3 Key Cases on Workers’ Compensation Settlements

Key Cases

The best workers' compensation claims and the most desired litigated cases share something in common: The people footing the bill tend to like them best when they're over and done with. Thus, settlement is often seen as a good resolution to a workers' compensation claim; knowing the ins and outs of settlements in your state can make an outcome even better.

Across the country, settlement law depends on state statutes, but a few cases stand out as noteworthy for when a workers' compensation settlement itself becomes the focus of a court case.

Here are those key cases.

(1) Schuck & Sons Construction v. Industrial Commission, 963 P.2d 310 (Ariz. Ct. App. 1998). Contrary to the employer's suggestion, Commission approval of the settlement agreement, before the worker's death and employer's attempted repudiation, was not a condition precedent required for enforcement of the agreement. The contention that a workers' compensation agreement may be rescinded because the offeree died after acceptance but before payment had been approved is without support in any law to which we have been referred. By agreeing to the lump sum settlement, the carrier gambled that the claimant might live for the entire periodic payment period, and it thus took the risk that the lump sum settlement would reduce the total benefits that it would have had to pay if, instead, it were to continue making those periodic payments. 

(2) Trahan v. Coco Cola Bottling, United, 894 So.2d 1096 (La.2005). Louisiana's policy for the administration of the workers' compensation system "clearly and unambiguously" sets forth that the best interest of the injured worker is served when he receives benefit payments on a periodic basis. The statute "plainly states" that a lump sum payment or compromise settlement in exchange for full and final discharge and release of the employer and/or his insurer from liability under the Workers' Compensation Act shall be allowed only if certain requirements are satisfied. The statute thus clearly limits itself to an agreement for a lump sum payment or compromise settlement in exchange for an employer's or insurer's full and final discharge from liability under the Workers' Compensation Act. In the Trahan case, there is no dispute that the agreement at issue was a partial settlement of past sums due claimant. Claimant reserved his rights to future compensation, including weekly and medical benefits. After the agreement was made, defendant was still liable for benefits due claimant pursuant to the Act that accrued after Oct. 21, 2002. This was therefore not a lump sum payment or compromise settlement in exchange for full and final discharge and release of the employer and/or his insurer from liability under the Workers' Compensation Act. Consequently, this was not a lump sum or compromise settlement entered into by the parties.

(3) Texas Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430 (Tex. 2012). (1) Claims against workers' compensation insurers for unfair settlement practices may not be made under the Insurance Code, but (2) claims under the Insurance Code may be made against those insurers for misrepresenting provisions of their policies, although in this case there was no evidence the insurer did so. The Legislature's definition of "settlement" under the current Act reflects legislative intent that is at odds with the intent reflected in Insurance Code section 541.060; the limited definition of "settlement" provided in the Act does not fit within the construct of section 541.060. The provisions of the amended Act indicate legislative intent that its provisions for dispute resolution and remedies for failing to comply with those provisions in the workers' compensation context are exclusive of those in section 541.060.

Practice Point

These decisions underscore that settlement outcomes in workers' compensation depend less on general contract or insurance principles and more on the unique statutory scheme governing workers' compensation in each state. Whether addressing enforcement, settlement approval, or claims-handling practices, courts generally defer to legislative choices designed to preserve the exclusivity and predictability of the workers' compensation system.

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