C&R Rescission: A Sixty-Second Seminar in Workers’ Compensation Claims Handling

Our blog today concerns a developing trend at the appeals board where settlement agreements designed to forever close claims are now being set aside, resulting in the files being reopened with litigation resuming. This trend is growing at such a rate that employers now need to employ additional protections to preserve their C&R settlements.

For years it was general knowledge that in the absence of extrinsic fraud an approved compromise and release forever closed a claim.  Extrinsic fraud occurs when a party engages in deception that keeps one from enforcing his/her legal rights.  For example:  an employer would be guilty of extrinsic fraud if it suppresses or fails to serve a medical report which materially changes the settlement value of a claim. Upon discovery thereof, an injured worker can petition the appeals board to set aside an approved C&R, under the premise that the applicant would never have entered that settlement had the medical report been known to them. We can understand this concept and fully agree that extrinsic fraud is a legitimate reason to set aside a C&R; however, that is not what is happening today.

Over the past few months, applicants have been able to successfully set aside past approved C&Rs on the grounds they were bullied by their own attorney into settling.  Yes, applicant attorneys are being blamed for pressuring their clients.  By way of example, see the decisions in Maxwell v. Global Cash Card, Inc., 2022 Cal. Wrk. Comp. P.D. LEXIS 168 (settlement rescinded two years after approval of C&R) and Jackson v. Door to Hope, 2022 Cal. Wrk. Comp P.D, LEXIS 237 (settlement rescinded two months after approval of C&R).  In each case the applicants asserted that their attorneys placed undue pressure on them, and such assertion led to the recission of C&R’s in each case.

Employers are now crying “foul” as there is no way to confirm or disprove that applicant was bullied by their attorney, as opposed to the injured worker simply experiencing “settlement remorse” for not holding out for more money.

We doubt if this bullying argument works both ways.  One could only imagine what would happen if a claims administrator petitioned the judge to set aside a C&R, asserting they were bullied by the employer to close the file.  Yet, as we have seen it is a totally different outcome where an applicant raises this very same assertion.

Will rescinding a C&R due to alleged bullying become a widely accepted ground for rescission? We certainly hope not, but if so, there is a possible solution.  We offer the following recommendations.  Going forward, settlement documents need to include a new stipulation, entered by the applicant under the penalty of perjury, where the applicant acknowledges to not being bullied, pressured or being subjected to undue influence to settle their claim. In addition, the applicant stipulates that settlement is being entered into voluntarily, and without reservation or duress, despite any future assertion that may be raised to the contrary.  The weight given to such a stipulation in a subsequent rescission hearing remains to be seen, but at least it is better than having no rebuttal evidence whatsoever.