The Proper Drafting of Settlement Documents

Transcription

1 The Proper Drafting of Settlement Documents Presented by: Iowa State Bar Association Workers Compensation Section August 21, 2014 Panel Members: Wendy Wilson Rosalind Darensbourg Penny Maxwell Miki McGovern William Grell

2 The Proper Drafting of Settlement Documents in Workers Compensation Cases I. DWC Website and Helpful Information About Workers Compensation Settlements II. Different Types of Settlements III. Overview of 6 Types of Settlements IV. Pitfalls in Drafting of Settlement Agreements

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5 IN WRITING SETTLEMENT/COMMUTATION BASIC REQUIREMENTS ON PRESCRIBED FORMS SIGNED BY ALL PARTIES/COUNSEL SUBMITTED TO COMMISSIONER APPROVED BY COMMISSIONER

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7 AGREEMENT FOR SETTLEMENT Establishes: 1) Employer Liability for Injury 2) Weekly Benefit Rate 3) Nature and Extent of Benefit Entitlement 4) Lifetime Medical Entitlement for Causally Related Care Review Reopening Available

8 AGREEMENT FOR SETTLEMENT Accrued Benefits to be Paid in Lump Sum with Interest at Time of Settlement. Future Benefits Owed under Agreement for Settlement Paid Weekly as Become Due.

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11 AGREEMENT FOR SETTLEMENT Must include: 1. Completed AGFS form 2. Medical Records or Other Evidence to Document Extent of Disability 3. Payment Activity Report Common Mistakes Seen By Compliance Analysts

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13 Compromise Settlement 1. Final Settlement of All Parties Interests (unless use 85.35(6) for future medical) 2. Must Be a Knowing Waiver of Rights by the Employee 3. Must Be a Reasonable and Informed Compromise of Parties Competing Interests 4. Substantial Evidence Must Support Settlement Terms

14 COMPROMISE SETTLEMENT 1. Terminates All Medical Rights for Claimant 2. Waives Employer s Rights to Future Credit or Indemnification 3. Waives any Right of Review Reopening 4. Often Used When Medicare Set Aside is Potentially Required 5. Can Include Stipulated Weekly Rate for Social Security Offset Purposes Pursuant to Iowa Code section 85.35(7)

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17 COMPROMISE SETTLEMENT Must Include: 1. Compromise Settlement Form 2. Addendum? Common Mistakes Seen by Compliance Administrators

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19 CONTINGENT SETTLEMENT Parties may enter into a settlement agreement permitted under Iowa Code section that is contingent upon the occurrence of some event, if that eventisexpectedtooccurwithinone year of the settlement approval. Most often used when Medicare Set Aside may be or is required and CMS approval is being sought.

20 CONTINGENT SETTLEMENT Spell out contingency clearly and good idea to file something with agency once contingency satisfied or removed. Contingency is automatically removed after one year if the parties do not petition for extension of time or petition for vacation of settlement.

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24 COMBINATION SETTLEMENT 1) Permits parties to compromise disputed portions of claim for a lump sum and close those claims. 2) Allows parties to stipulate to compensability and enter into an agreement for settlement for clearly compensable portions of claim.

25 COMBINATION SETTLEMENT Must Include: 1. Combination Settlement Form 2. Agreement for Settlement 3. Compromise Settlement Form 4. Payment Activity Report for Admitted Injury 5. Medical Records or other Evidence to Support Agreement for Settlement Common Mistakes Seen by Compliance Administrators

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27 FULL COMMUTATION Iowa Code sections and Voluntary full commutation can be used as a settlement vehicle. Commissioner establishes a fixed lump sum value that equals the total sum of future payments payable at present value.

