Foster Swift Workers' Compensation Update
January 3, 2020
The Michigan Court of Appeals recently issued a decision which addresses the rights of employers/insurance companies to obtain reimbursement for overpayments made to an injured worker. Iesha Fisher v Kalamazoo Regional Psychiatric Hospital and State of Michigan.
The undisputed facts of the case are as follows. Plaintiff Fisher sustained a workplace injury and was voluntarily paid benefits. The employer initiated a recoupment action, alleging that it voluntarily paid Ms. Fisher three months of benefits at an improperly high rate.
The workers’ compensation magistrate denied the employer's recoupment motion, holding that the employer could not recoup the overpayment without proving that the overpayment resulted from the employee’s fraudulent act. The magistrate found that the employer failed to meet its burden and denied the recoupment.
The employer appealed the ruling to the Michigan Compensation Appellate Commission. The Commission ultimately affirmed the magistrate's decision, holding that the employee's fraud must be shown before an employer can be granted the right to recoupment.
The employer/insurer filed an Application for Leave to Appeal seeking review by the Michigan Court of Appeals. The Court of Appeals granted leave and issued its opinion on September 10, 2019. The Court of Appeals held that the Appellate Commission lacked any legal authority to adopt its “employee fraud” requirement and reversed the Commission's decision. In doing so, the Court of Appeals noted that it is the Legislature that is entitled to create the law, not the Appellate Commission. The Court of Appeals observed that the Michigan Worker’s Disability Compensation Act (the “Act”), specifically MCL 418.833, clearly provides that an employer/insurer has the right to recoupment for overpayment without any consideration of the conduct of the employee. MCL 418.833(2) simply limits the employer's/insurer's retroactive recovery to the one-year period preceding the filing of the recoupment petition. This section is devoid of any "fraud" requirement.
This decision does seem to be somewhat at odds with the earlier Commission decisions, such as Whirley v JC Penny Co Inc, 1997 ACO 247. For instance, in Whirley, the Commission previously held that benefits voluntarily paid should remain undisturbed "in the absence of any fraudulent behavior" by the employee. See also Fourcha v Owens-Corning Fiberglass Corp, 1999 ACO 124.