The Compromise and Release and the Hidden Glitches of “Paragraph 3”

After a Compromise and Release (C&R) has been drafted, executed and approved, it is common for parties to feel confident that they have resolved all relevant issues in a case. Defendants proceed to close out their files and move on, only to be unpleasantly surprised a while later, when applicant files a claim for an injury, an injury that defendants were certain had already been settled by the C&R.

How could that happen?

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A review of certain recent WCAB Noteworthy Panel Decisions (NPD) shows exactly how that might happen. They provide lessons for future drafting of C&Rs to avoid these unexpected glitches in case resolution.

The NPD of Orellana v. United Care Services, Inc., 2015 Cal. Wrk. Comp. P.D. LEXIS 761 [2015 Cal. Wrk. Comp. P.D. LEXIS 761], dealt with Paulina Orellana, who was working as a certified nursing assistant, when she sustained a specific injury to her back on 9/22/2014, while pushing a patient. In addition, she also sustained a cumulative trauma (CT) injury to her back and other body parts ending on 10/1/2014.

Applicant filed the following workers’ compensation claims:

•   On 11/4/2014 applicant filed a claim for cumulative trauma injury ending 10/1/2014 (Case #ADJ9740118). This claim settled on 12/10/2014 with a Compromise and Release (C&R) in the amount of $15,000.
•   After the CT claim was settled by C&R, applicant filed a claim on 4/6/2015, for her specific injury of 9/22/2014 (Case #ADJ9913367)

When applicant filed her second workers’ compensation claim for the specific injury of 9/22/2014, defendants were quite unpleasantly surprised. They had assumed that ALL of applicant’s claims had been resolved by the C&R of 12/10/2014.

In fact, defendants had specifically drafted an addendum to the C&R, which they had thought effectively dismissed any future claims and included the following language:

“All claims of injury to any body part, system or condition not listed in this Compromise and Release are hereby dismissed with prejudice.”

In addition, they had made sure they had complied with 8 Cal. Code Reg. § 10874 [R 10874] and Labor Code Sections 5003- 5004 [LC 5003- 5004] and had used the mandated C&R form  “DWC WCAB FORM 15 (Rev. 10/2005)” which can be found at this link: https://www.dir.ca.gov/dwc/forms/CR15.pdf

Upon further inspection however, the parties discovered the conflict and possible misunderstanding that might arise due to the wording of the ultimately drafting of the C&R package.

Paragraph 1 of the mandated WCAB C&R Form 15 provides the basic information regarding the applicant, such as the birth date, location of employment and occupation. This is followed by a series of five lines in which parties are to “State with specificity the date(s) of injury(ies) and what part(s) of body, conditions or systems are being settled.”

In the Orellana case, the parties entered in paragraph 1, only the cumulative trauma ending 10/1/2014, which is logical considering that applicant had not yet filed a claim for her specific injury of 9/22/2014. So there was no mention at all in the C&R of this specific injury to applicant’s low back.

Paragraph 2 of the mandated WCAB C&R Form 15 provides for release of liability of defendant from all claims that may arise in the future by applicant “as a result of the above-referenced injury(ies).”

But it is Paragraph 3 of this mandated WCAB C&R Form 15 that contains the language relevant to this case. It provides:

“This agreement is limited to settlement of the body parts, conditions, or systems and for the dates of injury set forth in Paragraph No. 1 despite any language to the contrary in this document or any addendum.” (Emphasis added.)

In addition, to completing the mandated WCAB C&R Form 15, the parties in the Orellana case attached an addendum to the form which reads in part as follows:

Addendum: “Applicant warrants and represents, and the parties stipulate, that Applicant did not sustain any compensable injury as a result of Applicant’s employment by defendant other than the alleged injuries listed in the Compromise and Release, and that as a result of said alleged injuries Applicant did not sustain injury to any body part, system, or condition not listed in this Compromise and Release. All claims of injury to any body part, system or condition not listed in this Compromise and Release re hereby dismissed with prejudice.” (Emphasis added.)

Defendant argued that since the parties had agreed to add this addendum to the C&R, that ALL claims of injury, even those not listed, such as the 9/22/2014 specific injury to the low back, had effectively been dismissed with prejudice, through this addendum language of the C&R.

However, applicant countered that Paragraph 3 overruled that addendum and that Paragraph 3 allowed applicant to pursue her specific injury claim of 9/22/2014.