28 FULL COMMUTATION Future Period of Compensation Must Be Definitely Determinable Specific Number of Weeks Owed into Future Life Expectancy Table (876 IAC 6.3(1)) Life and Remarriage Table (876 IAC 6.3(3)) Condition Cannot Be One Which is Expected to Deteriorate Future Medical Expenses Must be Adequately Provided For in Full Commutation

29 FULL COMMUTATION Must Be at Least 10 Weeks of Future Benefits Payable into the Future Permanent Disability Benefits Must Commence as Required by Law Under Iowa Code section Parties cannot stipulate to an artificially late commencement date Benefits Paid in Lump Sum Upon Approval Full Discharge of Liability for Employer Closed File

30 FULL COMMUTATION Must Include: 1. Full commutation form/petition 2. Supporting Medical Records or Other Evidence 3. Payment Activity Report Common Mistakes Seen by Compliance Administrators

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33 PARTIAL COMMUTATION Iowa Code section Similar Concepts to Full Commutation Determinable Period of Benefits Being Commuted At Least 10 Weeks of Benefits into Future Being Commuted Can Commute Benefits Off Front or Back of Entitlement Period or on Pro Rata Basis Be Aware of Statute of Limitations Implications Does Not Close all Future Liability Open Medical Benefits for Causally Connected Treatment Potential for Benefits to Commence at Future Date

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36 PARTIAL COMMUTATION Must Include: 1. Partial commutation form/petition 2. Supporting Medical Records or Other Evidence 3. Payment Activity Report Common Mistakes Seen by Compliance Administrators

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40 Pitfalls Pro Se Settlements 1. Will be scrutinized more closely to ensure a fair compromise of the parties competing interests. 2. Must contain Claimant s Statement. 3. Medical Attached in Support? 4. Payment Activity Report Attached and Accurate? 5. Is the Settlement Overreaching or Blatantly Unfair to the Claimant?

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45 Pit Falls Contingent Settlements Iowa Code section 85.35(5) permits contingent settlement conditioned upon subsequent approval by a court or governmental agency, or upon any other subsequent event that is expected to occur within one year from the date of the settlement. If the subsequent approval or event does not occur, the contingent settlement and its approval may be vacated by order of the workers compensation commissioner upon a petition for vacation filed by one of the parties.

46 Pit Falls Contingent Settlements Iowa Code section 85.35(5) The contingency on a settlement lapses and the settlement becomes final and fully enforceable if an action to vacate the contingent settlement or to extend the period of time allowed for the subsequent approval or event to occur is not initiated within one year from the date that the contingent settlement was initially approved.

47 Pit Falls Full Commutation Full commutation only available if determinable period of entitlement (cannot be used for running healing period) Cannot include open lifetime medical benefits (must be a fixed lump sum) Cannot be a condition that is expected to deteriorate unless future treatment is adequately provided for in settlement.

48 Pit Falls Compromise Settlement Commission loses jurisdiction over claim once compromise settlement is approved. City of Ottumwa v. Poole, 687 N.W.2d 266 (Iowa 2004) Heartland Express v. Gardner, 675 N.W.2d 259 (Iowa 2003) White v. Northwestern Bell Tele. Co., 514 N.W.2d 70 (Iowa 1994) If you need to include MSA language or a potential MSA in the settlement, you need to include it with the original draft. Agency will not entertain or approve a modification of a compromise settlement previously approved.

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57 Pit Falls Social Security Offset Language Iowa code section 85.35(7) allows the parties t to stipulate to a weekly rate other than what was paid during claim. Claimant may gain economic benefit by extending benefit stream over remainder of life and reducing weekly rate for purposes of Social Security disability Cannot be used with commutations or agreement for settlement, however.

58 Pit Falls Death Cases Minor Dependents require guardians ad litem to protect their interests Be sure you have identified any potential dependents and they are included in the settlement agreement. Difficult to commute minors claims because period of entitlement is not known or determinable. Attorney fees contingent vs. hourly fees

59 SOME BRIEF BUT OBVIOUS TIPS ABOUT SETTLEMENT DOCUMENTS OR MIKI S HOT TOP 10 By: Miki McGovern 1. Before one even begins to draft a settlement document, make sure there is a first report of injury on file! 2. There must be a compliance number.

