Other Good and Valuable Consideration: Settling Workers’ Compensation Claims Presented by Paul L. Civerolo and Evie M. Jilek

Legal, ethical, and other issues in settlement Case law and statutory and regulatory considerations Working with unrepresented workers to navigate the settlement approval process Using settlement to manage or limit litigation Medicare/Medicaid considerations

Case law and statutory and regulatory considerations Settlement is not favored in Workers’ Compensation – Section 52-5- 12(A) “It is the stated policy for the administration of the Workers’ Compensation Act … that is in the best interest of the injured worker … [to] receive benefit payments on a periodic basis” The Court of Appeals has interpreted this strictly. Cabazos v. Calloway Constr., 118 N.M. 198, 879 P.2d 1217 (Ct. App. 1994); Sommerville v. Southwest Firebird, 2008-NMSC-034, 144 N.M. 396, 188 P.3d 1147; Benny v. Moberg Welding, 2007-NMCA-124, 142 N.M. 501, 167 P.3d 949. Section 52-5-12 provides only one way to close a case – subsection D, which requires a written agreement, that the worker understands, that the agreement be fair, equitable, and provide substantial justice to the parties, and compliance the approval process

Statutory Requirements Subsection D requires a written agreement – which is outlined in Section 52-5-13 Section 52-5-13 requires a joint petition (mandatory form from the Clerk’s office) Section 52-5-14 requires an Order, which must be reviewed by the Workers’ Compensation Judge (no mandatory form) The Judge must hold a hearing and make an independent judgement The joint petition must be consistent with the Order (be careful which box you check) The Order must be approved by both parties and must indicate the consequences of the settlement

What happens if you don’t follow the rules? Check the wrong box? No hearing and written agreement? Worker didn’t understand? Subsections B and C are not final Benny v. Moberg Welding, 2007-NMCA- 124 – Subsection B does not foreclose future rights to payments No settlement. Baca v. State, 404 P.3d 789 (N.M. App., 2017); Lucero v. First Fleet, (unpublished 2012) Sommerville V. Southwest Firebird, 2008-NMSC-034, 144 N.M. 396, 188 P.3d 1147; Jackson v. K & M Const, 2004- NMCA-82, 94 P.3d 837

Sealing the deal… Procedure Evidence Terms of the settlement Effect on future benefits Effect on right to trial Did the worker understand both? Did the worker think/talk it over? Did the worker know about the right to counsel? Is the worker under the influence? Is the settlement fair under the circumstances? Is the settlement in the worker’s best interest? Does the worker want the settlement to be approved? Check the WCA website for the most recent version of the required form. Lump Sum Tuesday petitions must be filed before 5:00pm on Monday. Make sure your documents indicate the terms of settlement and that the worker had a chance to read and revise. Get signatures on all documents before you file and send copies of the documents to the worker when they become available.

Ethical considerations with unrepresented workers Helping, but not counseling

Right to counsel or not? Understanding the right to counsel The right to be pro se Workers also have the right not to be represented Pro se workers must not receive legal counsel from employer/insurer Providing information about the process and the law is not legal counsel Workers have the right to counsel Under most circumstances half of the attorney fee is paid by employer/insurer No attorney can charge a legal fee before the case is resolved

What is legal counsel? “As advisor, a lawyer provides a client with an informed understanding of the client's legal rights and obligations and explains their practical implications.  As advocate, a lawyer zealously asserts the client's position under the rules of the adversary system.  As negotiator, a lawyer seeks a result advantageous to the client but consistent with requirements of honest dealing with others.  As intermediary between clients, a lawyer seeks to reconcile their divergent interests as an advisor and, to a limited extent, as a spokesperson for each client.  A lawyer acts as evaluator by examining a client's legal affairs and reporting about them to the client or to others.” – Preamble to the New Mexico Rules of Professional Conduct “In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer's role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding.” Rule 16-403

Using settlement to manage risk and litigation Risk Management: Using settlement to manage risk and litigation

Disputed settlements Completely Disputed – compensability is not accepted and any payments made were under a reservation of rights pending investigation Partially Disputed – the extent of compensability, certain medical treatment, or calculation of benefits are in dispute Section 52-5-12(D) does not limit a settlement to a full and final dismissal of all claims. Instead, Section 52-5-12(D) can be used to limit a claim in addition to providing an efficient way to close claims or dismiss disputed claims.

