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State Court Vacates Settlement After Surgery is Performed Prior to Workers’ Comp Board Approval

In McCarroll v. Livingston Parrish Council, 2014 La. App. LEXIS 2570, the First Circuit Court of Appeal of Louisiana affirmed the judgment of the Office of Workers’ Compensation (OWC), which vacated the approval of a settlement between the Livingston Parrish Council and Louisiana Workers’ Compensation Corporation (LWCC), an employer and its insurer, and Mr. McCarroll, their employee.

Mr. McCarroll was injured in December 2003 and began receiving workers’ compensation benefits soon thereafter. In July 2008, one of Mr. McCarroll’s doctors recommended cervical fusion, which Mr. McCarroll declined at the time. In early January 2009, the parties agreed to the terms of a settlement, including a $98,684 Medicare Set Aside (MSA), which included $21,793.00 for the recommended, yet declined, cervical surgery. The MSA was submitted to CMS for review and approved on February 2, 2009. Mr. McCarroll underwent the cervical fusion surgery on February 16, 2009.  A little over two weeks later, on March 2, 2009, Mr. McCarroll executed the Settlement Agreement and Release, and LWCC received the settlement documents signed by Mr. McCarroll and approved by the OWC on March 9, 2009. The attorney for the Council and LWCC signed the agreement on March 10, 2009. In accordance with the Order of Approval, LWCC funded the $110,000 indemnity settlement and $32,045 MSA seed.

When Mr. McCarroll’s surgery was performed prior to OWC approval of his MSA, the seed money could not be used to cover the costs of the surgery, so on March 10, 2011, almost exactly two years later, Mr. McCarroll filed a petition.  He asserted that Medicare refused to pay for any medical expenses that were incurred prior to the March 9, 2009 approval of the workers’ compensation settlement and that LWCC refused to pay for any medical treatment from late January 2009 up to the March 9, 2009 approval of the settlement, a time period including Mr. McCarroll’s surgery.

At trial, the LWCC claims specialist testified that she did not know that the seed money could not be used to pay the bill for the surgery if Mr. McCarroll had his surgery prior to the settlement being approved by the OWC. Mr. McCarroll then testified that he thought, upon signing the settlement agreement, his medical expenses would all be paid, and that he would not have signed had he known otherwise. The OWC stated in its written reasons that “[n]o one involved in this case at that time envisioned that Medicare would deny coverage because the surgery was done before the settlement was signed by the OWC.”  Consequently, the OWC vacated the settlement, as what was signed by the parties and subsequently approved was no longer the anticipated agreement.

Based on the standard of review that the court must apply to Workers’ Compensation cases, the OWC’s findings of fact must be made with “manifest error-clearly wrong.” The First Circuit Court of Appeal could not find where the OWC manifestly erred in vacating the Order of Approval, as the misunderstanding led to a misrepresentation that, although unintentional, was sufficient to set aside the agreement.