Compromise and Release Agreements Closing Workers Comp Cases
Include These Items in Your Compromise and Release Paperwork to Speed Up Settlement Approval and Payment
Workers compensation laws encourage settlements, called Compromise and Release Agreements.
But the parties must get the Workers Compensation Commission’s approval of the settlement terms before the release becomes valid and enforceable.
You seek approval of the Compromise and Release by submitting several papers to the Commission.
The most important of these documents is the Petition (or Motion) to Approve the Compromise and Release Agreement.
Your Petition includes the settlement terms, the claims released, and the facts showing why closing the case is in your best interests.
This article explains what the Petition must include for the Commission to enter an Order Approving the Compromise and Release. The sooner you give the Commission the required information, the sooner you get your lump sum payment.
I hope this information helps.
And if you want a free consultation, call me at (804) 251-1620 or (757) 810-5614 or complete the online contact form. See how my law firm can help you and your family after a workplace accident.
What is a Compromise and Release Agreement?
Black’s Law Dictionary (11th ed.) defines compromise as “to agree to settle a matter” and release as “liberation from an obligation, duty, or demand.”
Therefore, a Compromise and Release in workers compensation is a formal agreement where the insurance company pays you a lump sum to end your claim for benefits for a specific injury or occupational disease.
Is a Compromise and Release a Contract?
Yes.
A Compromise and Release ending your right to get workers compensation benefits in exchange for a cash payment has the same force as a contract once the Commission enters an Order approving the agreement.
Does the Compromise and Release Agreement Have to be in Writing?
Yes.
An oral agreement to settle your workers comp claim is invalid and unenforceable.
Therefore, you must submit to the Commission many documents, including a written petition, for the Compromise and Release to be binding.
Can I Negotiate the Compromise and Release Amount?
Yes.
Settlement may be your best option.
And you can – and should- try negotiating a fair Compromise and Release in your workers compensation case.
But I recommend never accepting the insurer’s first settlement offer. Always ask for more.
You can start the negotiation process by viewing this sample demand letter and these charts showing workers comp settlement ranges for your diagnosis here.
What Must the Compromise and Release Include?
In a workers comp case, the Compromise and Release Agreement must include the following:
Introductory Paragraph
The first paragraph should identify the following:
- Who the release binds;
- What the parties want (i.e., the Commission’s approval);
- The amount the defendants will pay you; and,
- The injury date (or diagnosis date for occupational disease claims) central to the release.
A blanket release of all workers comp claims is not allowed in Virginia. Instead, the parties must identify the specific dates and the money allocation for each incident or occupational illness.
Statement of the Case
The Compromise and Release Agreement should say this information:
- Accident date.
- Body parts injured or the illness diagnosed.
- Pre-injury average weekly wage.
- Periods of wage loss payments the insurer (or claim administrator such as Sedgwick or Gallagher Bassett) made already; and
- Whether the Commission has entered an Award Order
Payments Made
The document should say how much the defendants have paid for medical expenses, indemnity benefits, and vocational rehabilitation services. This section includes voluntary amounts paid.
Statement of Controversy
The Compromise and Release Agreement should explain the disputed issues in the case.
For example, the parties may disagree on the following:
-
- Compensability
-
- The correct average weekly wage
-
- Your level of permanent impairment
-
- The relationship between the accident and recommended medical care.
Summary of Medical Treatment
The document should summarize your medical treatment.
At a minimum, the papers should include the following:
- The healthcare providers that examined you.
- Any surgeries performed, including the procedure date.
- The date your treating physician declared you reached maximum medical restrictions.
- Permanent work restrictions.
- The date you received a full duty release (if applicable)
- The last date you sought care for the injury or illness.
Work Status
The Commission is more likely to approve the Compromise and Release if you have returned to some form of work.
Statement of Agreement
This section of the Compromise and Release explains how much the defendants will pay, the payment form (lump sum, annuity, or installment), and what medical treatment the defendants must pay for (including the date that medical coverage ends).
Ancillary Agreements
The Workers Compensation Commission does not have jurisdiction in labor and employment law claims.
But the parties must tell the Commission if other agreements exist (such as a resignation or a confidentiality/non-disparagement agreement).
In addition, the Compromise and Release should say that any ancillary agreement does not affect your rights regarding Medicare or any claim under the Commission’s jurisdiction.
Medicare and Medicaid
The Medicare Secondary Payer Act requires insurers and employees to consider Medicare’s interest when settling a workers comp claim.
Therefore, the release should say if you are eligible for Medicare or Medicaid. And, if so, whether these government programs paid for treatment related to occupational injury or illness.
