To say that the Commonwealth Court case of DePue v. Workers’ Compensation Appeals Board (N. Paone Construction) is troubling is a vast understatement. The court sets a very dangerous precedent regarding the finality of the compromise and release agreement (C&R), which warrants great attention on the part of the claimant’s practitioner when preparing the agreement. Moreover, it may have a chilling effect on settlements, given the great specificity of the settlement language that the decision imposes.
A C&R agreement under Section 449 of the state Workers’ Compensation Act permits the parties to enter into an agreement that finally resolves any and all issues raised in a workers’ compensation case, including future medical treatment. While increasingly rare, the parties can choose to "leave medicals open" by simply agreeing to a C&R of indemnity only. DePue presents a situation where the parties settled only the indemnity portion of the claim.
Essentially, because the injured worker, Michael DePue, in DePue did not expressly reserve his right to change the description of his work injury in the future, the court precluded him from doing so after the approval of the C&R agreement. Keep in mind that DePue did not even settle his right to future medical treatment. Moreover, the employer’s prior actions in voluntarily paying for medical expenses to the body part in question did not act as an admission of liability.
The facts of DePue were not in dispute. DePue sustained a work injury on February 26, 1996, in the nature of a closed head trauma. The employer, N. Paone Construction Inc., filed a notice of compensation payable (NCP) and began paying temporary total disability benefits until March 3, 2008, when the parties entered into a C&R agreement to settle only the payment of wage loss benefits. According to the C&R, the settlement was for "a full and final satisfaction of all future wage loss benefits."
In paragraph four of the C&R agreement, the description of injury was listed as "any and all injuries suffered at North Paone Construction Company, including but not limited to the accepted injuries of a severe closed head injury with seizure disorder and short-term memory loss." As indicated above, Paone Construction agreed to continue to pay "all reasonable and related medical bills."
On July 19, 2010, DePue filed a penalty petition alleging that the employer was failing to pay for $1,200 in medical bills to his left shoulder. Given that the shoulder injury was technically not listed as part of the accepted injury on the C&R agreement, DePue also filed a review petition, about a month later, seeking to change the description of his work injury to include the shoulder. Paone Construction denied the allegations in its answer, seeking to dismiss the petitions based on the theories of res judicata and collateral estoppel.
Without a hearing on the merits, the workers’ compensation judge (WCJ) denied the penalty and review petitions, concluding that the review petition was barred by res judicata. The WCJ cited the Commonwealth Court case of Weney v. WCAB (Mac Sprinkler Systems), where the claimant petitioned to further amend the description of injury three days after entering into a stipulation amending the NCP to include a shoulder injury. There, the court concluded that the second petition was barred by res judicata because the claimant was aware of those injuries during the first review petition proceeding and should have raised the additional injuries at that time.
The WCAB affirmed the WCJ’s decision and DePue appealed to the Commonwealth Court. DePue’s assertions on appeal included the notion that the left shoulder injury was "erroneously" omitted in the final draft of the C&R agreement and that Paone Construction was aware that the shoulder was an accepted injury and that it "routinely" paid medical bills for the shoulder injury. Based on these assertions, DePue argued that Paone Construction should be estopped from refusing to pay the medical bills for the left shoulder injury under the doctrines of promissory and equitable estoppel. Regarding the employer’s argument of res judicata, DePue sought to distinguish Weney by noting there was no prior litigation seeking to amend the description of injury in his own case as there had been in Weney.
In affirming the board’s decision and holding that DePue’s review petition was barred by the "final and binding C&R agreement," the Commonwealth Court began its analysis by referring to the intent of the legislature in enacting Act 57, and the notion that a C&R agreement be "on equal footing with civil settlements" in order to promote a public policy of encouraging the parties to settle disputes and bring them to finality. The court quotes the statute and goes through a litany of cases tending to support the obvious notion that a valid C&R agreement, once approved, is "final, conclusive and binding." The court also appealed to the principle that a C&R agreement can be set aside only upon a clear showing of "fraud, deception, duress, mutual mistake, or unilateral mistake caused by an opposing party’s fault." However, the court seemed to go well beyond those principles by concluding that "because claimant did not expressly reserve his right to add a new injury to the description of his work injuries, he was precluded from doing so more than two years after the approval of the C&R agreement."
Let us first not forget that the parties did not even settle the right to medical benefits. Therefore, it is troubling, to say the least, that DePue would need to expressly reserve his right to avail himself of those medical benefits. Seeking to amend a description of injury is part and parcel with that right to medical treatment.
Unfortunately, the facts of the case were not in DePue’s favor. Various exhibits submitted by the employer tended to show that the parties had actually negotiated the description of injury and had knowingly left the shoulder out of it. This led to charges by Paone Construction that DePue misrepresented the notion that the left shoulder injury was erroneously omitted in the final draft of the C&R agreement. The court seemed to put much weight on that fact and also the notion that the C&R agreement was "final and binding on the parties and may not be amended after its unappealed approval." It seems that focus on the binding effect of a C&R is a straw-man argument, as DePue does not appear to have even contested that fact.
The court also dismissed with brevity DePue’s argument that the employer was estopped from denying the shoulder bills. This finding is not surprising since there is a long-standing public policy of encouraging employers to voluntarily pay medical bills without concern that the injury would become the employer’s responsibility based on that payment.
It is difficult to conclude anything other than the focus on the intent of the parties should have been irrelevant. Moreover, the finality of a C&R should also not have been at issue. The bottom line remains that the description of injury was never actually litigated, as in Weney, and the right to receive future medical benefits was never released. It would seem these two facts alone would make the holding in the case unthinkable. The act is supposed to be humanitarian in nature. There is no way to conclude this result upholds that principle.
Practically speaking, the DePue case makes it loud and clear that great specificity must be taken when crafting the language of the C&R agreement. Leave nothing to the imagination. Insist on the inclusion of anything one might reasonably foresee as being a future issue. Unfortunately, the DePue case now makes that a necessity.
Christian Petrucci is a solo practitioner and past co-chairman of the Philadelphia Bar Association’s workers’ compensation section. He concentrates his practice in workers’ compensation litigation and Social Security disability.