., and its insurer, Hartford Insurance Co. of the Mid West (the employer), argued that a credit should be given for the number of weeks payments were made in accord with the Commission's original order. Under the weeks theory, the employer would get credit for the payments made for 148 weeks and would only have to pay $525 per week for 185 weeks. In other words, instead of paying the worker new money in the amount of $140,193, the employer would be required to pay only $97,125 ($525 x 185).

Swedo contended that his argument was supported by Labor and Employment Law Section 9-633, a 2001 statute found in the Maryland Code, and the definition of the word "compensation" found in Labor and Employment Section 9-101. Swedo also said his argument was supported by the legislative history of Section 9-633.

According to LE Section 9-633:

If an award of permanent partial disability compensation is reversed or modified by a court on appeal, the payment of any new compensation awarded shall be: (1) subject to a credit for compensation previously awarded and paid; and (2) otherwise made in accordance with this Part IV of this subtitle.

The Maryland General Assembly passed the statute in an attempt to clarify whether the dollar credit theory or the weeks credit theory should be used when the compensation amount was changed by an appeal to the circuit court.

The employer however, argued that its position was supported by Maryland case law - cases decided before the 2001 enactment of Section 9-633. The employer also argued that, if it was the intent of the legislature to overrule existing law in place at the time of enactment, then the legislature would have been specifically done so. In addition, relying on language used by the Court of Appeals in one of the four cases decided before 2001 on the issue, the employer claimed that public policy supports the well-settled precedent of using a "weeks" as opposed to a "dollar" approach for credits.

Maryland's Court of Special Appeals came down on the side of the "dollar credit theory." "In our view, based on the language used in LE Section 9-633 together with the legislative history of the statute, a dollar credit rather than a weeks credit should have been utilized in this case" the court said in reversing the trial court's decision for the employer.

The court discussed the legislature's intent in passing the 2001 statute and examined the meaning of the word "compensation" as it was used in Section 9-633 three times, quoted from Webster's Dictionary regarding the meaning of the word and also examined previous Court of Appeals cases, relying heavily on a case - Vest v. Giant Food Stores, Inc.-- decided in 1993 where the court also focused on the word "compensation," in coming to the conclusion in the present case that the dollar credit should be used.

In addition, in examining the employer's contention that the legislature would have said so if it intended to overrule existing law, the court said the General Assembly, in effect, did make clear its intention to overrule a case that the employer argued was the settled law. In that case -- Wright v. Philip Electronics North American Corporation, a 1997 Maryland appellate case -- the Court of Special Appeals ruled that the weekly credit approach should be used because it is consistent with the Workers' Compensation Act benefit structure.

The employer's assertion that the legislature had unequivocally reinforced the concept of a credit for weeks and not dollars is plainly not accurate, the court responded, explaining that under Maryland case law as it existed in March 2001, if an award was increased upon judicial review, the employer was not entitled to a credit based upon the number of weeks for which benefits were paid; instead the employer was only entitled to a credit for the total dollar amount actually paid to the claimant prior to the increase. But, if the award was decreased on appeal, the employer was entitled to a credit for the weeks compensation had been paid.

"The bottom line is that the employer is entitled to a dollar credit for the amount of money it paid for 148 weeks," the court said. "The result is required by Section 9-633," it added. First this is a case where an award of permanent partial disability compensation was modified on appeal. Second, the modification required that the new compensation be paid to Swedo in the amount of $174,825 ($525 per week for 333 weeks). Third, under Section 9-633, the new compensation was subject to a credit for compensation previously awarded and paid. The amount previously awarded and paid by the employer was $34,632 ($148 x 234). Thus, the employer or its insurer had to pay Swedo a total of $140,191 ($174,825 - $34,632).

Baltimore, Maryland-based Belsky, Weinberg & Horowitz has represented consumers in workers' compensation cases for many years. Call our attorneys at 410-234-0100 or email us for a free consultation.

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