If you qualify for Medicare, you must address the Medicare review thresholds and whether the parties sought (and received) Medicare approval of the medical allocation.
Social Security Disability
The Compromise and Release should include language to reduce (or eliminate) any workers compensation offset of Social Security disability insurance (SSDI) benefits.
Put these clauses in the papers even if you have not applied for SSDI.
Attorney Fees and Costs
You should include blank spaces for the Commission to write the fee and costs awarded.
Indemnification Provisions
Generally, the Commission does not like releases where an injured worker may have to repay the insurer.
However, the Commission will enforce a Compromise and Release stating that you must indemnify the defendants in specific situations involving things under your control.
For example, you may have to repay the defendants for expenses relating to your misapplication of set-aside funds or misrepresentation of your Medicare eligibility.
Subrogation Language
You may have used private health insurance to pay for medical treatment related to the workers comp claim.
Or the Compromise and Release may say the insurer denies your claim and will not be responsible for any medical treatment.
In these situations, I recommend including anti-subrogation language to strengthen your position if there is a legal fight with your health insurer over reimbursement or future coverage.
Signatures
All parties should sign the Compromise and Release, with signature blocks including their position, address, telephone number, and email address.
Signature Line for the Deputy Commissioner
A workers comp judge (deputy commissioner) must sign the Compromise and Release to bind the parties. Therefore, include a blank space on the last page for the judge to sign.
Sample Motion to Approve a Compromise or Settlement Agreement (“Petition”)
This section of the article gives you a sample Compromise and Release that satisfies the Commission’s requirements.
VIRGINIA: IN THE WORKERS COMPENSATION COMMISSION
James Smith,
Claimant,
v. JCN: VA02018233
Bob’s Factory,
Employer,
and
ABCD Insurance, Inc.,
Insurer.
PETITION FOR APPROVAL OF A COMPROMISE AND SETTLEMENT AGREEMENT
This case is before the Commission on the parties’ Petition for Compromise Settlement seeking approval of a settlement where the claimant receives $150,000.00.
After paying this amount, the employer and insurer will no longer have liability for the injuries of October 1, 2021. However, the employer and insurer will be responsible for the payment of reasonable and necessary medical treatment under Code Section 65.2-603, relating to the injuries of October 1, 2021, for the period from the accident date to the date the Commission enters the proposed Order.
Your petitioners, James Smith (“claimant”), Bob’s Factory (“employer”), and ABCD Insurance, Inc. (“insurer), represent to the Commission that:
1. The claimant tore his rotator cuff and injured his low back on October 1, 2021, while in the course and scope of his employment. At the time of his injury, the claimant earned $725.00 per week, which provides a compensation rate of $483.33.
2. The employer and insurer accepted the claim. And the Commission entered a Workers Compensation Award Order (Letter) on February 5, 2022.
3. As of January 12, 2023, the insurer has paid $18,050.00 in compensation benefits, $105,300.25 in medical expenses, and $0.00 for vocational rehabilitation expenses, for a total payment of $123,350.25.
4. On October 4, 2021, the claimant tore the rotator cuff in his left shoulder and strained his low back in a work-related motor vehicle crash. This back strain resulted in a herniated disc and the aggravation of pre-existing degenerative disc disease and spinal stenosis, which the insurer accepted as compensable.
5. The claimant underwent arthroscopic surgery for the rotator cuff tear and a discectomy and spinal fusion for the back injury. In November 2022, the treating orthopedic surgeon declared that the claimant had reached maximum medical improvement (MMI) and referred the claimant for a functional capacity evaluation (FCE) with an impairment rating. And in December 2022, the treating physician gave the claimant permanent restrictions, limiting the claimant to sedentary duty only.
6. The claimant found a light-duty position within his restrictions, which began on January 4, 2023.
7. The parties certify that there are no ancillary agreements (such as a resignation and release) related to this compromise settlement.
8. The claimant is not a Medicare beneficiary. And the anticipated total settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is not greater than $250,000.
9. The claimant has not applied for Social Security disability benefits.
10. The Centers for Medicare and Medicaid Services (CMS) have informed the parties that CMS will not review or approve a workers compensation settlement unless:
(1) the claimant is a Medicare recipient and the settlement proceeds are more than $25,000; or,
(2) the claimant has a reasonable expectation of receiving Medicare benefits within the next 30 months, and the value of the settlement is $250,000 or more.
The claim does not meet Medicare’s current review threshold as described in the July 11, 2005, and April 24, 2006, Medicare Policy Memoranda. As such, the claim does not require review or approval from CMS.
