Court Finds No Enforceable Settlement Agreement When CMS Rejected WCMSA Proposal and Requested Additional $200,000

In Mark Rainey v. Goodyear Tire & Rubber Company, et al, 2013 N.C. App. LEXIS 354 (decided April 2, 2013), an injured worker's attorney mediated a claim with his employer and its insurance carrier.  As a result of these discussions, the injured worker's attorney offered, succinctly, "If you can get $315K plus msa [sic], all new money, we have a deal" *3.  Thereafter, the defendants submitted a proposed Medicare Set-aside of $65,948.00 to CMS.  When CMS issued its decision, however, and demanded an MSA of $381,385.00.  After requests for reconsideration, CMS reduced the amount to $266,207.00.  The parties could not agree as to who would be responsible for funding the MSA and whether they actually had an enforceable settlement agreement.  The plaintiff took the position that the parties did have an enforceable agreement and that the MSA should be funded completely by the defendants.  The defendants, on the other hand, took the position that obtaining CMS approval of the $65,948.00 MSA was a condition precedent to the settlement agreement.  Once CMS demanded an MSA in a different amount, the condition failed (and there was no agreement).

The reviewing court agreed with defendants and with the earlier decision of the commission.  The court found sufficient evidence to support the finding that there was no meeting of the minds with respect to reaching a final settlement of the claim, and, as such, no enforceable agreement existed.  When CMS demanded an increased MSA amount, the tentative agreement failed and the parties were free to resume settlement negotiations. 

This case underscores the value of both an accurately-prepared Medicare Set-aside calculation (so the parties know their potential exposure) as well as extremely careful preparation of settlement documentation.  Had the defendants moved forward and settled the case as defendants sometimes do - with an open-ended promise to fund the MSA in whatever amount CMS approves - they would likely have had no recourse but to pay the additional $200,259.00 as CMS requested.