Employer Can’t be Ordered to pay Attorney’s Fees on Unpaid Medicals

By Jane Salem, staff attorney, Nashville

Last week, the Appeals Board held that, under section 50-6-226(a)(1), an employer can’t be liable for attorney’s fees based on the amount of medical expenses a court orders it to pay.

In September 2016, Nicole Bowlin was injured in a motor vehicle accident while working for Servall. She was transported by ambulance to a hospital in Martin, where she was diagnosed with a fracture of her cervical spine, and then airlifted to a hospital in Memphis.

Servall later denied the claim, so Bowlin requested an expedited hearing seeking benefits.

The trial judge, Allen Phillips of Jackson, rejected Servall’s defense and ordered it to pay the medical expenses. Judge Phillips also denied a fee request on the basis of a “wrongful denial,” but he awarded Bowlin’s attorney, Monica Rejaei, fees under section 50-6-226(a)(1) based on the amount of unpaid medical bills that he ordered the employer to pay.

Servall appealed, and the Appeals Board reversed in part, finding the fee award “premature” under the circumstances at the expedited hearing stage of the case.

The parties later settled all but the issue of fees. Servall’s attorney, Gordon Aulgur, didn’t agree to pay an attorney’s fee based on a percentage of the medical bills, so a compensation hearing was held on that sole question.

The parties stipulated that Servall paid the contested medical bills under the medical fee schedule. Specifically, Bowlin incurred medical expenses totaling $89,377.37 and that Servall paid $24,382.08 under the schedule. Rejaei didn’t request her fee based on a wrongful denial under section 50-6-226(d)(1)(B) but instead only claimed fees under section 50-6-226(a)(1) based on the award of medical benefits at the expedited hearing ̶ a 20% fee on $89,337.37.

Judge Phillips awarded her a 20% fee solely on the amount of the permanent partial disability benefits and denied the request for attorney’s fees on the contested medical benefits under section 50-6-226(a)(1), reasoning that under that section, any fees on contested medicals must be paid by the party employing the attorney out of her recovery.

Bowlin appealed, and the Board affirmed on Nov. 25.

The Opinion

Writing for the three-judge Board, Judge David Hensley reminded that Judge Phillips didn’t award fees for a wrongful denial at the expedited hearing but instead “reserve[d] consideration of any further application until after final resolution of the case.”

The determinative issue in this appeal, Judge Hensley clarified, was whether the Court of Workers’ Compensation Claims may order an employer to pay attorney’s fees on contested medical expenses recovered by or awarded to an employee pursuant to section 50-6-226(a)(1).

Judge Hensley wrote that in Langford v. Liberty Mutual, the Tennessee Supreme Court concluded in 1993 that “contested medical expenses are a part of the ‘recovery or award’ specified in [section] 50-6-226(a) on which attorneys’ fees may be assessed.” However, in that case, the defendant employer had been dismissed from the appeal and did not take a position.

Then in Wilkes v. The Resource Auth. of Sumner Cty., the Supreme Court held the employee’s attorney was entitled to an award of fees from the expenses related to reconstructive surgery. The justices noted “the practical impact of this holding is that the employee will not receive one hundred percent of the cost of the surgery,” and “[a]lthough this result is not attractive, we are not at liberty to rewrite Tennessee Code Annotated Section 50-6-226(a) to provide for attorney’s fees in addition to the ‘amount of the recovery or award.’ Such a change would require legislative action.”

Judge Hensley pointed out that “[i]n the twenty-four years since Wilkes was decided, the legislature has not rewritten the statute to provide for a different result.”

He then distinguished the cases attorney Rejaei relied on.

First, in Reatherford v. Lincoln Brass Works, a Supreme Court Panel affirmed the trial court’s order that the employer pay an attorney’s fee based on the employee’s attorney’s representation of a subrogation interest. However, the “critical distinction,” Judge Hensley wrote, “is that the employer was ordered to pay an attorney’s fee based on an attorney’s representation of a third party in the recovery of its subrogation lien and not based on the attorney’s representation of the employee.”

The other case attorney Rejaei cited was Moore v. Town of Collierville. The issue differed in Moore, Judge Hensley wrote, because the question was whether an employer is liable to a health insurer who paid medical expenses incurred by an employee for a work injury but didn’t intervene in the case to seek reimbursement. The justices didn’t address section 50-6-226(a) in Moore.

“[T]he Court did not address whether the employer was responsible for paying the statutory attorney’s fees or whether such fees would be deducted from the amounts recovered,” Judge Hensley wrote. “Thus, Moore is clearly distinguishable from the instant case and, like Reatherford and Wilkes, does not support the assertion that section 50-6-226(a)(1) authorizes the Court of Workers’ Compensation Claims to order an employer to pay attorney’s fees on contested medical expenses that are recovered or awarded to an employee.”

He continued, “Employee has not cited, nor have we located, a case holding that an employer may be liable for the attorney’s fees authorized in section 50-6-226(a)(1).  Moreover, a plain reading of section 50-6-226(a)(1) indicates that the attorney’s fees are to be ‘paid by the party employing the attorney.’ This language has been part of the workers’ compensation law since its 1919 inception.”

Click here to read the opinion.

New River Gorge Bridge, Fayetteville, West Virginia, earlier this fall. Photo by Judge Brian Addington, Gray.

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