11. The parties agree that this settlement of $150,000.00 is reasonable compensation for any future medical indemnity benefits (including compensation for permanent partial disability, temporary total disability, and temporary partial disability) the claimant may receive for these work injuries. The parties agree they considered Medicare’s interests and that this settlement is in no way an attempt by any party to shift the responsibility for any future medical payments to Medicare.
12. The parties recognize that the Social Security Act provides for the apportionment of workers compensation benefits received in the form of a lump sum settlement in determining the extent of any offset of workers compensation benefits against the receipt of Social Security Disability benefits. For this purpose, the claimant was born on _______________________. Therefore, under Section 8.01-419 of the Code of Virginia, 1950, as amended, the claimant has a life expectancy of _____________ years.
The settlement proceeds of this compromise settlement should be apportioned by the Social Security Administration as follows:
A) Legal Fees and Expenses: As set by the Virginia Workers Compensation Commission in the Order approving the parties’ Petition for Approval of a Compromise Settlement and Release Agreement, $30,000.00 must be set aside from the lump sum payment before proration.
B) Medical Expenses: Under 42 U.S.C. § 1395(Y)(b)(2), the parties acknowledge and affirm that out of the settlement proceeds, $7,500.00 shall be set aside and designated for the claimant’s benefit as compensation for future Medicare covered medical expenses causally related to this injury by accident.
C) Remainder of Lump Sum (Prorated Compensation Rate): The remainder of the lump sum represents the settlement and compromise of all future claims for disability benefits, including permanent total disability benefits. The insurer could have paid these benefits over the remainder of the claimant’s life. Under Section 8.01-419 of the Code of Virginia, 1950, as amended, the claimant’s life expectancy is _______years. Prorating the balance of the settlement proceeds ($____________ net proceeds) by _______ months (_____ years x 12 months) yields a monthly compensation rate of $__________ per month. This monthly rate is the figure the Social Security Administration must use to determine any offset based on the claimant’s receipt of this additional workers’ compensation payment.
13. The above apportionment used for Social Security purposes also applies to any long-term disability insurance or short-term disability insurance policies that have paid or are paying benefits to the claimant.
14. Should the Social Security Administration reject this proposed formulation, the claimant reserves the right to offer any other formulation that may be in his best interest.
15. The parties have settled this claim on a denied and disputed basis regarding the causal relationship of future medical care the claimant may need. Accordingly, the parties stipulate that any medical treatment rendered after the Commission approves this settlement is unrelated to the compensable injury by accident and that the Commission would likely make such a factual finding in a Virginia Code § 65.2-704 proceeding. As a result, the parties agree that the employer is not responsible for paying for any medical treatment after the settlement approval date.
16. The claimant understands that the Commission will award attorney fees from the lump sum payment.
17. All parties are mindful of the uncertainties of litigation and have agreed upon this lump sum compromise and release agreement.
The parties, therefore, ask the Virginia Workers Compensation Commission to enter the attached Order.
What Other Documents Should I Submit with the Petition When Asking for Approval of the Compromise and Release Agreement?
In addition to the Petition, you should submit to the Commission the following documents when asking for settlement approval:
Order
A signed Order makes the Compromise and Release official and binding.
In general, the Order’s contents are similar to the Petition. However, the Order includes a space for the judge to sign.
Claimant’s Affidavit
In Virginia, the Workers Compensation Commission requires all injured workers to sign affidavits stating they understand the Compromise and Release’s effect on their future rights.
Medical Reports
You should provide medical records showing that your injury has stabilized or reached MMI.
However, these documents are less influential in cases that settle when the insurer disputes compensability.
Retainer and Attorney Fee Agreement
Although there are exceptions, the Commission will usually award the fee in the retainer agreement if reasonable.
Petition and Order Informational Letter
The Commission requires injured workers to give financial information so it can decide if the settlement is in your best interests.
You should file this letter as a sealed document, so the insurer does not get more access to your financial situation.
Child Support Order
You should submit any DCSE Withhold Orders with the proposed Compromise and Release.
Medicare Set Aside (MSA) Projection
If the settlement includes a future medical allocation, I recommend submitting a copy of the MSA projection report.
CMS Approval Letter
The Commission wants to review the CMS letter approving the MSA amount if you fall within CMS’s review thresholds.
Annuity Contract
You should give the Commission a copy of the annuity contract if the Compromise and Release specifies a structured settlement.
Make Sure the Workers Compensation Compromise and Release Agreement is in Your Best Interests
A Compromise and Release Agreement is the desired outcome for many insurers, employers, and employees.
But you should only release the employer and insurer if the Compromise and Release terms benefit you and fairly value your claim.
Call us today so we can evaluate your options and help you get every dollar available after a workplace injury or occupational disease.
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