Iowa Workers' Compensation Act Changed to Allow New Type of Settlement

Until this year, parties to a workers'' compensation claim could settle a case under an open-file basis, called an Agreement for Settlement, or a closed-file basis, called a Compromise Settlement.
Open file settlement. If the parties reach an open file Agreement for Settlement, they stipulated that a work injury had occurred, and stipulated to an amount for compensation, but allowed medical care to continue. Any disputes on medical care would be settled by the Iowa Workers'''' Compensation Commissioner''s Office.
Closed file settlement. Under a compromise settlement, the parties agree that there is a bona fide dispute whether a claim is compensable, and agree to a specific sum of money to settle the dispute. No medical bills are paid, unless specifically agreed to as part of the settlement, and no future medical or pharmacy care is available.
In 2008, however, the Iowa General Assembly allowed for a hybrid type of settlement, in which the parties agree that there is a dispute whether the injury is work-related, agree to a specific sum of money to settle the dispute, and agree to provide medical and pharmacy care for a specified period of time, subject to review by the Commissioner’s Office.
The addition to the Workers’ Compensation Act is found at §85.35(5)A, and provides: "The parties to any settlement made pursuant to this section may agree that the employee has the right to benefits pursuant to section 85.27 under such terms and conditions as agreed to by the parties in the settlement, for a specified period of time after the settlement has been approved by the workers’ compensation commissioner. During that specified period of time, the commissioner shall have jurisdiction of the settlement for the purpose of adjudicating the employee’s entitlement to benefits provided for in section 85.27 as agreed upon in the settlement."
The change allows the parties to agree to a specific sum of money to settle a claim, close out the employer’s risk of future liability, and provide medical and pharmacy care for the person who has alleged a work injury.
In a less noteworthy bill signed into law, the Iowa General Assembly amended §85.36 of the Iowa Code, to require that shift differential pay be counted as part of wages when the insurance carrier calculates average wages and the weekly workers'' compensation rate. See H.F. 2658, recently signed by Iowa Governor Culver.


H. Edwin Detlie
  • 06-11-2008

Do you foresee that there will be more settlements overall in Iowa with this hybrid settlement approach? Is it a win-win for both claimants and employers/insurers? What traps, if any, are there for claimants who enter into this type of hybrid settlement?