When an employer and insurer appeals a decision of the Maryland Workers’ Compensation Commission there are several positive outcomes which may result. One possibility is that a jury or judge reduces the amount of permanent partial disability benefits awarded to a claimant. Because such benefits remain payable to a claimant while an appeal is pending, the employer and insurer may find they have, in fact, overpaid benefits pursuant to the prior award. Under Maryland law, such an overpayment becomes a credit against future indemnity benefits. Assuming the employer and insurer properly held the claimant’s attorney’s fees in escrow during the appeal, the question arises: must these attorney’s fees be released to opposing counsel even though the claimant has already been paid all benefits he or she is due?
The longstanding rule in Maryland is that an employer and insurer must pay legal fees to a claimant’s attorney, even in those instances where a claimant has already been paid all compensation due under a modified award. In Staley v. Board of Education of Washington County, 308 Md. 42 (1986), the Court of Appeals of Maryland discussed in detail the traditional function of an attorney’s fee petition. When a claimant’s attorney files a fee petition with the Commission and provides a copy to the employer and insurer, the employer and the insurer must reserve in escrow the requested fees. This provides protection to the claimant’s attorney in that it effectively creates a lien against the claimant’s compensation for the attorney’s legal fees. The Court went on to explain that an overpayment to the claimant as the result of an operation of law should not prejudicially effect the attorney’s lien. In short, an overpayment of benefits to a claimant as the result of a successful appeal by an employer and insurer does not extinguish the claimant’s attorney’s lien and the employer and insurer are not discharged of their responsibility to pay these legal fees.
More recently, in Prince George’s County v. Minor, 227 Md. App. 233 (2016), the Court of Special Appeals of Maryland denied attorney’s fees pursuant to a permanency award. In that case, the claimant’s attorney failed to file a consent form at the time of the hearing before the Workers’ Compensation Commission and no attorney’s fees were awarded in the Commission’s first award of compensation. The County paid the claimant’s compensation in full before his attorney was awarded fees and before a lien was established.
Minor explicitly distinguished itself from Staley and carved out a narrow exemption to the broader rule that attorney’s fees are due to the claimant’s attorney even if it would result in an overpayment. Specifically, Minor makes clear that, if claimant’s counsel failed to put the employer and insurer on notice of his or her fees by filing a timely request with the Commission, the employer and insurer are not obligated to pay. Rather, the claimant’s attorney must seek reimbursement of his or her fees from the claimant directly.
In the instance where an employer and insurer successfully overturn a significant permanency award and payment of attorney’s fees would cause a large overpayment, it is worth considering settlement. As Sims v. First National Bank of Maryland, 42 Md. App. 309 (1979) makes clear, there is no requirement that settlements address only issues that have not already been litigated. Keeping this in mind, employers and insurer may wish to consider settling the entire claim following a successful appeal, including any issue of attorney’s fees.
For more information about this article, please contact April Kerns at 410.230.2975 or firstname.lastname@example.org.