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The Puzzle of Overpayments and Credit

Published on: 2/01/2005

February 1, 2005

Overpaying a claimant can be one of the more frustrating issues faced in workers' compensation cases. Generally, defendants are entitled to a credit for all voluntary payments made to the claimant. Therefore, if the claimant is voluntarily overpaid by the defendants, before entry of an award, the defendants usually receive a full credit for all amounts paid to the claimant.

However, once an award is entered for wage loss benefits, the issue of a credit for the overpayment becomes a little murky. There have been instances where overpayments made pursuant to a wage loss award do not give rise to a credit in the future. In a recent case, the Virginia Court of Appeals shed some light on the issue of credits for overpayments made under an award.

In Bay Concrete Construction Co. v. Davis, (Elder, J.) No. 3096-03-1, Aug. 3, 2004, the claimant was awarded temporary total disability, which the carrier paid. Simultaneously, the employer continued to pay the claimant his pre-injury salary. The claimant did not advise the carrier or the employer of the double payments.

The defendants sought to recover the benefits overpaid under the wage loss award and the Commission held that the overpayments of disability compensation only entitled the carrier to a credit against any future compensation due and did not allow recovery of those overpayments from claimant "by action at law" pursuant to Va. Code Sects. 65.2-710 or 65.2-712.

The defendants did not allege, and presented no evidence, that the claimant failed to disclose to carrier a return to work during the period in question. In addition, credible evidence supported the Commission's determination that the claimant did not commit fraud or misrepresentation in order to procure the disability compensation payments at issue.

The Court found that because of the claimant's total physical disability, he was not able to earn any wage during the period in question, and thus, he had no "earnings" within the plain meaning of Va. Code Sect. 65.2-712. The evidence proved, at most, that the carrier made an overpayment of compensation to the claimant due to a mistake, and the Commission properly awarded the employer a credit for those overpayments against future compensation.

In addition to the clear language of the statute, policy reasons also dictated this result. Allowing recovery through a credit as opposed to an action at law best balanced the dual goals of preventing the claimant's unjust enrichment without unduly penalizing the claimant financially for failing to recognize or report the overpayment in a more timely fashion.

This opinion reminds us of the need to pay careful attention to both wage loss benefits and payments from the employer that a claimant may receive following an injury. Careful attention to this detail could have prevented the double payments to the claimant. This case may also provide an avenue to pursue credits in the future for mistaken payments made to a claimant after he returns to work for the insured when a lack of communication between the insured and the carrier results in overpayments. Since most of these decisions are very fact specific, we recommend that you contact your attorney to discuss overpayment/credit as they arise.