The Perils of Paragraph Three – Mind Your Step

When a case is resolved by way of a Compromise & Release (C&R), parties often believe that all pertinent issues (including claims of injury and body parts) have been disposed of in the settlement. This is because settlements will carefully delineate all of the body parts and claims that are being resolved in the written agreement. What do we make of the applicant who decides to file a subsequent claim alleging an injury that was presumably resolved in the prior settlement? An important lesson can be learned about how settlements should be drafted to avoid refiling of claims. Our lesson comes from the 2015 California workers’ compensation claim of Orellana v. United Care Services, Inc.

In Orellana, the applicant sustained a specific back injury on September 22, 2014, and a cumulative trauma (CT) injury to her back and other body parts ending October 10, 2014. However, the applicant only filed the CT claim through October 1, 2014. The CT claim was resolved by way of a C&R on December 10, 2014. The defendant appended an addendum to the C&R, which indicates that any claims of injury (i.e., the specific injury on September 22, 2014) not listed in the C&R were dismissed with prejudice.

On April 6, 2015, the applicant filed the specific injury claim from September 22, 2014, to the back against the same employer. This came as a surprise to the defendant, who thought all of the applicant’s claims were resolved in the prior C&R. The defendant argued that the specific injury claim was dismissed per the addendum language attached to the settlement documents that resolved the applicant’s cumulative trauma claim on December 10, 2014.

The Workers’ Compensation Appeals Board did not agree with the defendant because the language in the addendum was overruled by paragraph three in the mandated C&R form. Paragraph three expressly limits the settlement to the body parts and dates of injury specifically identified in paragraph one of the mandated C&R form. Paragraph three reads, “This agreement is limited to settlement of the body parts, conditions, or systems and for the dates of injury set forth in Paragraph No. 1 despite any language to the contrary in this document or any addendum.” Paragraph one provides the basic information regarding the applicant, such as the birth date, location of employment, and occupation. Additionally, there are a series of five lines in which parties are to “State with specificity the date(s) of injury(ies) and what part(s) of body, conditions or systems are being settled.” Because there was a conflict between paragraph three and the addendum, which purports to have also settled “other claims” not listed in paragraph one, paragraph three overruled that addendum.

The issue boils down to what was the intention of the parties when it came time to settle. The intention of the parties is best discerned when settlements are clear (with no contradictions) and specific. It is, therefore, important to make sure that settlement documents are well drafted.

One tip is to make the most of paragraph one and list all the body parts and specific claims (if known), rather than to rely on the addendum.

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