Opinion
BOARD No. 014056-94
Filed: May 19, 1997
REVIEWING BOARD DECISION
(Judges Maze-Rothstein, McCarthy and Smith)
APPEARANCES
Thomas R. Gratzer, Esq., for the employee.
Ralph J. Cafarelli, Esq., for the insurer.
The issue presented on appeal is whether medical bills submitted to the insurer, but not paid, following a lump sum settlement and prior to a third party settlement petition are subject to an offset by the insurer under Hunter v. Midwest Coast Transp., Inc., 400 Mass. 779, 782 (1987). We hold that the insurer is not entitled to a Hunter offset in this case. We, therefore, affirm the decision which ordered the insurer to pay the outstanding bills at the full departmental rates without an offset.
The essential facts as outlined were submitted on stipulation and were incorporated into the decision. (Dec. 2; Exhibit A.) The employee sustained an industrial injury on February 5, 1994 and received worker's compensation benefits. On October 5, 1994, he had arthroscopic surgery to repair his right ankle work injury caused by an automobile accident that involved a third party.
A few weeks later, on October 24, 1994, the employee's Worker's Compensation case was resolved by a § 48 lump sum settlement. The insurer accepted liability for the employee's right ankle and back injuries related to the motor vehicle accident. The lump sum agreement included this pertinent language: "In addition to the lump-sum, the insurer agrees to pay all outstanding reasonable and related medical bills incurred as of this date." (Exhibit A.) (Emphasis added).
Following the October 24, 1994 approval of this agreement, counsel for the employee forwarded medical bills, including those for the October 5, 1994 arthroscopy and the surgeon's bill, requesting full payment, according to the terms of the lump sum settlement. The insurer received the outstanding bills on or about January 24, 1995 and February 8, 1995. (Dec. 2.)
Another administrative judge approved a § 15 third party petition on March 28, 1995 with respect to the February 5, 1994 employment related motor vehicle accident. The insurer compromised its lien and was reimbursed for benefits previously paid in accordance with the agreement. Paragraph 13 of the § 15 petition provides:
Under G.L.c. 152, § 15 sums recovered by an injured employee in a third party action shall be distributed to the workers' compensation insurer to the extent of the benefits paid to the employee; the excess (so called statutory excess) is retained by the employee. The insurer is permitted to offset to the extent of the excess, amounts due on account of future compensation payments. The Hunter court, supra, set forth the method of determining the application of these principles. This is further discussed infra in this decision. See G.L.c. 152, § 15, as amended by St. 1991, c. 398, § 39.
If the workers' compensation case will remain open after the third party settlement, set out the agreement between plaintiff/employee and the workers' compensation insurer respecting reallocation of the legal fee as required by Hunter v. Midwest Coast Transport. Inc. et al., 400 Mass. 779 (1987).
The workers' compensation insurer shall pay one third (1/3) of any future §§ 13/30 benefit(s) owing to the plaintiff/employee for medical services occurring after the date this petition is approved by the Department of Industrial Accidents until such time the $8,333.34 net excess is exhausted. (The excess is reduced by deducting the unpaid portion of §§ 13/30 payment(s) from the excess balance.) Once the excess is exhausted, the workers' compensation insurer will be obliged to pay 100% of any additional §§ 13/30 benefit(s).
(Emphasis added).
Although the insurer concedes the outstanding medical bills were submitted before the third party settlement, it did not pay them. The employee then made a § 30 medical claim for payment, which the administrative judge denied at conference. The employee appealed.
The decision, issued on April 23, 1996, ordered the insurer to pay the contested § 30 medical bills. (Dec. 5.) The judge reasoned that the claims were subject to compromise by the § 48 lump sum agreement, and as such, the insurer agreed to pay the medical services at issue, at the full board rate, by that agreement's terms. (Dec. 2, 4.) He concluded that the insurer is, therefore, entitled to a Hunter offset only on future medical services that take place after the date of the § 15 approval. (Dec. 3.) It is the insurer's appeal that is before us.
General Laws c. 152, § 15 grants an insurer the right to reimbursement for compensation paid where there is recovery against a third party for the employee's injuries. Section 15 provides in pertinent part:
Where the injury for which compensation is payable was caused under circumstances creating a legal liability in some person other than the insured to pay damages in respect thereof, the employee . . . may proceed to enforce the liability of such person . . . . The sum recovered shall be for the benefit of the insurer, unless such sum is greater than that paid by it to the employee, in which event the excess shall be retained by or paid to the employee.
G.L.c. 152, § 15, as amended by St. 1991, c. 398, § 39.
