Avoid Legal Issues After Settling A Workers’ Comp Claim

Failure to draft a settlement document with precision can be costly, cause delays, and lead to unnecessary litigation.

You settled a workers’ compensation case with an injured employee. Now what?

This is a question members of the claims management team need to think about when they settle a workers’ compensation case. The main concerns are that the injured worker’s needs are appropriately taken care of, the settlement is reasonable for all involved, and all legal issues are properly addressed.

Most jurisdictions require the details be included in a written release or settlement agreement. This can be confusing for the injured worker who may need assistance. Otherwise, there can be delays, frustration, and either party backing out of the agreement. Understanding the process is key to reaching settlements that are truly a win-win for all concerned.

Having a professional administrator involved has been shown to bring about settlements acceptable to all. Organizations that provide professional administration are neutral in terms of the details of the agreement. Their role is to help the injured worker post-settlement, through guidance and, to an extent, managing the administration of the settlement funds.

Presumptions of Fairness

Settlements that involve attorneys are generally presumed to be “fair.” Issues often arise when a defense attorney or claim handler reaches a settlement with an unrepresented employee. When this is the case, the defense will generally be required to show a compensation judge or regulatory commission that the employee understands the agreement, and it conforms to the workers’ compensation act.

Taking the following steps can make the settlement process go smoothly:

Make sure the employee fully understands the settlement agreement — especially that future medicals are being closed out. Placing it in all caps/bold lettering helps ensure this is the case.

Let the injured employee know they can have the settlement agreement reviewed and explained to them by an attorney, if they do not have one. Some attorneys who represent injured employees will perform this service for a nominal, flat legal fee.

Have the employee make a written attestation in the body of the settlement agreement that they understand all future workers’ compensation benefits are closed out.

Ensure the employee understands any reporting requirements or post-settlement responsibilities. If the employee has a Medicare Set Aside (MSA), they will need to submit annual attestations to the Centers for Medicare and Medicare Services (CMS) each year. A professional administrator can help ensure the injured worker understands these responsibilities, and what services are available to help them comply with these guidelines.

Use Clear and Concise Language – Avoid Boilerplate

Workers’ compensation practices are often driven by form language. This includes using it for various items such as outlining the statutory authority for settlement, issues concerning the resolution of non-intervening medical interests and providers, and Social Security offset language. Notwithstanding these uses of form language, it is important the terms of settlement are clearly defined.

Failure to draft a settlement document with precision can be costly, cause delays, and lead to unnecessary litigation. An example of this comes from Paluch v. UPS, 2014 Ill. App. LEXIS 283 (Ill. Ct. App. 1^st 2014), where a settlement agreement was challenged related to provisions concerning a MSA. In this case, the question related to whether a workers’ compensation settlement required the employer/insurer to pay the employee

$400,000, which included the MSA, or if it required payment of $400,000, plus an MSA. In sending the matter on for an evidentiary hearing, the court noted, “Sloppy, imprecise drafting can lead to legal wrangling. A single word in reciting the terms of a settlement, for example, can bring about intense litigation over interpretation. In drafting settlement agreements, lawyers should, quoting novelist Vladimir Nabokov’s advice to writers, ‘have the precision of a poet, leaving out the poet’s creativity, originality or artistic flourishes.’ Had the lawyers here been more studious and careful in choosing a single word (“plus”), this case undoubtedly would not have been necessary.”

In addition to using clear and concise language, the agreement should also meet the specific needs of the injured worker. For example, if a structured settlement is being used, the agreement should stipulate how and when monies will be available. Many such agreements include a monthly amount with additional funds allocated for specific times, such as when children may need college funding.

Taking Care of All Intervenors

Many jurisdictions require parties in a workers’ compensation action to place all interested parties on notice. This includes either extinguishing their rights if they fail to intervene or settle their interests as part of any settlement. These parties include medical providers, medical insurers, other no-fault and liability insurance carriers, long- and short-term disability plans, and government disability and medical programs.

Often, professional administrators are involved to provide information about support and resources that are available to the employee after they settle their case. A major task of professional administrators is to help injured workers comply with the myriad of requirements the Centers for Medicare and Medicaid Services have in handling the MSA.

Placing these parties on notice requires cooperation between parties. This should be something asked about at the initiation of a claim, and through the discovery process. It also requires parties to update their inquiry as a claim moves toward mediation, hearing, or settlement. Failure to take these steps only causes delay, and frustration.

Conclusions

Members of the claim management team play an important part in settling workers’ compensation claims. It is important they take steps to ensure the settlement is consistent with the applicable Act. Other steps need to include proper drafting of a settlement agreement, and the resolution of all claims. Taking the proper steps will ensure a settlement is complete and resolved in a timely matter.

Author Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center , which offers the Certified Master of Workers’ Compensation national designation.

Contact: mstack@reduceyourworkerscomp.com.

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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.