We consider this article required reading for all claims adjusters, risk managers, defense lawyers, and workers' compensation hearing officers across the country. In Paluch v. United Parcel Service, Inc., the Illinois Appellate Court reversed and remanded a claim, finding the workers' compensation settlement agreement was ambiguous as to the total amount the employer owed to the employee. The unanimous Appellate Court remanded the case for an evidentiary hearing as to what the settlement might actually be. It appears the six-figure settlement agreement was unclear, ambiguous, contained conflicting clauses, and was open to more than one interpretation.
 
Following contract approval, the employer and its carrier interpreted the agreement as requiring a single lump-sum payment of $400,000 for both the workers' compensation settlement and Medicare set-aside amount. In contrast, the employee and his attorney interpreted the agreement as requiring a lump-sum payment of $400,000, in addition to separate payment of a Medicare set-aside, in annuity form. The amount in dispute is an additional $181,580.96. Ouch.
 
The agreement states:
 

Respondent agrees to pay and Petitioner agrees to accept $400,000.00 in a lump sum plus payment of a Medicare Set-Aside (MSA), in annuity form, in full and final settlement of all claims for benefits past, present and future based on injuries arising out of an accident on or about July 11, 2006. This settlement represents as a compromise of wage differential benefits in the amount of $218,419.04 under Section 8(d)(1) of the Workers' Compensation Act, plus funding of an MSA in the amount of $148,790.00, direct reimbursement of BCBS lien in the amount of $31,135.82 and direct reimbursement of Aetna lien in the amount of $1,655.14. Respondent will pay all necessary and related medical expenses pursuant to the fee schedule or negotiated rate, whichever is less, that have been submitted to Respondent prior to contract approval and that contain all the required data elements necessary to adjudicate the bills pursuant to Section 8.2(d). Petitioner is responsible for payment of any and all medical expenses not submitted prior to contract approval. Petitioner hereby foregoes any right to review or reopen the settlement and agrees that all rights under Section 8(a) and 19(h) are expressly waived unless otherwise retained under the terms of this contract. The parties have taken Medicare’s interests into consideration and included with this settlement is a proposed MSA with initial funding of $106,650.00 and an annuity providing $3,329.87 per year continuing for life for a total proposed MSA of $148,790.00. The MSA shall be submitted to CMS for approval. Should CMS determine the MSA to be insufficient, the Respondent reserves the right to appeal the decision, and Respondent agrees to either modify the MSA consistent with CMS recommendations or elect to allow Petitioner to retain his medical rights under Section 8(a). If the MSA is approved, then petitioner’s rights under section 8(a) will cease upon funding of the MSA and the matter will be finalized with no futher [sic] activity necessary at the Commission.

 
The next paragraph states:
 

• Total Amount of Settlement
• $400,000.00
• Deduction: Attorney's Fees
• $43,600.00 reduced from $80,000.00
• Deduction: Medical reports, x-rays
• $2,611.84
• Deduction: Other (explain)
• $[blank]
• Amount employee will receive
• $353,788.16

There were arguments going in both directions outlined in the Appellate Court’s well-reasoned ruling. We note it is unusual but not impossible for a Plaintiff-Petitioner attorney to take a legal fee on the Medicare Set-Aside value—stating the attorney fee was reduced from $80K should indicate the employee was intended to receive $400K as a compromise of permanency.

We also note there was Social Security spread language calculated on the amount the “employee will receive”—we agree with the trial court, it would be inconsistent to consider the MSA value as part of the spread language. We have no idea what the eventual facts will bear out or what the outcome will be. We are certain the defense side is expending legal fees they didn’t plan on expending and petitioner/plaintiff counsel is spending legal time they aren’t going to get any more money for. While we don’t know for sure, we can’t imagine petitioner Paluch is happy about any of it.