Legal “Double Dipping” Costs Employers
Lately, we have seen an increase in claims being settled by C&R with no voluntary resignation by an employer's prior carrier. What does this mean?
With a Compromise & Release, C&R, the injured employee receives a lump sum amount that includes a buyout of all future medical care. The carrier is “released” of all future exposure. However, if the employee is still employed, they can file another subsequent claim with the same employer. Even if it is to the same body part, medical care cannot be apportioned. There can only be apportionment to the Permanent Disability portion of the Award.
It is considered best practices, not to settle a case by C&R with an active, current employee, but rather Stipulate to the medically determined level of Permanent Disability.
Here’s why:
If the employee files a new claim with the same employer, for the same body parts, medical treatment starts again and is paid on the new claim. Even if the employee was paid a lump sum in the C&R for that same treatment, the medical payments start up again on the new claims.
There is only apportionment of any Permanent Disability. There is no apportionment of medical care.
The employee pockets the money paid to him to assume this care. The employer is penalized with a new claim and costs that will impact their X-Mod.
This is legal “double dipping” that is allowed in the Workers’ Comp system. In addition, it sends a negative message to other employees. File and claim and get a big check!
Background:
A claim that results in a permanent impairment, can be resolved in one of two ways. This is a simplified explanation of those 2 types of settlements:
1. Stipulated Award:
Permanent Disability is formalized and approved by the WCAB judge. The level of PD is paid out at $290 (maximum) per week until the full amount of the Award is paid. The claim is left open for a lifetime medical award for the body parts included in the Stipulation and the future care as outlined by the doctor.
2. Compromise and Release (C&R)
The same level of Permanent Disability is agreed upon. Then the estimated cost of the future medical care is added. The total amount (PD + Future Med) is paid out in a lump sum to the injured employee. The employee releases the insurance carrier of all future liability. This includes medical treatment and the right to reopen the file for any new and further disability. The employee assumes responsibility for paying for any future medical treatment for this injury.
Example:
Current employee, 52-year-old janitor, injures his low back. He is off work for one week and returns to modified duty that his employer accommodates during recovery. After conservative medical treatment, he is determined to have reached Maximum Medical Improvement and is released to full duty. He returns to his regular job.
The doctor reports that the employee has permanent impairment based on the objective findings. The resulting Permanent Disability rates to 20% for his age and occupation. This equates to $21,895.
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Two settlement options:
Stipulate to the 20% Permanent Disability. The Award is paid at $290 per week for 90.25 weeks until the full $21,895 has been paid. The file remains open for the medical treatment that was outlined.
C&R for $38,395
$21,895 = Permanent Disability
$15,000 = Future medical care
$ 1,500 = Right to Reopen
$38,395. Compromise and Release. Paid in one lump sum
Neither party (employee nor employer) can be forced into a C&R. As discussed, it is considered best practices to Stipulate with a current employee because of the employer’s potential for additional costs and exposure if a new claim is filed.
It is a possible solution that an employee can voluntarily resign in order to lay the groundwork for the employer to consider agreeing to a C&R.
Problem:
It is common practice for an insurance carrier to C&R cases on an expired policy, regardless of the employee’s work status or the employer’s request NOT to C&R.
The carrier may even state that they want to limit their future exposure and get the case off-their-books. This does not consider the potential exposure and harm to the employer. Is this a good-faith effort to protect their prior insured? It does not seem to be.