60 Miki s Hot Top USE THE FORMS FROM THE WEBSITE. THEY ARE POSTED FOR A REASON. THE DIVISION WANTS THE PARTIES TO USE THE APPROVED FORMS. 5. This statement seems obvious but have all parties sign the documents. 6. If you want a copy returned to you, include an extra copy with a self addressed stamped envelope.

61 Miki s Hot Top When there is a self represented claimant, the division personnel will be looking VERY closely at the documents! 8. Do not fax the original settlement documents. 9. Do not tell the workers compensation compliance administrators you were allowed to do something in the past; therefore you should be allowed to do something now. 10. Do not ask the deputy what authority she has to deny approval of your settlement documents. Ask the deputy what suggestions she has to ensure the documents will be approved.

62 Settlement Case Notes Prepared by Zac Foxx, Summer Intern at the Iowa Division of Workers Compensation and Drake 2L student. Dillon v. Davenport, 366 N.W.2d 867 (Iowa 1973) The City of Davenport hired outside counsel to litigate a workers compensation claim with a city employee. The attorney was given specific authority to settle the claim. A settlement was reached orally between the parties. The city then rejected the settlement. The employee sued for specific performance and interest. The Court stated the settlement was valid, despite the fact that the city council resolved to settle the claim in a closed session. The Court, however, denied the plaintiff s claim for interest, because the settlement still needed approval from the industrial commissioner before it was the equivalent of a money judgment as contemplated by the statute.

63 City of Ottumwa v. Poole, 687 N.W.2d 266 (Iowa 2004) Poole entered into a settlement agreement with a claims association in writing, but later refused to sign the agreement. He stated the claims association specialist misrepresented his possibility for future benefits and his impairment rating. The district court allowed the settlement to be rescinded. The court of appeals reversed the lower court. The Supreme Court held that the relationship between the specialist and the injured worker was not one of trust and confidence; therefore there was no enhanced duty of disclosure. Kirk Gross Co. v. Schwab, 2006 Iowa App. LEXIS 1801 Claimant suffered a work related injury. Employee s attorney offered to settle the claim with the employer and insurance agency or $6500. Claimant asserted he never authorized his attorney to settle the claim and terminated his attorney s representation and preceded pro se. On the date of the trial, the claimant never appeared. Plaintiff, (the employer in the district court), presented evidence of the workers compensation claim and the settlement negotiations and agreement. Claimant s former attorney testified he actually had been authorized to settle the claim. Since the claimant failed to appear to rebut the evidence presented, the district court found the agreement valid. The Court of Appeals agreed.

64 Sauter v. Cedar Rapids & I. C. R. Co., 204 Iowa 394 (1927) Claimant brought suit to enforce the memorandum of settlement. Trial court awarded him the maximum amount of benefits allowed by law. Supreme Court set aside the judgment and decree, holding the trial court was not authorized to enter a judgment that is not in accordance with the terms of the settlement, nor alter the duration of payments. Ledezma v. Procter & Gamble Hair Care, L.L.C., 2013 Iowa App. LEXIS 854 Claimant alleged bad faith refusal to pay medical bills pursuant to an agreement for settlement was a contract claim, and not a workers compensation or insurance bad faith claim, as established by the case of White v. Northwest Bell Telephone Co. Trial court did not rule on the issue based on procedural grounds. The Iowa Court of appeals affirmed.

65 McCollough v. Campbell Mill & Lumber Co., 406 N.W.2d 812 (Iowa App.) 1987) Claimant was injured in a work related accident. He received a commutation of his workers compensation award. Several years later, claimant began having pain related to his original injury and he sought to have the award set aside in order to pursue additional workers compensation benefits, alleging fraud and mutual mistake of fact. While Iowa courts have held that mistake of medical facts leads to additional benefits, they are only limited to review reopening cases. A claimant can only seek review reopening if benefits have not been commuted. The court noted there was no evidence of mistake of fact, and the plaintiff was aware at the time of commutation, his condition might worsen.

66 QUESTIONS/DISCUSSION

67 THANK YOU

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