Before a claimant gets their money, the Department of Labor must approve the claimant’s Longshore or Defense Base Act settlement. It’s a legal requirement. A claimant will not receive any of the settlement proceeds until the DOL reads and approves the settlement. Essentially, the DOL wants the last say regarding monetary adequacy of the settlement.
Recently, the DOL issued OWCP Bulletin No. 14-05. In it, the DOL addressed Section 8(i) of the Longshore and Harbor Workers’ Compensation Act—the Act’s settlement provision—in light of an important decision from the Benefits Review Board, Richardson v. Huntington Ingalls, Inc.
Richardson Addresses the Determination of Settlement Adequacy:
Here’s a quick history lesson about Richardson. In 2013, a represented claimant and a represented employer got together and negotiated a settlement. They submitted the settlement to the district director for approval, but the district director denied the settlement. He determined that, under the guidelines he was required to apply, the settlement was not adequate.
The attorneys for the claimant and the employer referred the case to the Office of Administrative Law Judges. They added $500 to the total settlement amount and asked the administrative law judge for an order approving the settlement. The Solicitor of Labor then appeared in the case and argued that the settlement amount was not accurate. The solicitor “insisted” that a district director or an administrative law judge must simple apply actuarial tables and a discount rating to find a minimum adequate amount.
The judge disagreed. Sure, the DOL has a statutory role to play—paternalistic as it may be—in approving settlements that are reasonable, but the problem is that represented parties are allowed to negotiate settlements based on their individual assessment of a case. Sometimes parties want to avoid litigation and settle a case based on the facts as the litigant sees them—without the DOL taking a “quasi-in loco parentis role” over injured workers. Accordingly, the judge approved the settlement.
The Benefits Review Board Affirmed the ALJ’s Decision:
Aggrieved by the strongly worded ALJ opinion, the solicitor appealed the case to the Benefits Review Board. The end result was that the BRB affirmed the ALJ’s opinion. Some of the highlights of the BRB’s decision include:
- Denying the solicitor’s argument that a judge may not distinguish between settlements of represented and unrepresented parties;
- Denying the solicitor’s argument that settlements have to be based on actuarial tables;
- Confirming that parties to a settlement must explain the adequacy of their settlement, as required by 20 C.F.R. § 702.243;
- Noting that settlements are compromises—mutually acceptable alternatives to litigation.
Industry-Wide Discourse About Richardson:
Richardson led to a lot of conversations about the adequacy of settlements. Lawyers posted articles on respected legal blogs like the LexisNexis Workers Compensation Law Community. National conferences addressed the propriety of the solicitor’s opinion. Even I jumped into the fray with a few posts on my old blog.
The funny thing was that nearly all of the practitioners agreed that the solicitor was wrong and the ALJ was right. No one wanted the government to keep—as one commentator put it—“meddlin’ with settlin’.”
The DOL’s Published Settlement Position:
The DOL published OWCP Bulletin No. 14-05 to declare its post-Richardson settlement position. The Bulletin draws a distinction between:
- Claims with a compensation order and claims without a compensation order, and
- Claims with represented versus unrepresented claimants.
For cases where a compensation order exists, the district director will still evaluate settlements “using life tables and the actuarial present value of the claim using the facts in the compensation order.” This means that, when evaluating a proposed settlement, the district director should consider (among other things):
- Whether claimant is entitled to additional compensation;
- The dollar amount paid per week to the claimant;
- The claimant’s age;
- Whether a bona fide dispute exists regarding substantive issues in the case.
For cases where a compensation order has not yet been issued—indeed, the majority of Longshore and Defense Base Act claims involving settlements—the district director will consider whether the claimant is represented by an attorney. From there, the settlement evaluation differs.
For represented parties, the district director will weigh the adequacy of a settlement after “considering all the circumstances.” It is the DOL’s position that it can still consider the life and actuarial tables if it wants to, but that an actuarial table analysis is not required. Further, the DOL stated:
The District Director should continue to ensure that all of the information required by 702.242(b) is included in the 8(i) settlement application and review the proposal considering the factors outlined in 20 C.F.R. 702.243(f). Under Richardson, however, considerable weight must be given to the views of the claimant and his counsel as to the adequacy of the settlement amount. In particular, their opinion regarding the risks of litigation and the “probability of success if the case were formally litigated” should be respected unless information in the file or application contradicts the parties’ statements in the application. If a represented claimant expresses an unambiguous willingness to settle, complete agreement with and understanding of the settlement terms proposed, and there is no reason to question the claimant’s counsel’s competence or ethics, the District Director should ordinarily approve the settlement, keeping in mind that the settlement process requires compromise.
