Opinion
No. 057423-95
October 7, 2002
REVIEWING BOARD DECISION
(Judges Levine, Carroll and Costigan)
APPEARANCES
Mark J. Nevils, Esq., for the insurer at hearing Dorothy M. Linsner, Esq., for the insurer on appeal Susan Saucier, Esq., for the Trust Fund at hearing Pedro Benitez-Perales, Esq., for the Trust Fund on appeal
The insurer and the Workers' Compensation Trust Fund crossappeal a recommittal decision of an administrative judge. In Cosgrove v. Penacook Place, 15 Mass. Workers' Comp. Rep. 166 (2001), we reversed the judge's original denial of the insurer's petition for reimbursement pursuant to G.L.c. 152, § 37, The judge had reasoned that monies paid pursuant to a lump sum agreement — arguably allocable to § 34A exposure — could not be reimbursed under § 37, since liability for § 34A benefits had never been established. We concluded that the judge's approach was erroneous, and recommitted the petition for the judge to determine the reasonableness of the lump sum agreement in light of the potential exposure to § 34A liability and to consider the amount to allocate from the lump sum for § 34A. Cosgrove, supra at 174. In this recommittal decision, the administrative judge awarded the insurer some of the reimbursement that it sought. But for one arithmetical error, which we reverse, we conclude that the judge has properly followed the order of recommittal, and we affirm the decision. We also summarily affirm the decision as to the Trust Fund's argument on appeal regarding reimbursable amounts of medical benefits contingent on the establishment of entitlement to reimbursement under one of the other sections enumerated in § 37.
"Section 37 provides, in pertinent part:
Whenever an employee who has a known physical impairment which is due to any previous accident, disease or any congenital condition and is, or is likely to be, a hindrance or obstacle to his employment, and who, in the course of and arising out of his employment, receives a personal injury for which compensation is required by this chapter and which results in a disability that is substantially greater by reason of the combined effects of such impairment and subsequent personal injury than that disability which would have resulted from the subsequent personal injury alone, the insurer or selfinsurer shall pay all compensation provided by this chapter. ...
Insurers making payments under this section shall be reimbursed by the state treasurer from the trust fund created by section sixty-five in an amount not to exceed seventy-five percent of all compensation due under sections thirty-one, thirty-two, thirty-three, thirty-four A, thirty-six A, and, where benefits are due under any of such sections, section thirty;. . . provided, further, that no reimbursement shall be made for any amounts paid during the first one hundred and four weeks from the onset of disability or death.
The insurer and the Trust Fund stipulated to all of the elements necessary to make out a cognizable petition for second injury reimbursement under § 37. (Dec. 2-3.) The only issue left to be litigated on recommittal was the amount of the reimbursement to which the insurer was entitled. of the $100,000.00 awarded to the employee in the lump sum agreement, the insurer claimed seventy-five percent of $78,000.00 plus appropriate contingent reimbursement for medical benefits. Prior to the lump sum, § 34 benefits had been paid for more than two years. (Dec. 6-7.)
The judge disagreed with the insurer's assertion that $78,000.00 was the amount of benefits paid in the lump sum settlement that were reasonably allocated to § 34A exposure. The judge reasoned:
The amount of $8,369.00 should be excluded from reimbursement because it represents 42.16 weeks of § 34 benefits that remained at the time of the lump sum settlement. That leaves a balance of $69,631.00. The maximum possible exposure to § 35 benefits should be excluded from reimbursement as it is arguable that a substantial amount of the lump sum settlement represents payment for § 35 benefits. That maximum possible exposure to § 35 is seventy-five percent of her § 34 benefits, or $148.95 per week for 260 weeks, or $38,727.00. The previous balance of $69,631.00 minus $38,727.00 equals $30,904. I determine in accordance with § 37 that 75% of the $30,904.00 should be reimbursed by the Trust Fund to the insurer. I also determine that the Trust Fund should reimburse the insurer 75% of medical payments pursuant to § 30 that the insurer made on behalf of the employee after the first one hundred and four weeks from the onset of disability.
Recently, the Appeals Court reversed our interpretation of § 34A, which read into the statute a requirement of exhaustion of § 34 benefits prior to entitlement to permanent and total incapacity benefits. See Slater's Case, 55 Mass. App. Ct. 326 (2002). As a result, insurers can now claim entitlement to reimbursement prior to the exhaustion of the payment of other weekly benefits. Since we affirm this judge's allocation of § 35 benefits within the amount paid in the lump sum agreement, the issue does not arise.
(Dec. 7-8; footnote added.) The judge supported his conclusions with subsidiary findings that the employee was a supervising cook at the time of her subsequent injury, that she had made no attempt at vocational rehabilitation at the time of the lump sum, and that there was no medical documentation of permanent and total disability in the record. (Dec. 5.)
