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Settlement Language May Open the Door to Unintended Liability for Future Medical Treatment

While addressing a minor pleading error, the Western District of Missouri opens a major can of worms that will have great impacts on settlement agreements.

 

The case of Frank Pierce v. Zurich American Insurance Company, WD77095, filed by the Western District of the Court of Appeals on September 9, 2014, has created ripples well beyond the rather specific issues that were presented on appeal. The case involves a 2009 injury, wherein Pierce sustained a knee injury while working for Zurich’s insured. Pierce underwent two knee surgeries that were authorized by Zurich. In 2010, the authorized treating physician opined that Pierce would eventually require a total knee replacement, but indicated that the need for same was related to pre-existing arthritis, not the 2009 work injury. Pierce obtained a separate opinion from an orthopedic surgeon of his choosing who opined that the future need for the total knee replacement was related to the 2009 work injury.

 

In 2012, Pierce and Zurich settled the workers’ compensation claim. The parties used language standard in a Stipulation for Compromised Settlement, including the passage that “the Employee understands: by entering into this settlement, except as provided by Section 287.140.8, RSMo, the Employee is forever closing out this claim under the Missouri Workers’ Compensation Law”. The parties also agreed to leave open medical treatment for one year from the date of the settlement agreement.

 

In June 2012, within the one year time period contemplated by the settlement agreement, Pierce sent a demand to Zurich for the total knee replacement surgery. Zurich sent Pierce back to the original authorized treating physician, who, as he had earlier, opined that the need for the total knee was not related to the work accident. Based upon this opinion, Zurich denied the total knee replacement.

 

Pierce then brought suit in circuit court seeking an order requiring specific performance of the settlement contract and/or a finding that Zurich fraudulently made materials representations for the purpose of denying medical treatment. Zurich filed a Motion to Dismiss the Petition, suggesting that the trial court lacked subject matter jurisdiction over the issue as the exclusive remedy was with the Workers’ Compensation Division. The trial court granted Zurich’s Motion to Dismiss, finding that the Division has exclusive subject matter jurisdiction in the case.

 

Ultimately, the Court of Appeals agreed that the case was not proper in Circuit Court, but disagreed with the trial court as to why. The Court of Appeals held that because Pierce was seeking a total knee replacement, this remedy was covered by the “Reactivation Provision” of Section 287.140.8, and therefore was under the exclusive jurisdiction of the Division. In essence, the Court of Appeals overturned the trial court because the trial court reached its decision based upon “lack of subject matter jurisdiction”, when it should have based its decision on “lack of statutory authority.” While this certainly appears to be a distinction without a critical difference, the Court of Appeals’ reasoning in reaching this conclusion will be the element with the most importance to other cases.

 

The Court evaluated Section 287.140.8, known as the Reactivation Provision. This provisions states:

 

The employer may be required by the division or the commission to furnish any injured employee with artificial legs, arms, hands, surgical orthopedic joints, or eyes, or braces, as needed, for life whenever the division or the commission shall find that the injured employee may be partially or wholly relieved of the effects of a permanent injury by the use thereof. The director of the division shall establish a procedure whereby claim for compensation may be reactivated after settlement of such claim is completed. The claim shall be reactivated only after the claimant can show good cause for the reactivation of this claim and the claim shall be made only for the payment of medical procedures involving life – threatening surgical procedures or if the claimant requires the use of a new, or the modification, alteration or exchange of an existing, prosthetic devise. For the purpose of this sub-section, “life threatening” shall mean a situation or condition which, if not treated immediately, will likely result in the death of the injured worker.”

 

Relying on this provision, the Court found that any settlement where Section 287.140.8 is not referenced or is left open allows for the re-opening of the case should a new or altered prosthetic device ever be required. In other words, even if a prosthetic device was not to be provided by an Insurer as an element of a settlement agreement, the settlement could later be re-opened to evaluate whether the current need for a knee replacement is related to the original injury. This would seemingly apply to any settlement for any body part where a prosthetic device could later be warranted; i.e. – a torn meniscus on a knee that later requires a knee replacement; a hip flexor injury to a hip that later requires a total hip replacement; or possibly even an authorized microdisectomy at a level that later requires fusion hardware.

 

There are several important takeaways from this case. First, it is a Western District decision, binding only on cases pending in that district and is subject to reversal if the case is accepted by the Missouri Supreme Court. Second, the Court of Appeals did not indicate that it is a slam-dunk loss against the Employer if the settlement is re-opened pursuant to the Reactivation Provision. Rather, the matter then goes back in front of the Division to determine if the need for a prosthetic device is related to the original work accident. Finally, there may be ways to contract around this holding.

 

The lawyers at Lemp & Murphy have considered this decision in great detail. Contact us with questions you might have regarding the decision or on how it may apply to your cases.

 

 

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