PENNSYLVANIA LEGAL UPDATE

SPRING 2003 ISSUE

TO PROMOTE DISCUSSION OF GENERAL LEGAL ISSUES, WE WISH TO POINT OUT SEVERAL LEGAL DEVELOPMENTS. THIS PUBLICATION IS NOT INTENDED TO PROVIDE LEGAL ADVICE FOR A PARTICULAR FACTUAL SITUATION. WE WOULD BE HAPPY TO HEAR FROM WEB SITE READERS. YOUR QUESTIONS OR COMMENTS SHOULD BE DIRECTED TO: Newsletter Spring03@WSMOSlaw.com



HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996 – PRIVACY

Effective April 14, 2003, a federal regulation known as the HIPAA Privacy Rule will be implemented by all health care providers, insurers and employment related benefit plans. Beginning that date, virtually all entities possessing personally identifiable health information become subject to far-reaching federal regulations governing the way health information on an individual is handled. These regulations cover all manners in which information is transmitted, whether transmitted by phone, letter, fax, in person, or by visual observation. Although the federal regulations were designed to protect the privacy rights of individuals, many individuals will experience frustration because the privacy rule will result in a barrier to traditional flow of information. Now, if an individual wishes to have a representative deal with a health plan, they will find that the health plan must refuse to disclose information unless and until the individual submits a written Authorization Form.

The United States Department of Health and Human Services published the regulation in December, 2000 and a copy can be obtained from this link to the Regulation residing on the HHS Web Site. This is the infamous law which you may have read about which some fear will prevent the Clergy from obtaining information from hospitals concerning members who have been admitted. Other examples of forbidden actions according to the language of this poorly written regulation include:

• Doctors phoning prescriptions into a pharmacy;
• Parents calling to inquire as to the status of a claim for services provided to a child;
• Publicly visible sign-in sheets at the doctor’s office;

HHS plans to soften the rule so that it does not prohibit many of these types of information transmissions.

The entire health care industry is spending vast sums of money to comply with these confusing federal regulations. The government has estimated that the cost of compliance is $11 billion dollars. It is likely that some of the steps taken will cause inconvenience; however, the health care industry will no longer be allowed to sell your name and health information to tele-marketers, credit bureaus, banks, or to your employer. We suspect that there have not been many instances of this type of prohibited activity in the past and question whether there really is a need to spend $11 billion dollars fixing a problem which is virtually non-existent.

Our firm is activity involved in employee benefit plan regulation and if you have any questions or comments, we would love to hear from you. Click QUESTIONS AND COMMENTS

WORKERS' COMPENSATION UPDATE

A series of interesting new cases on workers' compensation provides Pennsylvania employers and workers with new insights into this complex area of law.

Denying Medical Treatment

A Pennsylvania court recently fined an employer who interfered in the progress of an injured worker's medical treatment. The worker was a maintenance employee who injured his back moving furniture at work. After the injured worker received four months of benefits, the employer petitioned for a termination of the benefits, claiming that the worker was fully recovered. The worker's physician disagreed and scheduled back surgery several months later. The employer's insurance carrier refused to authorize or pay for the surgery, claiming that the case was contested and going to a hearing.

The injured worker filed for a prompt review hearing and asked for penalties against the employer for the delay of the surgery. The workers' compensation hearing officer found that the worker was still injured and needed the surgery and that the employer had wrongfully refused to pay the medical bills. The employer was penalized in an amount equal to 20% of the worker's total accrued compensation benefits.

A Pennsylvania court upheld the hearing officer's decision and penalty, noting that once an injury is proven to be work related an employer cannot stop making required benefit payments in the absence of some order authorizing the cessation or restriction of benefits. The court also found that an employer's insurance carrier's refusal to grant a pre-approval or pre-certification of surgery or other medical treatments is equal to a refusal to pay bills and violates the Workers' Compensation Act unless the employer first secures an order supporting the refusal.

Alternative Employment

Another Pennsylvania court required an injured worker to meet with a vocational expert chosen by the employer. The Workers' Compensation Act permits an employer to require an employee to participate in an "expert interview." Often, such interviews are with vocational experts who are skilled at assessing job skills and recommending alternative employment. The Act requires that injured workers cooperate and follow up on job referrals to appropriate jobs within their capacities. The court ruled that it is reasonable for employers to utilize the "expert interview" requirement to have injured workers meet with vocational experts, at the employer's expense, to assist the employer in choosing appropriate job referrals.