The issue was brought to trial. It then became the duty of the trier of fact to determine what the intentions of the parties were when drafting the C&R. Did they intend to settle only the CT? Or did the parties intend to settle both the CT and any future claims such as the specific injury? Was there a “meeting of the minds” on this issue?

Ultimately on 9/28/2015, the Judge issued his Findings and Order and concluded:

“While it is true that the parties added an addendum to the Compromise and Release Agreement, they did not delete the language found in Paragraph 3 and replace it with the language contained in paragraph 1 of the Addendum to Compromise and Release.

Therefore, it is the finding of this Court that the specific injury claim was not resolved by the Compromise and Release in case number ADJ9740118.”

QUERY: Should parties delete the language found in Paragraph 3 to avoid issues like this in the future? If so, will Judges approve such amendments to the C&R considering 8 Cal. Code Reg. § 10874 requires parties use Form 15 provided by the WCAB?

PRACTICE TIP: Although the judge in this case found that paragraph 3 superseded any addendum, it is not certain the result would have been different, even if paragraph 3 had been deleted. Regardless of whether Paragraph 3 is deleted, parties should investigate claims thoroughly to insure there are no contradictions or outstanding issues left unresolved at the time of the execution of the C&R. Parties should make certain all body parts and all dates of injuries are listed in Paragraph 1 to avoid any surprises such as the one in this case.

For cases with similar results, see the following writ denied and NPD cases:

1. Johns Mansville v. Workers’ Comp. Appeals Bd. (Cooper) (2016) 81 Cal. Comp. Cases 216 [81 CCC 216] (writ denied). The WCAB affirmed the WCJ’s finding that the decedent’s surviving spouse was entitled to pursue a claim for death benefits arising from the decedent’s death caused by malignant peritoneal mesothelioma, which involved injury to the decedent’s abdomen, stomach and peritoneum and not to his “lungs and respiratory system” which were settled in the decedent’s 2008 Compromise and Release Agreement. The WCAB determined that the defendant’s attempt to incorporate a general release of the decedent’s claim for injuries other than his lungs and respiratory system into the addendum to the Compromise and Release was void. Here, the Compromise and Release was expressly limited to the listed body parts, conditions or systems regardless of the contrary language in any addendum, the general release of future claims and causes of action specifically referred back to the injuries listed, and the specific release of death benefits applied only to injuries covered by the agreement. The WCAB concluded that the release of death benefits in the Compromise and Release for injury to specifically identified body parts did not release the defendant from paying death benefits resulting from any injury or any body part.

2. Rodriguez v. Air Serv Corporation, 2015 Cal. Wrk. Comp. P.D. LEXIS 728 [2015 Cal. Wrk. Comp. P.D. LEXIS 728]. The WCAB affirmed the WCJ’s finding that the applicant was permitted to pursue a claim for cumulative trauma to her left shoulder ending on 5/21/2011, notwithstanding the defendant’s assertion that it had intended to include the cumulative trauma claim in the 2014 compromise and release agreement settling the applicant’s claim for a 6/11/2010 specific injury to her head, neck, low back, and right shoulder. Here, the applicant credibly testified that she intended to settle only the specific injury case (which included the right shoulder injury) but not the cumulative injury to her right shoulder. The defendant knew that the applicant had two separate claims at the time the applicant’s case was settled. The WCAB found that the exclusion of the cumulative injury claim from the settlement was not a mutual mistake but rather a unilateral mistake by the defendant. If the defendant wanted to include the cumulative trauma claim in the settlement, the defendant was required to properly identify the cumulative trauma injury in the compromise and release agreement, which the defendant did not do. The addendum to the compromise and release agreement, stating that the applicant released the defendant from all liability for injuries during the applicant’s entire period of employment, was superseded by the provision in the pre-printed compromise and release form limiting the settlement to the body parts specifically identified in the compromise and release agreement.

CONCLUSION:

Settlement documents are usually a welcome resolution by both the parties and the trial judge, as it means putting an end to the controversy and moving forward to other matters. However, it’s important to make sure that settlement documents are well drafted to reflect the intent of the parties as indicated in the NPDs cited above.

Also, parties need to make sure the settlement amount is adequate and includes an amount sufficient for the injured worker’s future medical treatment. In determining adequacy, substantial medical support on this issue will be the key to obtaining an Order Approving. In addition, make sure that the document has been properly signed and executed, so as to avoid delays and even sanctions as occurred in the case of Marchese v. The Home Depot, 2009 Cal. Wrk. Comp. P.D. LEXIS 423 [2009 Cal. Wrk. Comp. P.D. LEXIS 423].

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