For unrepresented claimants, the DOL takes a much more paternalistic approach. Settlements are reviewed with “more rigor than for a represented claimant.” Essentially, the district director should “attempt to ensure that the claimant fully understands the potential value of the claim.” Adequacy will be determined based on the particular circumstances of the case. (My opinion: OWCP Bulletin No. 14-05’s requirements for settlements involving unrepresented claimants requires district directors to read the tea leaves for a case to determine “probability” of success.)
Can the DOL Take This Settlement Position?
OWCP Bulletins are not law. They cannot supersede statutes or regulations. But, here, the DOL’s position has regulatory support. The Code of Federal Regulations identify all of the information that is needed for a settlement. Three specific regulatory provisions are important for this issue.
First, there is 20 C.F.R. § 702.242(b), which requires settlement applications to contain the following information:
- A complete description of the terms clearly indicating the amounts to be paid for compensation, medical, and attorney fees;
- The reason for the settlement, and the issues which are in dispute, if any;
- The claimant’s date of birth and, in death benefits, the names and birth dates of all dependents;
- Information on whether or not the claimant is working or is capable of working, including a description of the claimant’s educational background and work history, as well as other factors which could impact, either favorably or unfavorably, on future employability;
- A current medical report describing any injury related impairment as well as any unrelated conditions, indicating whether maximum medical improvement has been reached and whether further disability or medical treatment is anticipated;
- A statement explaining how the settlement amount is considered adequate;
- If the settlement covers medical benefits, an itemization of the amount paid for medical expenses by year for the three years prior to the date of the application and an estimate of the claimant’s need for future medical treatment as well as an estimate of the cost of such medical treatment. The adjudicator may waive these requirements for good cause; and
- Information on any collateral source available for the payment of medical expenses.
Second, there is 20 C.F.R. § 702.243(f), which requires consideration of a settlement adequacy to inquire as to:
- The claimant’s age, education and work history;
- The degree of the claimant’s disability or impairment;
- The availability of the type of work the claimant can do;
- The cost and necessity of future medical treatment (where the settlement includes medical benefits).
Third, there is 20 C.F.R. § 702.243(g), which addresses adequacy where there is a compensation order but there is no substantive dispute. Essentially, when there is no dispute, but there is an ongoing compensation order, the district director is going to pay very close attention to the actuarial value of an injured worker’s claim.
What Will This Bulletin Do For Claimants?
In my opinion, OWCP Bulletin No. 14-05 is more important for DOL district director and claims examiners than it is for claimants. The Bulletin provides the DOL’s written policy position on settlement adequacy calculations. Nonetheless, claimants can use OWCP Bulletin No. 14-05 to gain insight into the Longshore and Defense Base Act settlement process and the value of their claim.
For represented claimants, your attorney is likely the best source of information about the value of your claim and the likelihood that the employer and carrier will settle for that dollar value. From my time representing employers and carriers, I can easily say that neither want to pay the actuarial value of a claim. They want a compromise—which is why they are negotiating a settlement in the first place.
For unrepresented claimants, be wary of adequacy determinations that could torpedo your settlement. The employer and carrier do not want to pay the actuarial value of the claim. Why? They look at the actuarial tables as the full, judgment value of your claim. If a claimant with a compensation order in hand is going to get an adequacy analysis based on the actuarial tables, then why should the employer and carrier voluntarily pay that same amount in a compromise? Any number of issues could arise in the future which could change the value of the claim. That is just how they look at things. So, by “torpedo your settlement,” I do not mean that the DOL is doing anything wrong with their adequacy analysis—in fact, I think the contrary. But, pragmatically, a defendant only wants to pay so much before they decide that settling the case is no longer in their best interest.
What should claimants do if faced with a settlement offer? Contact an attorney. Become a “represented claimant” and let your attorney negotiate the best possible deal for you. Your attorney will consider all of the factors required by the regulations (see above) and then confer with you about settlement. The attorney will talk to you about when the actuarial tables do and do not apply. They will calculate the potential dollar value of your claim and likely express it to you in range format. By “range format,” I mean that they will tell you that your settlement will likely fall between two dollar amounts (e.g., between $75,000 and $125,000; or, between $250,000 and $325,000). And pursuant to OWCP Bulletin No. 14-05, it looks like the DOL will more easily approve a settlement between represented parties.
Photo courtesy of Flickr user Neubie. Title, “Money Hand.” Note: Changes were made to the margins only.