Can unsettling post-settlement events unsettle a settled workers' compensation claim?

Florida's First District Court of Appeal (DCA) recently confronted this question in a sympathetic case (Cordovez v. High-Rise Installation/Bridgefield; Fla.1st DCA 10/29/2010) forcing a closer look at the fine line between oft-encountered “buyer's remorse” and more rarely encountered authentic grounds for doing the virtually unthinkable: setting aside a settlement and general release where unanticipated post-settlement events present dramatic new circumstances for one of the parties — almost always the injured worker in such circumstances.

Attempts to “unsettle” settled workers' compensation claims, once thought impossible, gained traction following a few breakthrough successes in the late 1970s. Settlements were then greatly impacted by ensuing amendments, but after experiments with sharply curtailed settlements, the Florida Legislature began loosening its grip to the point where, in 2000, settlements no longer required judicial approval. Not even the attainment of maximum medical improvement (MMI) was a prerequisite to complete settlement any longer (although some protective procedures remain in place for the unrepresented claimant).

For a time, few knew exactly what to do with questioned settlements under a statute no longer requiring — or even permitting — judicial oversight of same (except as to fees). Consequently, activity died down until a few years ago when it was clearly determined that the Judge of Compensation Claims (JCC) did have jurisdiction over a party's efforts (usually the injured worker's) to set aside a settlement, and that inquiry was to be founded — uniquely in the workers' compensation setting — on contract law principles. Since then it has been “open season” on this issue.

Justifiable Buyer's Remorse?

Regardless of what legal principle is latched onto as a vehicle for hoped-for set aside (often by a successor attorney, and often citing ineffective original counsel and/or such counsel acting without claimant's authority), scratch deep enough and the primary motivation often is what has come to be known as “buyer's remorse” — a claimant saying in effect: What have I done!

More problematic is the situation faced by the JCC in the Codovez case, where the claimant, who had suffered a known head injury, was diagnosed with concussion and had lingering symptoms at the time of mediation, at which time he settled his case — while represented — executing a release shortly thereafter. Several months after mediation, he began experiencing unusual symptoms, ultimately diagnosed as a cerebral fistula, a serious condition that required delicate brain surgery at significant cost.

The problem for all concerned was this: In the hearing to set aside the settlement agreement, expert testimony established that a) the fistula was causally related to the original injury, and b) no one could either have diagnosed it or have seen it coming at the time of the mediation. It was a completely concealed “time bomb.”

At trial the claimant argued this “unknown” injury constituted good grounds for setting aside the release, and he was supported by case law that holds where there is a completely unknown injury that first manifests itself after a settlement, rescission is the only fair thing to do. The employer/carrier (E/C) argued: But what constitutes an “unknown” injury?

Agreement and Disagreement

All were in agreement that the claimant had suffered “a head injury,” and as such, this admittedly unforeseen diagnosis stemmed from a “known” injury, i.e., the head injury. It would have been different, E/C argued, had a tumor in the claimant's hip emerged later on (and was somehow related). The trial court agreed with the employer, and claimant appealed.

The matter drew the attention of the court as oral argument was scheduled and the argument was selected as a demonstration before students from Florida State University Law School. The students also were invited by the court to participate with the attorneys (the author of this article for the defense, and opposing counsel Jay Levy of Miami) in an extended question and answer session afterward.

The claimant's appeal had gained some traction. There would probably be an opinion, and the defense recognized a lot was at stake here; namely, the sanctity of closure in the workers' compensation setting vis a vis a potentially broader class of circumstances permitting the setting aside of settlements and releases than the traditionally minuscule set allowed previously. (The oral argument can be viewed at the 1st DCA website link [ http://www.1dca.org/video/2010.htm ] for Case No.: 1D09-5786; date: 9/28/10).

The court affirmed, and in doing so issued a detailed opinion (at 47 So.3d 1120, Fla 1st DCA 2010), a process often intended as instructive to bench and bar given that no such opinion is needed in affirming (as opposed to a reversal, where setting forth the court's reasoning is essentially mandatory). The court determined that where, in the broadest possible sense, the injury is known (in this case, “head injury”), it will not matter that an unknown and also unknowable manifestation, even with an entirely new diagnosis, later emerges or emerges from hiding.

The court also added another useful ruling, in two parts: There is a higher burden on a claimant seeking to vacate a settlement that is reached in formal mediation, and while represented by counsel.

The court closed with a notable comment issued by the trial judge, namely that: “parties have …the right to make, what is in apparent hindsight, a bad bargain, especially when represented by counsel.”

All this underscores the need for very careful work in the case of an unrepresented claimant. But even there, with adequate understanding of the circumstances made available at the time of settlement, the same basic outcome would obtain.

In summary, the newly patched dike is again holding the water back securely!

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