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California: Third-Party Settlement; Credit and Attorney’s Fees

September 22, 2022 (4 min read)

In a noteworthy board panel decision, Pena v. Aqua Systems, the WCAB addressed the principles to be followed when a defendant asserts a third-party settlement against its liability to pay workers’ compensation benefits. In this case, defendant and applicant stipulated to a third-party credit to be applied against applicant’s attorney’s fees, without the involvement of the applicant’s attorney. The panel rescinded that part of the decision and found that the third-party credit cannot be asserted against applicant’s attorney’s fees and that such fees must be commuted from the far end of the award. While the third-party credit can be asserted against the life-pension benefits, further proceedings are required to determine whether it can be asserted against further medical treatment. Read the LexisNexis headnote below.


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Miguel Pena, Applicant v. Aqua Systems, Great American Insurance Company, administered by Athens Administrators, Defendants

W.C.A.B. No. ADJ10308959—WCAB Panel: Chair Zalewski, Commissioners Sweeney, Razo

Workers’ Compensation Appeals Board (Board Panel Decision)

Opinion Filed September 14, 2022

Publication Status:  CAUTION: This decision has not been designated as a “significant panel decision” by the Workers’ Compensation Appeals Board. Practitioners should proceed with caution when citing to this panel decision and should also verify the subsequent history of the decision, as these decisions are subject to appeal. WCAB panel decisions are citeable authority, particularly on issues of contemporaneous administrative construction of statutory language [see Griffith v. WCAB (1989) 209 Cal. App. 3d 1260, 1264, fn. 2, 54 Cal. Comp. Cases 145]. However, WCAB panel decisions are not binding precedent, as are en banc decisions, on all other Appeals Board panels and workers’ compensation judges [see Gee v. Workers’ Comp. Appeals Bd. (2002) 96 Cal. App. 4th 1418, 1425 fn. 6, 67 Cal. Comp. Cases 236]. While WCAB panel decisions are not binding, the WCAB will consider these decisions to the extent that it finds their reasoning persuasive [see Guitron v. Santa Fe Extruders (2011) 76 Cal. Comp. Cases 228, fn. 7 (Appeals Board En Banc Opinion)]. LexisNexis editorial consultants have deemed this panel decision noteworthy because it does one or more of the following: (1) Establishes a new rule of law, applies an existing rule to a set of facts significantly different from those stated in other decisions, or modifies, or criticizes with reasons given, an existing rule; (2) Resolves or creates an apparent conflict in the law; (3) Involves a legal issue of continuing public interest; (4) Makes a significant contribution to legal literature by reviewing either the development of workers’ compensation law or the legislative, regulatory, or judicial history of a constitution, statute, regulation, or other written law; and/or (5) Makes a contribution to the body of law available to attorneys, claims personnel, judges, the Board, and others seeking to understand the workers’ compensation law of California.

Disposition:  Reconsideration is granted, the December 22, 2021 Findings and Award is rescinded, and a new Findings of Fact is substituted. The matter is returned to the trial level for further proceedings consistent with this decision.

Third-Party Settlements—Approval of Settlement By WCAB—Credit and Attorney’s Fees—WCAB, granting reconsideration and rescinding WCJ’s decision, held that applicant’s workers’ compensation attorney was entitled to 15 percent attorney’s fee to be commuted from far end of applicant’s permanent total disability award, and that defendant was entitled to third-party credit of $474,705.79 applicable against applicant’s life pension (and potentially against award of future medical care) but not against applicant’s attorney’s fee, notwithstanding Stipulation to Credit between applicant and defendant in applicant’s third-party case to immediately apply credit against all unpaid workers’ compensation benefits, when applicant’s attorney was never notified of third-party settlement and did not execute or consent to Stipulation to Credit (which was signed only by defendant’s attorney and applicant’s attorney in civil case), and parties did not obtain WCAB approval prior to executing Stipulation to Credit, and WCAB reasoned that releases purporting to exempt employers from liability for workers’ compensation benefits are prohibited and presumptively invalid unless WCJ determines that they meet requisite criteria for approval of settlements per Labor Code §§ 5000-5006, that Stipulation to Credit in this case was presumptively invalid because there was no evidence WCJ ever inquired into its fairness or adequacy, and since agreement was not signed by applicant’s attorney, it did not meet even minimum statutory requirements for approval, and that because defendant was on notice for entire pendency of workers’ compensation case that applicant was represented by attorney, and failed to seek applicant’s attorney’s agreement to subject attorney’s fee lien “to an immediate award of credit,” there were no legal grounds to allow defendant to apply its third-party credit to attorney’s fee. [See generally Hanna, Cal. Law of Emp. Inj. and Workers’ Comp. 2d §§ 11.25[1], [2], 29.07[1], [2]; Rassp & Herlick, California Workers’ Compensation Law, Ch. 12, § 12.04[2].]

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