Why Some Workers' Compensation Claims Don't Settle at Mediation

Most any workers' compensation claim can be settled at mediation, including pro se claims, uninsured claims, denied claims, claims of fraud, and claims involving SS/Medicare, LTD/STD, retirement, pension, and health insurance issues. Of course, according to the NCIC, only about 75% of all workers' compensation claims are settled at mediation. The following entry is a discussion of why 1/4 of all workers' compensation claims do not settle at mediation.

I. The Claim was not Properly Prepared Prior to Mediation.
Probably the biggest reason a claim fails to settle at mediation is either the Plaintiff's attorney, or the Defendants' attorney, dropped the ball. So, since the mediator has little control over the preparation of the parties' respective cases prior to mediation, I have prepared a list of questions the mediator can ask counsel when the claim is first scheduled for mediation to ensure that the parties are moving the case toward resolution at mediation.

A.Have you Determined All Disputed Issues?

B.If Applicable, Have you Started Working on Medicare Set Aside and CMS Approval?

C.Has All Discovery Been Answered?

D.Has all Relevant Information Been Updated Prior to Mediation?

1.Rating(s)
2.Restrictions, including all Functional Capacity Evaluations
3.Causation/Future Treatment Opinions from All Physicians
4.Medical Bills, both paid and unpaid
5.All medical records, including any prior relevant Medical records

E.Has a Demand Been Sent Prior to Mediation?

II. Why Well-Prepared Workers' Compensation Claims Do Not Settle at Mediation

A. There is an Allegation of Fraud or Similar Misconduct on the Part of the Plaintiff.

Recently, I have had several claims which have involved allegations of fraud or other misconduct. One involved allegations that the Plaintiff was working while collecting WC benefits; the other case involved an allegation that the Plaintiff was injured exercising at a gym outside of work, and was making a fraudulent claim for WC benefits. Neither case, to which I refer, settled at mediation. I have also handed many cases where the Plaintiff failed a drug test either immediately after the injury, or during treatment for a compensable injury. The reason I believe these cases are so difficult to settle is because of the emotional involvement of either the Defendants, or the Defendants' attorney.

Allegations of workers' compensation fraud seem to be more pervasive of late. Personally, I believe this situation is the result of employers' reaction to a perception that their premiums are out of control because of fraudulent claims. This perception has caused employers to put more pressure on the insurance companies, and third party administrators, to deny claims where there is even a whisper of fraud or misconduct. I also think rising premiums have motivated employers to allege fraud, or similar misconduct, without any evidence, simply to ensure that the claim is denied.
At mediation, it is the difficult task of the mediator to get to the heart of these allegations of fraud and misconduct, and deal with them in a logical manner, focusing on what evidence will actually be presented at hearing and the legal import of such evidence, as opposed to emotion based on rumor and hearsay.

B. The Plaintiff is only Interested in Medical Treatment.

From the Plaintiff's perspective this can be the most difficult issue to deal with in an accepted claim. There are 2 major problems confronting the plaintiff's attorney, and the mediator, in this situation. First, some injuries cannot be cured. To give an example, right now, in this country, there is no consistently effective way to treat low back injuries. Disc and/or spinal fusion surgery is usually effective in relieving leg pain, but not necessarily back pain, which can be just as debilitating. Spinal surgeons are now regularly using prosthetic disc replacements, but the FDA has only approved single level disc replacements in this country.

The second major problem confronting all parties is that the WC system cannot compel a treating physician to perform surgery, perform a certain diagnostic test, prescribe medication, prescribe physical therapy, prescribe a functional capacity evaluation, etc. So, even if the Plaintiff, or his advocate, believes that a certain treatment protocol may be effective, it is up to the physician to effectuate such procedure. While this may seem obvious, it is not obvious to a lot of Plaintiffs who come to attorneys looking for help in compelling the treating physician to "make them better." When faced with this request, I have on many occasions referred plaintiffs to other physicians, who have sometimes been successful in treating the plaintiff. As a mediator in such a case, the focus of the mediation should be on facilitating an agreement between the parties to refer the Plaintiff to another physician. Even if the second opinion physician does not offer further treatment, the second opinion can be effective in simply confirming the efficacy of the plaintiff's current treatment protocol.

C. Plaintiff is Interested in a Remedy not Offered Under the Workers' Compensation Statute, i.e. a suit Against the Employer for Negligence, Wrongful Termination, Pain and Suffering, etc.

Some Plaintiffs have a media-generated perception of their right to "sue" the employer for negligence, wrongful termination, pain and suffering, etc. Sometimes, there are other viable claims beyond the scope of workers' compensation, such as wrongful termination (REDA) claims, FMLA (Family Medical Leave Act) claims, ERISA (claims under an ERISA benefits plan). If there is such a claim, which is viable, it should be filed as soon as possible. Most such claims have to be filed within 180 days of the inciting event. If such claim has been filed prior to mediation, it is possible to mediate to a successful resolution both the WC claim and the ancillary claim (REDA, FMLA, ERISA, etc.) at the time of mediation, as long as the Plaintiff understands the limited value of the ancillary claim standing alone. Finally, the Plaintiff's attorney should spend time with the Plaintiff when the demand is discussed, and again before mediation, explaining that pain and suffering are not elements of their workers' compensation claim.