The insurer's first argument on appeal is correct. The judge erred in his calculation of the "maximum possible exposure to § 35" in the lump sum agreement. Where § 34 benefits are paid to exhaustion (156 weeks), only four years of § 35 benefits are available to the employee, not five years as assumed by the judge. See G.L.c. 152, § 34, para. 2, and § 35, para. 2. As the judge's allocation took into account that full entitlement to § 34 benefits, any amount allocated to the maximum § 35 entitlement (75% of the § 34 benefits), which necessarily represented payments in excess of four years, was erroneous. We therefore reverse the order as to the amount contained in the judge's $38,727.00 allocation to § 35 which exceeds the four year maximum entitlement.
We affirm the remainder of the decision. The insurer argues on appeal that the decision is erroneous because the judge did not support his implied finding that the employee's level of impairment would improve after exhaustion of § 34 benefits. (Insurer's Brief, 9.) We do not agree. It is the insurer's burden to show that it is entitled to recovery under § 37. See Diliberto v. New England Elec. Co., 11 Mass. Workers' Comp. Rep. 123, 130-131, 135 (1997), aff'd sub nom. Aetna Life Cas. Ins. Co. v. Commonwealth, 50 Mass. App. Ct. 373 (2002); Cosgrove,supra at 173. Accord West's Case, 313 Mass. 146, 153-155 (1943) (although employee and insurer are bound to terms of an approved § 6 agreement [now under § 19, which would also apply to § 48 agreements], employer in subsequent § 28 claim was not collaterally bound by such terms, having had no opportunity to be heard on the matters involved in the agreement; the employee retained the burden of proving the elements of the underlying claim, including that there was an industrial accident). The insurer must convince the judge of the likely emergence of permanent and total incapacity from the status of temporary and total incapacity. And entitlement to § 34A benefits does not simply arise with the exhaustion of § 34 benefits. Just as an employee has the burden to prove entitlement to § 34A benefits, so too the insurer has the burden to prove its entitlement to the amounts attributable to likely § 34A exposure, which it seeks in its petition for § 37 reimbursement. That the judge was not persuaded that the lump sum reasonably represented an incapacity forecast of the employee going directly from § 34 to § 34A is not arbitrary, capricious or contrary to law.
In both Diliberto and Aetna, no special deference was given to the terms of the lump sum agreement that was approved by an administrative judge. West, supra. See A. Cella, Administrative Law and Procedure § 285 (1986) (presumption of regularity is simply a presumption that an administrative agency has acted in a regular and lawful manner; that the proceedings were properly or regularly conducted). In the present case, the insurer did not raise a presumption of regularity. But cf. Harkins v. C.R.A.B., 15 Mass. App. Ct. 964 (1983) (effect of presumption of regularity was to place burden on local board to introduce evidence that monies in lump sum incorrectly allocated). Although in Diliberto liability was accepted by the insurer in the approved lump sum agreement, both the reviewing board and Appeals Court in effect held that the insurer did not meet its burden of proof; the employee's claimed injury was not compensable under c. 152, so that the insurer's lump sum payment for that injury was unreasonable and not reimbursable under § 37.
This illustrates that the more unreasonable the lump sum settlement for the insurer (e.g., accepting liability where there is none; agreeing to an amount reflecting an employee's entitlement to § 34A benefits despite the absence of a supporting medical opinion) the more that lump sum is in the employee's "best interest" and therefore likely to be approved. (Section 48(1) provides that a lump sum agreement is not perfected unless approved "as being in the claimant's best interest.") On the other hand, the more unreasonable the lump sum settlement is for the insurer, the less likely the insurer will receive any or all that it seeks by way of § 37 reimbursement.
"Where. . . the medical evidence establishes present total disability but points to a time when the employee will be capable of performing remunerative work, " upon exhaustion of § 34 benefits, the employee is entitled to § 35 benefits, not § 34A benefits.Marino v. M.B.T.A., 7 Mass. Workers' Comp. Rep. 140, 141, 141-142 (1993).
The employee was not so confident that she would be awarded § 34A benefits had the issue been litigated. A reason she expressed in her lump sum agreement for settling the case was that while she felt unable to obtain and retain meaningful work, she "realize[d] the uncertainty surrounding litigation for § 34A benefits." In addition, the § 11A physician opined that the employee was not at an end result on November 14, 1996. The lump sum agreement was executed and approved on December 31, 1997, without an updated medical report. Furthermore, the employee was, according to the lump sum agreement, only forty years old at the time of the settlement with a life expectancy of forty years. Under § 34A, the employee's tax free weekly benefit would have been $220.67 (without factoring in cost of living adjustments, § 34B); the tax free yearly benefit would have been $11,474.84. The amount of the lump sum proceeds that the employee netted was $78,000.00 after deductions for attorney's fees ($17,000.00) and for an allocation for loss of function ($5,000.00). If the employee prudently invested the net proceeds and received (at that time) a 5% taxable return, her annual taxable income would have been only $3,900.00. The lump sum settlement could reflect the employee's uncertainty of § 34A recovery.