Not all appropriate jobs must be accepted by injured workers. For example, a former police officer who had served for 28 years on the force was on permanent disability due to multiple injuries. He was referred to a light-duty job at the police station. Because the former officer was receiving a mixed compensation of pension and workers' compensation benefits, and because any return to work in the police department required a freeze of his pension, the court found that he was entitled to refuse the job. If a job poses an "unjust burden" to the injured worker, he or she cannot be required to accept that job.

CAN YOU BE SUED FOR USING AN AED?

What are your obligations and liabilities if you use an automated external defibrillator (AED) to rescue someone in an emergency? An AED is a portable device that uses electric shock to restore a stable heart rhythm to an individual in cardiac arrest. Many public buildings, malls, recreational facilities, and schools now maintain AEDs for use in emergencies. The devices are "automated" to read the distressed person's heart rhythms before administering any shock.

Pennsylvania's Good Samaritan Act provides that anyone who is trained to use an AED and uses one in an emergency is not liable for damages unless he or she is grossly negligent or engages in intentional wrongdoing. The Act also protects untrained users. While certified emergency medical services (EMS) personnel are the preferred users of AEDs under the law, if no EMS personnel are available, untrained persons may use AEDs.

Anyone who lacks the training but uses an AED in an emergency is immune from suit if he or she uses the device in good faith. The Act defines "good-faith use" as occurring when the user has "a reasonable opinion that the immediacy of the situation is such that the use of an AED should not be postponed until emergency medical services personnel arrive or the person is hospitalized."

The Good Samaritan Act protects individuals or businesses who keep AEDs on their premises. If "expected users" are appropriately trained, the AED is properly maintained and regularly tested, and instructions are posted that require that all users promptly call EMS personnel if the AED is used, an individual or a business with an AED on the premises cannot be sued over the use of the device.

The immunity provided by this law recently prompted an unusual lawsuit. A Pennsylvania man collapsed at a tennis club. Within a minute, members of the club administered cardiopulmonary resuscitation and called for an ambulance. EMS technicians arrived about 10 minutes later and used their AED to shock the man's heart. After hospitalization, the man survived but suffered permanent injuries that left him disabled. On his behalf, his wife sued the tennis club for negligence, alleging that if the club had provided an AED on the premises his injuries would have been significantly less serious. She argued that since the club would not have been at any risk had it provided an AED, it should have had an AED on the premises.

The Pennsylvania Supreme Court dismissed the suit, ruling that the existence of a civil immunity provision for good samaritans who use an AED in an emergency situation cannot impose a duty on any business establishment or individual to acquire, maintain, and use an AED. Because the use of AEDs is "highly regulated" by Pennsylvania law, the court ruled that no business should be required to take on the responsibility of maintaining an AED and training expected users unless it freely chooses to do so.

AEDs save lives. While no individual or business can be required to keep an AED on site, the broad immunity provided to trained and untrained users strongly protects those who choose to make AEDs available for critical emergency use. Anyone who is not trained to use an AED and is faced with the decision of whether to use one should call 911 first and find out how soon a trained person can arrive at the scene of the emergency. Unless you are trained, do not use an AED until you have made all possible efforts to contact appropriate emergency help.

MAKING DEALS WITH THE GOVERNMENT

A Pennsylvania developer and a local school board agreed that the developer would construct a major sewage treatment plant to service a planned new school as well as the developer's planned residential development. One year later, the newly elected school board decided not to build the school and attempted to terminate the agreement with the developer. The school district claimed that the new board was not bound by any contracts signed by the previous board. Because he had already expended considerable expense to design and secure approvals and licenses for the sewage treatment plant, the developer sued the school district.

Contracts signed by governmental bodies are treated differently than are contracts made exclusively between private parties. Since governmental bodies engage both in "proprietary" or ordinary business actions and also perform purely governmental functions, their contracts must be examined to distinguish their business contracts from government actions. Generally, business agreements bind successor government officials, but those agreements that involve a governmental body's police powers or affect issues of general public importance are not binding on newly elected officials. In the performance of sovereign or governmental functions, no governmental body can take actions that will bind its successors.