D. No SSDI Benefit to Settling the WC case because No SSDI Offset
Most of the time, an injured employee who is receiving WC (Workers' Compensation) benefits and SSDI (Social Security Disability Income) benefits simultaneously will benefit from settling his/her WC case by taking advantage of pro-rating the settlement proceeds of the WC case over the life expectancy of the injured worker, thereby reducing the SSDI offset. Essentially, SSDI uses a formula whereby the workers' compensation benefits of an injured employee are subtracted from 80% of the employee's ACE (Average Current Earnings). Usually, this leaves the incremental difference between 80% of the ACE and the 66 2/3% WC benefits, i.e. roughly 13 1/3% of the worker's pre-injury wages, to be paid by SSDI as long as WC benefits are paid on a weekly basis. When the WC case is settled, the injured worker can prorate his share of the settlement proceeds over his life expectancy and thereby significantly reduce the WC offset, increasing his benefits from SSDI.

However, this is not always the case. If an injured worker is earning enough money, they will be capped by the maximum WC compensation rate, which will create a larger gap, i.e. larger than the normal 13 1/3%, between their ACE (Average Current Earnings) and the WC benefits, allowing a larger, if not full, recovery under SSDI. For example, if an employee is earning more than about $75,000.00/yr., there may not be any offset in the SSDI benefits. To give a numeric example, if an employee is earning $75,000.00/yr., and he/she were injured in 2006, the WC benefit is maxed out at $730.00/wk., or $3,163.34/mos. Under SSDI rules, 80% of the ACE would be $5000.00/mos. The monthly WC benefit of $3,163.34, when subtracted from that figure, leaves a figure of $1,836.66/mos., which allows this injured employee to collect $1,836.66 from SSDI benefits, which is nearly the maximum an individual can receive on SSDI. Therefore, settlement of this particular WC case would not increase the SSDI benefits. Depending on any applicable LTD (long term disability) policy language, this result may also occur under similar formulas for WC offsets in LTD policies.

E. Medicare Set Aside Agreement (MSA)
While most Defendants now require MSAs in virtually any case settling over $10,000.00, where there is any chance of the Plaintiff-employee receiving Medicare benefits, the actual cost of the MSA is being borne by the Plaintiff in self-administered MSA trusts. For that reason, in my opinion, the advent of the MSA has become a disincentive to Plaintiffs in larger cases to settling the WC case. Let me explain. If an injured employee is simultaneously entitled to SSDI/Medicare benefits and WC benefits, all authorized medicals related to the WC claim are paid by the Defendants. All non WC related Medicare qualified expenses are paid by Medicare/CMS. However, after the claim is settled, WC no longer pays any medical expenses and there is some chance that Medicare may be asked to pay for future WC related expenses. Therefore, Medicare/CMS requires a MSA which allocates a portion of the settlement into a trust to pay for future WC related Medicare qualified expenses after the settlement of the WC claim. The problem for the Plaintiff is that the cost of the MSA is incorporated into the settlement as a satisfaction of all future WC related Medicare qualified expenses. The Plaintiff is left to administer the trust, and bear the risk that CMS may not approve the set aside, or that even if Medicare/CMS approves the MSA, that CMS may not agree with the Plaintiff's accounting of their Medicare qualified expenses. According to CMS, the Plaintiff has to account for and prove payment for WC related Medicare qualified expenses up to the total amount in the segregated MSA account before CMS will start paying these bills. The problem is that all of these MSA and CMS issues are being borne by the Plaintiff. For that reason, if the MSA required by the Defendants is large enough and the risk of future WC related medical costs is great enough, there is not much incentive to the Plaintiff to settle such a case, unless the consideration for the settlement is substantial. I recently mediated a case where the last offer was $800,000.00, inclusive of a $95,000.00 self-administered MSA. The Plaintiff was taking considerable pain medications, which at that time were not covered by Medicare/CMS. The case did not settle at mediation. Now, because Medicare does pay for prescriptions, the MSA was revised to $295,000.00, because the Plaintiff has a life expectancy of over 40 years.

F. Catastrophic Injury Claims
Perhaps the most difficult claims to settle at mediation are the catastrophic injury claims. Similar to the claims where an MSA is required, settlement of these claims shifts the burden and risk of all future wage loss, medical, housing, and transportation needs to the Plaintiff for the remainder of the Plaintiff's life. Of course these claims are further complicated by the necessity of an MSA. Using the same example as used above, which case I first mediated in February, 2005, we obtained an order in that case for the Defendants to provide Handicapped Accessible Housing and ongoing Transportation and later an order providing for a Handicapped Modified Vehicle (IMS). The difficult task is convincing the Defendants to give up enough in cash and structure to make the settlement of a catastrophic injury claim less risky for the Plaintiff. Despite the risk, such Plaintiffs still benefit from the settlement by way of the reduction of the SSDI offset, and the peace of mind of having a lifetime annuity, and cash enough to purchase modified housing and transportation and ongoing medical supplies.

G. Unknowledgeable or Unskilled Mediator
Personally, I have had the good fortune of working with many skilled mediators. I have mediated many hundreds of workers' compensation claims. There is a difference between a skilled and knowledgeable mediator, and one who is either unskilled, or unknowledgeable. An unknowledgeable mediator simply relays demands and offers without any input into the issues; without exploring the upside and downside to pursuing the claim to litigation. However, it is possible for a mediator to have tremendous knowledge of the issues, but to be too pushy. Such a mediator is equally unsuccessful because both parties feel pressured into acquiescing to the will of the mediator, as opposed to reaching an agreement they have come to through their own volition. The successful mediator is the one who is both knowledgeable on the issues, and can also subtly lead the parties, slowly but surely to a compromise which the parties believe to be of their own choosing.