One of the best things a party can do in the workers’ compensation system is to reach an agreement to settle via compromise and release because it typically resolves liability for future medical care.

Jessica E. Bair

Other than litigation and trial, there are two main avenues in which a claim can settle:

• A stipulated award, which leaves future medical care open.
• A compromise and release, which resolves future medical care.

This article will only focus on tips for drafting a C&R.

What is a C&R?

In a nutshell, it is a settlement that allows the claims adjuster/insured to give a lump-sum payment to the applicant in exchange for closing the claim, which means closing out any future medical care that the adjuster will no longer be liable to cover. As you can imagine, workers need medical treatment to recover from their work-related injuries. Throughout the claim’s lifespan, the medical treatment is paid by the insurance adjusters (on behalf of the employer).

So when a claim is ready for resolution, the insured is buying out the future medical care by providing the applicant with a lump-sum payment.

Now for the fun part: the nuts and bolts of a C&R.

What must be included?

Every C&R must include identifying information such as the applicant’s name, date of birth, Social Security number (if applicable), date of injury, type of injuries (specific versus cumulative trauma claim), how many claims, how many body parts were injured, counsel’s information and the settlement amount. It is always a good idea to have copies of the claim acceptance/denial letters handy. That will help ensure that the correct, proper body parts are incorporated into the settlement.

Comments section

This is the section where you can incorporate main points that are necessary for the C&R. The settlement has to be adequate and reasonable for the applicant, and this is the section to address any key issues (such as QME evaluations, forgoing further discovery, waiving future exams) or any issues regarding denied claims (i.e., Thomas finding). It is helpful to include language regarding the voucher and whether it is owed or not.

Addendums

It is common to see attorneys include addendums to the C&R as part of settlement. These addendums tend to address specific issues (such as penalties/interest, attorney fees, waivers, Social Security, etc). These addendums are discretionary, so a C&R can still proceed if there is no addendum.

Perhaps the most important addendum one can include is known as a QME waiver. This form states that an applicant has been informed of a right to a final report from a PTP, a QME or an AME and that she is voluntarily waiving that right. If the case you’re settling does not contain a final report from a QME or AME, make sure to have the applicant sign this waiver, or else your settlement could get set aside. (This waiver is necessary for both C&Rs and stipulated awards.)

Voluntary resignation

Always be sure to check with the employer/insured about their preference for a voluntary resignation. Having the applicant sign a resignation provides an additional shield for the employer, as it will not have to worry about the risk of the applicant reinjuring himself at work. Keep in mind that the resignation is for the insured only; it is not to be incorporated into the C&R, as judges will likely suspend the settlement if this is included.

TD/PD payments

It is helpful to have a benefits printout that shows all the TD, PD (if any) and medical treatment that has been paid by the insured. This information needs to be incorporated in the C&R. You must be sure that you have the correct TD/PD rates to ensure benefits were not overpaid, underpaid or to confirm if benefits were paid at all.

Medicare set-aside

An MSA takes into account an applicant’s future medical care after she is over the age of 65. Be sure to check the age of the applicant. Even if she were not 65 or older at the time of the date of injury, most claims take several months or years to resolve, so applicants may be over the age threshold by the time the case resolves.

This requires you to take into account Medicare’s interests when considering settlement. When the applicant is on Medicare, some of the settlement money must be set aside to pay for any medical expenses incurred through Medicare. It is worthwhile to get this process started ahead of time to not hold up settlement.

Liens

One of the biggest holdups to a settlement is liens, with the most common ones being liens from EDD, child support, medical treatment, interpreters and more.

Be sure to contact all parties involved as early as you can so that you can work on a resolution that does not hamper your settlement. Most often, you can either litigate the lien separately, incorporate the lien settlement into the C&R or resolve the lien ahead of settlement. There is a section in the C&R to address liens specifically, so make sure to have any info regarding liens available at the time of settlement.

Orders approving, orders setting aside

Most judges recommend e-filing a proposed order approving compromise and release. This makes things easier for the judge and helps get complex details right, such as multiple ADJ numbers, unusual party names, credits, attorney fee liens, Thomas language, etc.

If the judge approves the settlement and finds it to be adequate for the applicant, she will issue an order approving the compromise and release, and the parties can sort out the remaining payments owed.

However, if the judge does not approve the settlement, she will issue an order suspending the compromise and release, which will then require you to address whatever issues the judge finds, as well as appear before the Workers' Compensation Appeals Board to further hash out the details. I recommend having an experienced workers’ compensation attorney review the C&R before it is filed, as it is more complicated to resolve and fix issues if the settlement is rejected by the judge.

What’s next?

Now that you have all the basic required information for a C&R, make sure you have all the correct information/parties and make sure all parties have signed/dated the C&R. Don’t forget that two witnesses need to sign the C&R as well.

Before e-filing the settlement documents with the court, make sure to serve the final versions of the settlement documents on all parties. When e-filing, make sure to e-file the settlement documents and any relevant medical reports, denial letters, MSAs and a proposed order approving your settlement with the correct caption and payment information.

Conclusion

So long as you incorporate these practical tips into your C&R, you will be less likely to have the judge suspend the settlement for adequacy issues.

These are just a few practical tips when drafting a compromise and release, and there are always case-specific issues that need to be individually addressed per claim.

Jessica E. Bair is an associate attorney at Bradford and Barthel’s San Jose office. This entry from Bradford & Barthel's blog appears with permission.