5.5 Compromise Settlements

• Library: Workers' Compensation Practice in Virginia (Virginia CLE) (2020 Ed.)

5.5 COMPROMISE SETTLEMENTS ¹⁰²

5.501 Compensation Claims.

A. In General. The compromise settlement procedure is useful where the parties are unable to reach an agreement on the material facts that would entitle the worker to benefits and where the parties do not wish to pursue the claim in a hearing. A compromise settlement may also be appropriate after an initial or subsequent award of benefits if the medical condition has stabilized. In determining whether a compromise settlement is appropriate, counsel must consider the effect it may have on other benefits such as Social Security Disability, Medicare, or third-party actions.

Voluntary settlements between the parties on disputed compensation claims are specifically authorized by section 65.2-701 of the Virginia Code, as long as the amount of the settlement and the time and manner of payment are approved by the Commission in accordance with section 65.2-701. section 65.2-701 of the Virginia Code, provides that a settlement will be approved by the Commission only if it serves the best interests of the employee or the employee's dependents. ¹⁰³ The Commission scrutinizes all settlements to ensure that this criterion is met in all cases.

B. Lump Sum or Structured Settlement. The parties may agree to make a lump sum payment to compromise any wage loss, permanent partial, or medical benefits. In some cases a structured settlement involving an annuity will be appropriate. ¹⁰⁴ The only distinction between a lump sum settlement and a structured settlement is that, in the latter, payments are made in an annuity format. According to Rule 1.7, the petition must state that the company issuing the annuity is authorized by the State Corporation Commission to transact the business of insurance in the Commonwealth and that, in case of default, the employer or carrier remains responsible for payment. ¹⁰⁵

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Practitioners should be aware that a lump sum settlement may have the effect of reducing the injured worker's benefits under the Social Security Disability Act. Although legal, medical, and related expenses may be deducted from the amount used to calculate this reduction, it is important that the amount of these expenses be specified in the settlement agreement to ensure that they are not used. A worker who is or may be entitled to Medicare benefits must have settlements reviewed by the Centers for Medicare and Medicaid Services to protect Medicare's potential interest. ¹⁰⁶

C. Petition and Order. The contents of the petition and the order to be used in compromise settlements are provided in Rule 1.7. The petition must set forth the matter in controversy, the proposed terms of the settlement, the proposed method of payment, and any other facts that will enable the Commission to determine whether the best interests of the injured worker will be served on approval of the settlement. ¹⁰⁷

D. Attorney Fees. Attorney fees in compromise settlements are subject to the approval and award of the Commission. An injured worker may not be charged a fee in excess of that approved by the Commission. ¹⁰⁸

E. Commission...