Unlike Woodman v. Sun Life of Canada, 16 Mass. Workers' Comp. Rep. 116 (2002), a case presenting a lump sum agreement executed at the exhaustion of § 34 benefits, the judge's conclusion here is supported by adequate subsidiary facts and inferences drawn therefrom, including that there was no medical documentation of permanent and total incapacity and that the employee was in a supervisory position at the time of the second injury. In Woodman, the judge had merely "supported" her conclusion allocating the maximum entitlement to § 35 benefits to the lump sum amount with the truism that the agreement indicated that the employee" "had concerns that she would not achieve more than § 35 benefits if the matter had been litigated.'" Id. at 118. Moreover, the medical evidence in Woodman went further by establishing a "worsening" of the seventy-one year old employee's condition that warranted a settlement that reflected permanent and total incapacity. Such evidence could support the insurer s claim that the lump sum agreement, executed at the exhaustion of § 34 benefits, reasonably contemplated the likelihood of an immediate permanent and total incapacity entitlement. Id. The case was recommitted to the judge for reconsideration and further findings on the reasonableness of the settlement allocation.
Unless we "intend to stifle the authority and discretion of the judge to weigh" the factors bearing on determining the appropriate amount of § 37 reimbursement, Cosgrove, supra at 174, we defer to the judge's exercise of discretion where it is not abused. The judge passing on a petition for reimbursement is not a mere rubber stamp. "It is . . . appropriate for the judge to review the reasonabless of [the] allocation" in the approved lump sum agreement. Carmilia v. General Elec., 15 Mass. Workers' Comp. Rep. 261, 277 (2001). In the present case, the judge's rationale for awarding the insurer less reimbursement than it desired does not reflect an abuse of discretion or arbitrary or capricious behavior. We cannot say the judge erred in not being persuaded that the insurer met its burden.
The decision is reversed as to the allocation of any amount to § 35 that represents payment in excess of the maximum four years of entitlement after three years of § 34 has been paid. The decision is otherwise affirmed.
So ordered. ______________________ Frederick E. Levine Administrative Law Judge _______________________ Martine Carroll Administrative Law Judge
In my view, the mandate to apply a "reasonableness" standard to the challenged allocation does not mean that the judge may substitute wholesale his assessment of the underlying case for that of the parties who negotiated the settlement and the administrative judge who approved it. G.L.c. 152, § 48. The Trust Fund should be held to the same high standard imposed on a local public employee retirement board and the Contributory Retirement Appeal Board who, like the Fund, were not parties to and not bound by a § 48 lump sum settlement, when they challenged allocations in the. settlement:
[T]he effect of the presumption of regularity (citations omitted) which attached to the settlement by reason of its approval by the division of industrial accidents (see Hansen's Case, 350 Mass. 178, 180 [1966]) was to place the burden on the local board, if it wished to avail itself of an offset under G.L.c. 32, § 14 (2)(a) (citations omitted) to introduce evidence.. .in the course of the proceedings... from which the hearings officer.. .could find that one or more of the specifically identified components of the settlement represented money which should have been paid under one or more of the five sections of G.L.c. 152 which are listed in the aforementioned § 14(2)(a).
That statute provides for an offset between, inter alia, a public employee's retirement benefit for ordinary or accidental disability and any c. 152 weekly incapacity benefits paid during or for any period of such retirement. Thus, amounts allocated in a lump sum settlement in redemption of past and/or future weekly incapacity benefits within the period of retirement are offsettable and allocations to other non-offsettable statutory benefits may be challenged by the retirement board.
George Harkins v. Contributory Retirement Appeal Board another, 15 Mass. App. Ct. 901, 964-965 (1983). (Emphasis added.) Thus, I disagree with the majority that "[i]t is the insurer's burden to show the likely emergence of permanent and total incapacity from the status of temporary and total incapacity." Once the lump sum settlement was approved, it was the Trust Fund's burden to overcome the resulting presumption of regularity by introducing evidence that the allocation it challenged was "unreasonable." In my opinion, the Fund did not meet that burden.