Although the employee is entitled to retain the "excess," the insurer may offset any further or additional compensation payments for which it may be liable against the excess in order to effectuate "'the general policy against double recovery and the reimbursement provisions of § 15.'" Percoco's Case, 418 Mass. 136, 139 (1994), quoting Richard v. Arsenault, 349 Mass. 521, 524-525 (1965). In Hunter v. Midwest Coast Transport. Inc., 400 Mass. 779, 779-780 (1987), the Supreme Judicial Court held that "the attorney's fees and costs paid by an employee, as well as the amount of compensation already paid by the insurer, be deducted from the total recovery for the purpose of calculating the amount of the 'excess' to be used as an offset against future compensation payments by the insurer[.]" Id.; see Richard supra at 523-525;Barbosa v. Armstrong World Indus., 9 Mass. Workers' Comp. Rep. 566, 567-568 (1995). Nonetheless insurers can, and many do, agree to accept less than full reimbursement to aid in negotiating a settlement of a workers' compensation lien in a third party action. Taylor v. Trans-Lease Group, 34 Mass. App. Ct. 404, 409 (1993). As such, where the parties' stipulation incorporates the material terms of a settlement agreement, and there is no reason to believe that a final judgment was not entered in accordance with that agreement, "the stipulation by the parties must remain as agreed upon," and the board may not revise the settlement agreement to alter the amount of the statutory excess to be off-set. See Pina's Case 40 Mass. App. Ct. 388, 391 (1996).
Thus, the question here is not the general law but the enforcement of the language of these particular § 48 lump sum and § 15 agreements.
The medical treatments at issue occurred prior to the October 24, 1994 lump sum agreement and before the March 28, 1995 approval of the § 15 petition. The employee's § 30 claim was foroutstanding payments of services rendered prior to the obligation assumed by the insurer in the § 48 lump sum agreement where it agreed "to pay all outstanding reasonable and related medical bills incurred as of this date." (Dec. 2 n. 1.) (Emphasis added.) In this regard, the language of the § 48 agreement differs from the language of the § 15 agreement, which speaks clearly to subsequent medical services: "[t]he workers' compensation insurer shall pay one-third (1/3) of any future § 13/30 benefit(s) . . . for medical services occurring after the date this petition is approved." (Dec. 2.) (Emphasis added).
When settlement agreements are properly formed under contract law, executed and approved according to the statute's requirements and are free from fraud, duress or other illegality, it is the contractual provisions which govern the outcome of a dispute. See Pina's Case, supra at 391; Elisee v. Holyoke, 8 Mass. Workers' Comp. Rep. 114, 115 (1994), citing Hansen's Case, 350 Mass. 178, 180 (1966) (a lump sum agreement has been held to be an "agreement in regard to compensation" and once there is approval by the division, further inquiry into the merits of the original controversy is precluded except by the Superior Court for fraud or mistake); Perkins's Case, 278 Mass. 294, 299 (1932); O'Reilly's Case, 258 Mass. 205, 209 (1927); see also Sylvia v. Burger King Corp., 6 Mass. Workers' Comp. Rep. 272, 274 (1992) and cases cited. Moreover, in response to DiMartino v. Quality Industrial Propane, Inc., 407 Mass. 171, 174 (1990), the statute now requires an insurer's agreement to the terms of § 15 settlement. G.L. c. 152, § 15 as amended by 1991, c. 398, § 39. See also L. Nason R. Wall, Massachusetts Workers' Compensation Reform Act § 13.2 at 365-366 (1995) (for a general discussion). Thus at present, without an insurer's acquiescence, its right to reimbursement cannot be abridged. Taylor v. Trans-Lease Group, 34 Mass. App. Ct. 404 (1993). Finally, the parol evidence rule, a substantive principle of law, precludes modification, variation, or contradiction of a contract's terms where the expression of an agreement is integrated into a clear and unambiguous writing which both parties assented to as its final form. Elisee, supra at 116-117, citing Nelson v. Hamlin, 258 Mass. 331, 340 (1926).
As stipulated by the parties and as found by the judge, the insurer was in receipt of the outstanding bills three months prior to the approval of the § 15 agreement. There is nothing in the record to indicate, nor does the insurer argue, that the § 48 and § 15 agreements fail to accurately reflect what the parties agreed to and got approval for. The insurer who fully participated in forming the terms of the § 15 agreement, acquiesced freely to them without requiring language that would explicitly or implicitly account for the outstanding prior bills. In fact the reverse is true. The § 15 agreement mentions only future medical bills. Nor is there any suggestion that either the § 48 or § 15 contracts were tainted by illegality. Having fully and freely agreed to the terms of both the § 48 and § 15 settlements, the insurer is bound to pay the disputed medical bills in accordance with the clear and specific terms of the subject agreements under the afore stated principles of law.
Accordingly, we affirm the decision of the administrative judge. The insurer is bound by its § 48 agreement to pay for the § 30 medical services incurred prior to the lump sum agreement at the full departmental rates. The insurer is entitled to an offset of the statutory excess for compensable medical services occurring after the date the § 15 petition was approved.
So ordered.
_________________________ Susan Maze-Rothstein Administrative Law Judge
_________________________ William A. McCarthy Administrative Law Judge
_________________________ Suzanne Smith Administrative Law Judge
Filed: May 19, 1997