Pennsylvania courts have consistently held that a newly appointed governmental body must be free to function on behalf of the public by which it was appointed or elected "unhampered by the policies of the predecessors who have since been replaced." To permit the outgoing body to "hamstring" its successors by imposing upon them a "machinery which is not attuned to the new body or its policies" would be unfair.

In the case involving the developer and the school district, the court found that the crux of the contract was the construction of the new school. Noting that the creation and operation of public schools have traditionally been governmental functions in Pennsylvania, the court held that the first school board's decision to build a school could not bind the successor board. The court dismissed part of the developer's suit but found that the developer was entitled to pursue his claims for reimbursement for his out-of-pocket expenses.

In a similar case, a Pennsylvania court found that a multi-year investment and securities lending agreement between the commonwealth's treasurer and a bank involved the governmental function of safekeeping the commonwealth's assets and therefore was unenforceable against the succeeding commonwealth's treasurer. Another court explained that an employment contract between a township's supervisors and a police chief involved the governmental function of insuring public safety and was unenforceable against future supervisors who might want to appoint a new police chief. However, a contract between a county's commissioners and a private contractor to operate a free-standing drug and alcohol treatment facility was held to be a business function and therefore could be enforced against successor commissioners.

Anyone entering into contracts with governmental bodies must be aware of the fact that, unlike private persons, governmental bodies may be able to reject the contract after new elections or appointments. Since Pennsylvania courts will support the entitlement of newly appointed or elected officials to make independent decisions, any contract involving essentially a governmental function is subject to the wishes of future government officials.

CRUISE SHIP TICKET IS A CONTRACT

A federal court in Philadelphia recently dismissed a suit brought in Pennsylvania by a 75-year-old Pennsylvania woman who fell down a flight of stairs on a cruise ship and broke her leg. The court ruled that the injured woman was required to bring suit against the cruise line in Florida because her ticket included a "forum selection clause" alerting all passengers that any dispute must be litigated in Miami-Dade County.

The injured woman resided in a Pennsylvania nursing home and remained unable to walk unassisted due to the injuries she suffered on the cruise ship. As a widow, she argued that requiring her to sue in Florida was too inconvenient given her health and personal circumstances. In addition, many of the witnesses to her fall were also Pennsylvanians who were not likely to be willing to travel to Florida to testify.

However, the court found that the injured woman failed to meet the difficult burden of showing that enforcement of the forum selection clause would be unreasonable. A forum selection clause must be "reasonably communicated" to the passenger in order to insure that she received "sufficient notice" of the conditions. Because the plaintiff actually received the ticket in advance of the trip, she had legal notice of the clause. Since cruise lines and other commercial businesses are permitted by contract to limit the places where they can be sued and since the contract clause was reasonably drafted, the plaintiff could not sue in Pennsylvania.

While courts are entitled to review forum selection clauses to be sure that they are "fundamentally fair," clearly drafted clauses are generally acceptable. Such clauses are commonly included in a variety of consumer contracts, including car leases, ski tickets, home construction contracts, vacation packages, and appliance purchases.

LIFE INSURANCE PROVIDED BY EMPLOYERS

Many employees enjoy free life insurance as a benefit of employment. Some employee benefit plans permit or require employees to pay some amount to have life insurance. Whether free or at some cost, any life insurance provided as a benefit of employment is regulated by the Employee Retirement Income Security Act (ERISA).

ERISA requires that all employee benefit plans must be written and that a written summary of the plan must be provided to all employees. The plan must clearly name an administrator, which is either the employer or the insurance company. Employees are entitled to prior notice of any changes or modifications to the plan. Many employers who provide life insurance as a benefit of employment do not realize that they must comply with ERISA. It is commonplace to find that employees are not clearly aware of the terms of their employee life insurance policy or the amount of the coverage.

If you provide life insurance to your employees, check your paperwork to see if you or the insurance company ever issued a plan or a summary plan document. If not, you should do so promptly because ERISA can subject an employer to fines of up to $110 a day for violations. If you are an employee, review your employee life insurance documents to be sure you know who administers the plan and how much coverage you have. Be sure your spouse or loved ones are aware of the existence and the amount of the coverage. If you have questions, submit them in writing to your employer or plan administrator.

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