Managing future risk Partial settlements under Section 52-5-12(D) can foreclose a change of condition for scheduled injuries Partial settlements allow one-time payments for medical care that is unsavory or impractical such as treatment that is off-label or medical cannabis Legal issues such as disputes under the new TTD/PPD statute can be settled with a partial payment that specifically dismisses those issues With some creativity, rights of reimbursement can be resolved with a Section 52-5-12(D) Indemnity only settlements limit future payments when medical cannot be settled or when the employment relationship continues after the injury

Offers of Judgement Section 52-1-54(F) provides for an offer of settlement or compensation order with a fee-shifting provision Must alert the other party of the fee-shifting provision Must be. specific in the terms, resolve “critical issues,” and be unambiguous such that the outcome at trial can be measured against the offer – Leonard v. Payday Prof’l, 2007-NMCA-128, 168 P.3d 177 and Abeyta v. Bumper to Bumper Auto Salvage, 2005-NMCA-087 115 P.3d 816. Must be made more than 10 days before trial

CMS and the Secondary Payor Act Medicare and Medicaid concerns

Medicare or Medicaid? Medicare is a federal system Medicare is secondary to any other insurance or source of liability including workers’ compensation. Workers’ compensation insurers have a responsibility to identify claimants who are Medicare recipients and appropriately report. Reporting is required under ongoing responsibility for medicals and total payment obligation to claimant. Medicaid is a state-administered federalish system Medicaid is also secondary, but there is no single reporting system as in Medicare. Medicaid has the right to be reimbursed for payments they make that should have been covered under workers’ compensation. Medicare Advantage Plans These are not traditional Medicare, but their rights are expanding in federal courts.

Taking Medicare’s interests into account Medicare’s interests are based on the statutory definition of the coverage. In New Mexico, lifetime benefits mean that Medicare is never primary for the workers’ compensation injury. Medicare’s interests are defined by the reporting. Ongoing responsibility for medical identifies the claimant and the diagnostic codes related to the ongoing responsibility for medical. Think about this reporting when considering paying under “reservation of rights.” Terminating ongoing responsibility for medicals must be supported. Talk to your Medicare specialist to determine general practice considerations. Settlement and Medicare. Identify whether the worker is a Medicare beneficiary. If yes, CMS will review a proposed Medicare Set Aside Trust if the total settlement amount exceeds $25,000.00. If no, CMS will not review a proposed Medicare Set Aside Trust unless: The worker will become a Medicare beneficiary within 30 months of the settlement; AND The total settlement amount exceeds $250,000.00

Medicare Set Aside Trusts and Conditional Payments Medicare set aside trusts allow a carrier to close medical benefits (within the rules outlined by CMS) without the specter of future action by CMS to recover payments. MSA proposals are based on the prior 2 years of medical records; MSA proposals only cover Medicare-eligible expenses; MSA proposals do not have to be a crystal ball, but must reasonably anticipate the lifetime costs of current medical treatment or plan. Medicare’s rules and statute explain that Medicare must be secondary to other payments, but they provide a process to allow claims management. Medicare has an interest in any payments made to the worker for any payments already made by Medicare. Get a conditional payment search for Medicare recipients. Make sure that your accounting of Medicare’s interest are based in the medical records. IME reports are not binding in New Mexico, so they are not necessarily useful for limiting a MSA proposal.

Annuities, releases, and terms and conditions for MSA trusts Annuity-funded MSA trusts are allowed by CMS and, provided there is appropriate accounting showing that the money was spent on Medicare-eligibile expenses for the settled conditions, CMS will cover treatment for the remainder year until the next annuity payment is made. Annuities require a non-qualified assignment to allow the employer to assign its obligation to make annual deposits to a different entity. This is separate from a general release. Get everyone on board BEFORE the hearing. CMS approval often results in an adjustment to the MSA number, so it is prudent to wait for CMS approval before the hearing. CMS approval has change a lot. Proposals are submitted electronically and take fewer than 2 months. Terms and conditions should be attached to the workers’ compensation order. Terms and conditions outline a worker’s responsibility to report to Medicare regarding MSA expenditures and the consequences for misusing payments made specifically for Medicare-eligible expenses.

Paul L. Civerolo and Evie M. Jilek www.civerololaw.com T: (505) 888-4200 F: (505) 888-4207 evie@civerololaw.com paul@civerololaw.com