An intriguing decision of the Minnesota Supreme Court caught my attention recently. In November 2019, the Court decided Block v. Exterior Remodelers, Inc., A19-0584. The Court was asked to interpret a statute, not an unusual occurrence in workers' compensation. But, the nature of the statute made the interpretation interesting.
The injury occurred in 1988, resulting in two back surgeries. The worker then settled with the Employer in "a full, final, and complete settlement agreement." This was approved by the Workers' Compensation Court of Appeals (WCCA) in 1992 and the settlement proceeds ($40,000) were paid.
About 17 years later, "in 2009, Block experienced new symptoms related to the 1988 injury. He had two more back surgeries." Then, "in 2016 (24 years later), Block filed a Petition to Vacate the Award (settlement)." He argued this was appropriate because the parties had made a "mutual mistake of fact" in making the settlement, and that he had suffered "a substantial change in his medical condition that could not have been anticipated at the time of the Award (settlement)."
The WCCA "vacated the Award based on the substantial change in (Mr.) Block’s medical condition," but disagreed there had been a "mutual mistake of fact." The matter would seem concluded when "neither party appealed the WCCA decision." But, Mr. Block then sought "additional benefits." The Employer sought "a credit for the $40,000 already paid under the vacated Award (settlement)." The parties submitted this question to the trial "judge on stipulated facts." The judge concluded the Employer was entitled to this credit for funds it paid associated with the retroactively eliminated settlement.
Mr. Block brought the appeal, claiming that the trial judge erred in not applying Minn. Stat. § 176.179. The Court reminded that “[i]t is . . . a basic tenet of workers’ compensation law that the substantive rights of employer and employee are fixed, not by their agreement, but rather by the law in effect on the date of the controlling event (accident).” Therefore, the law as it existed in 1988 applies to the parties' disagreement.
The Court explained that Minnesota law allows the settlement of workers' compensation claims, "subject to approval by a compensation judge." However, the Minnesota statute also allows the settlement to "be set aside later if the WCCA determines that there is cause to vacate it."
The "mutual mistake of fact" argument is worthy of note. Mr. Block contended "When the parties settled Block’s claim, they believed that Block’s back injury was cured and, thus, payment of an award that is later vacated must be a mistake." Therefore, he contended that the Employer cannot be entitled to a credit for money it paid by "mistake." He cited "the version of section 176.179 in effect at the time of Block’s injury in 1988," which provides: "no lump sum or weekly payment, or settlement, which is voluntarily paid to an injured employee . . . shall be refunded" if it is later determined to have paid by mistake of fact or law.
The Court explained that when benefits were "mistakenly overpaid" in other cases, that has been deemed "a mistake in fact that made the overpayment 'mistaken compensation.'” Mr. Block's argument was that the settlement proceeds paid ($40,000) under his agreement and judicial approval, was likewise a "mistake" and therefore this is "mistaken compensation," which should be a windfall to him and not recoverable by the Employer following vacation of the settlement agreement twenty-seven years later.
The Court distinguished the instances of such "mistaken compensation" cited by Mr. Brock. It concluded that the $40,000 "was not paid mistakenly." It noted that the record did not support any evidence of a "mutual mistake" in 1992. Instead, the record indicated that "the parties negotiated the settlement at arms-length and based on all of the information available at the time." And, notably, the "settlement was approved by the compensation judge."
The Court conceded that "neither settling party in 1992 could have foreseen or predicted medical developments," as demonstrated here. That the parties cannot accurately predict the future does not equal a "mistake of fact or law." Therefore, the Court affirmed the trial judge's denial of Mr. Block's objection to the Employer's credit for the $40,000 already paid.
The case is intriguing for several reasons. First, the law allowing a "full, final, and complete settlement agreement" to be set aside is curious. The setting aside, by definition, means that the settlement was neither "full, final, nor complete." Settlement comes with risks. It is possible that a patient may deteriorate or improve following a settlement. If a patient thereafter improves unexpectedly, through happenstance or the advancement of medical science, would it be appropriate to order the worker to return the settlement proceeds based upon "a substantial change in his medical condition?" Or, should the parties, in an arms-length transaction, each be permitted to assess and value their respective risks and make a forever-binding "full, final, and complete settlement agreement?"
The second matter of interest, comparing Minnesota to Florida, is that this settlement was approved by the workers' compensation judge. In that setting, some might argue that the judicial approval militates in favor of permanency and the unassailable nature of the settlement. In Florida, the vast majority of settlements are not approved by judges of compensation claims. The Florida Legislature removed the requirement of judicial approval for settlements of cases in which the injured worker is represented. Section 440.20(11). Despite that, there is no similar avenue for revisiting a decades-old settlement in Florida. If a settlement can be undone by either party, some would argue that the expense of settlement might be hard(er) to justify.
The final matter of interest in this litigation is the court's reminder regarding the substantive rights of the parties. It is difficult for many in the workers' compensation community to accept that statutory rights and obligations are controlled by the statute in effect when an accident or injury occurs. The subsequent amendment of the statute may change procedural processes, but no substantive rights and obligations. It therefore remains pertinent for everyone involved in any claim to return to that applicable statute, even decades later. Workers' compensation claims may indeed have significantly long lives as Mr. Block's 1988 injury has.