Lacking evidence to the contrary, the Fund merely argued that the § 34A allocation, as well as the statements in the lump sum settlement agreement that the employee was "permanently and totally disabled" and that her present work capacity was "none, " were "self-serving" on the insurer's part. The administrative judge agreed, (Dec. I, 6), but the reviewing board did not, terming that characterization "off the mark", in light of the many potential variables and considerations which affect settlement negotiations. Cosgrove v.Penacook Place, 15 Mass. Workers' Comp. Rep. 166, 172 (2001). I agree with the majority that the administrative judge erred in calculating the amount of the employee's potential § 35 entitlement but disagree that the rest of the judge's decision should be affirmed. In my view, it is internally inconsistent, arbitrary and capricious.
In Woodman v. Sun Life of Canada, 16 Mass. Workers' Comp. Rep. 116 (2002), the reviewing board cited with approval to similar lump sum language in vacating an administrative judge's disallowance of a § 34A allocation and substitution of a § 35 allocation. The board noted that the Trust Fund had not presented any evidence to counter the assertions in the lump sum agreement, notwithstanding that the agreement also included a statement about the uncertainty surrounding § 34A litigation. Such is the case here, but the lump sum language goes even beyond that cited by the reviewing board in Woodman: "the employee has a legitimate claim for permanent and total disability and this settlement is intended to resolve that claim, " and "[t]his settlement takes into account the prospect of permanent and total disability." (Exhibit 1.)
Notwithstanding the reviewing board's reprimand, the judge's decision on recommittal contains that same aspersion. (Dec. II, 6, 7.) Given that the employee, although only forty years old, was on Social Security disability benefits when she settled her case, it is equally, if not more, plausible that the § 34A allocation and the statements as to her medical condition and work capacity were important to her and accurately reflected her disability status. Moreover, as the allocation arguably precluded the employee from ever claiming permanent and total incapacity benefits for any work injury in the future, G.L.c. 152, § 48 (3), it cannot be said that the allocation was a harmless fiction intended only for the insurer's benefit.
Based in part on the absence of an expert medical opinion as to permanent and total disability and the fact that the employee had not yet filed a § 34A claim, the judge tinkered with the allocation of the settlement proceeds and ended up proposing, in effect, that some five or more years after the December 1997 settlement, having first exhausted § 34 total incapacity benefits and then § 35 partial incapacity benefits, the employee then would have a viable claim for § 34A permanent and total incapacity benefits. This is an arbitrary, capricious and incongruous result.
That is not surprising in that, according to the § 11 A doctor, the employee was not yet at a medical end result, although he opined that she continued to be totally disabled. Moreover, the § 34 statutory maximum was then some forty-one weeks away from exhaustion and the parties did not have the benefit of the Appeals Court's ruling inSlater's Case, 55 Mass. App. Ct. 326 (2002).
The judge allowed the insurer a seventy-five per cent reimbursement on the balance remaining after deducting (incorrectly) the value of maximum § 34 and § 35 benefits. (Dec. II, 8.) It should be noted that if the employee had not settled her case and had proven entitlement to § 34 benefits to exhaustion (156 weeks), in a claim for § 34A benefits, she would have to show only that she remained totally disabled and that such disability "will continue for an indefinite period of time which is likely never to end, even though recovery at some remote or unknown time is possible. . . ." Sylvester v.Town of Brookline, 12 Mass. Workers' Comp. Rep. 227, 231 (1998), quotingYoffa v. Metropolitan Life Ins. Co., 304 Mass. 110, 111 (1939). If, however, as the administrative judge insisted, the employee's best case scenario upon exhaustion of § 34 benefits was entitlement to § 35 temporary partial incapacity benefits only, then her burden of proving entitlement to § 34A benefits thereafter would be considerably heavier: she would have to prove a worsening of her condition, either medically, Foley's Case, 358 Mass. 230, 232-233 (1970), or vocationally,Lally v. K.L.H. Research Development, 9 Mass. Workers' Comp. Rep. 427, 429 (1995).
In his first decision, the administrative judge declared that, "[t]he insurer attempts to predict the future, to its benefit, at the expense of the Trust Fund." (Dec. I, 6.) In my view, the judge has done much the same thing, but at the expense of the insurer. As between the parties who negotiated the settlement and the judge who approved it in 1997, and the administrative judge who decided the insurer's § 37 petition in 2000 and, on recommittal, in 2002, I think the former were in a far better position to assess the employee's potential entitlement and the insurer's potential exposure in this case. In light of the "presumption of regularity" to be accorded the approved lump sum settlement agreement and the Trust Fund's failure to offer evidence to rebut that presumption, I dissent from the majority and would reverse so much of the administrative judge's decision as disallows the allocation of $69,631.00 to potential § 34A benefits and reduces the insurer's § 37 recovery accordingly.
____________________ Patricia A. Costigan Administrative Law Judge