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Advisory 94-10

Statutory Requirements for Court Settlements and Agreed Judgements

The Commission has identified court settlements and agreed judgements that contain terms that are prohibited under the Act. Section 410.256 sets out specific requirements for settlements made after judicial review of a Commission decision is sought. It requires that a settlement be approved by the court and that prior to approving a settlement the court must find that it accurately reflects the agreement between the parties, adheres to all appropriate provisions of the law, and under the law and the facts, is in the best interest of the claimant.

Settlement language should be specific to avoid confusion. Many settlements still reference the Industrial Accident Board, Award of the Board, and uncertainty as to liability as the basis for the settlement. Such language is improper in the context of the new law and should not be contained in a settlement.

Limitation of Issues:

Only those issues decided by the Appeal Panel may be resolved in a settlement as per Section 410.302. Follow-up issues must be resolved by the Commission.

The language of an agreement that overturns an issue decided by the Appeals Panel should explicitly state the issue.

Maximum Medical Improvement (MMI) and Impairment Ratings:

Section 410.256(c) prohibits the making of settlements which resolve an issue of impairment before the claimant reaches maximum medical improvement and requires such settlements to adopt one of the impairment ratings made under Subchapter G, Chapter 408.

A settlement which resolves a dispute regarding an impairment rating should cite the impairment rating and provide the name of the doctor who assigned it.

Lump Sum and Commutation of Benefits:

Section 410.256(b) prohibits a settlement from providing for the payment of benefits in a lump sum except as provided by Section 408.128. (Commutation of Impairment Income Benefits).

Accrued benefits may be paid in lump sum as provided by the Act.

Judgments containing lump sum payments of accrued benefits should itemize the payment period and payment rate of the accrued benefits.

Settlements should specifically state the commutation of impairment benefits bars additional entitlements to income benefits per Section 408.128(c).

Medical Benefits:

Section 410.256(b)(2) forbids settlements that limit or terminate medical benefits to which the employee is entitled under the Act.

Settlements should explicitly state that future medical benefits are not limited.

Attorney's Fees:

Attorney's fees are governed by Sections 408.147, 408.185, 408.221 and 408.222.

Attorney's fees should be itemized to identify the date services were performed and the rate at which those services are being billed.

Attorney's fees related to other causes of action such as suit under 408.208 or a claim for damages due to bad faith should be separately enumerated fees arising out of the original workers' compensation cause of action.

Settlements and Agreed Judgments must conform to the provisions of the Act and be filed with the Commission's General Counsel's Office within fourteen days of the settlement or judgment. Agreements made in violation of the Act will result in sanctions as provided by Chapter 415 and referral to the Commissioner of Insurance of the Texas Department of Insurance with a request to revoke the carrier's authority to write workers' compensation insurance in the state. In addition, carriers that enter into improper settlements or agreed judgments will remain liable for all benefits under the Act.

Signed this 14 th day of November, 1994.

Todd K. Brown Executive Director


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