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A Real Life Lesson Why It’s Almost Always Better To Settle

LaQuan Tremell Taylor’s injuries were horrific. The 27-year-old veteran, was robbed, carjacked, and shot in the parking lot of a Kroger grocery store in Atlanta, Georgia. After three weeks in a coma, roughly a year in the hospital, multiple surgeries, and millions of dollars of treatment, plaintiff’s spinal cord injury left him a partial paraplegic with scars over his entire body and continuing pain. Kroger was the primary defendant in his suit for the store’s negligent failure to maintain adequate security.
Kroger’s insurance stacked thusly:
$3,000,000 self-insured retention (SIR)
$2,000,00 ACE American Insurance Company.
$25,000,000 Starr Surplus Lines Insurance Company
$25,000,000 Great American Insurance Company Of New York
Excess above Great American: XL Insurance America and Chubb Group of Insurance CompaniesPlaintiff’s pre-trial demands were within Starr’s coverage limit. But Starr refused to settle. The final judgment exceeded 61 million dollars. It appears that Starr did not attempt to mediate a settlement until after judgment was enteredNotwithstanding its ill-advised choice, Starr refused to pay more than its policy limit to satisfy the judgment. Great American settled the case and on February 11, 2021 sued Starr for reimbursement. The complaint for declaratory judgment alleges that Starr had acted in bad faith and was “stubbornly litigious.” Great American has asked for reimbursement of its settlement contribution plus attorney fees and expenses.

I see many cases that, like the Taylor case, clearly have the potential to “blow up.” Cases settle when parties are willing to spend the necessary time in good faith mediation and make reasonable settlement proposals. When parties are “stubbornly litigious”, the results can be disastrous.

And Then There’s . . .
In workers compensation cases, being “stubbornly litigious” can mean denying requested medical treatment. Often, though, alternative treatments end up being more expensive in the long run. Patients who cannot get treatment through the usual process sometimes end up in emergency rooms, incurring a much larger bill.
 

Authorizing a quick, “expensive” treatment can lead to early claim closure and a less costly claim overall. Sometimes the injured worker ends up undergoing the procedure which was originally requested anyway. And don’t forget the administrative expenses of utilization and bill review.Patients aren’t doctors. Patients are not writing the Requests for Authorization. Almost every patient will prefer conservative treatment to life-threatening surgery. Sure, there are malingerers and patients who exaggerate their pain in the hope of scoring heavy-duty medication or just gaining attention. And, yes, some doctors overtreat to increase their fees. Independent doctors, claims personnel, and defense attorneys have heightened their awareness of those patterns.

Don’t lose sight of the forest for the trees. Like Starr Surplus Insurance, a “stubbornly litigious” stance can end up costing you more in the end.

New Law on Settlement Agreements

A new California law effective January 1, 2020 governs settlement agreement language regarding employment dismissals and rehires. An employer and employee can still agree that a settlement includes termination of employment, but the agreement cannot include language that the person is barred from re-employment.

The legislative history of AB749 shows that the motive behind the law was to prevent situations where a sexual harasser remains employed by a company, but the victim can’t get back or hang on to a job. Here’s the language:

“An agreement to settle an employment dispute shall not contain a provision prohibiting, preventing, or otherwise restricting a settling party that is an aggrieved person from obtaining future employment with the employer against which the aggrieved person has filed a claim. . .”

The law specifically allows termination of a current relationship. Also, the law explicitly states that an employer need not re-hire someone when “the employer has made a good faith determination that the person engaged in sexual harassment or sexual assault” or ”there is a legitimate non-discriminatory or non-retaliatory reason for terminating the employment relationship.”

If It’s Not a Sexual Harassment Case?
This law applies to all claims brought by an employee against an employer in any forum, including mediation, arbitration or other internal process. When an injured worker has not returned to work for years, their employment status in certain situations could still be technically “employed.” To clarify that the injured employee cannot access employee benefits, a settlement agreement may include language defining the date of termination of employment or might specify that the employee is resigning.

I have helped create a settlement where status as an employee was reinstated for a minimal amount of time with the proviso that the employee was resigning on a specific date. I have also helped create settlement agreements where the employee was paid as an independent contractor for a limited period.  This will be more difficult now after passage of AB5, also going into effect on January 1, 2020, which tightens the definition of who is an independent contractor.

Settle, Settle, Settle

It’s almost always better to settle than to keep pouring money into litigation. A trained settlement professional can help you negotiate the best result.

Evaluating the Denied Workers Comp Claim

I recently mediated a partially denied claim where the attorney for the injured worker had no idea what the value of the future medical costs might be. It was an old dog claim, and treaters had been deposed multiple times.

When a printout provides historic data, it’s pretty easy to project future expenses. Sure, parties might disagree about the credibility of treaters’ recommendations or the likely cost of future expenses. They might debate the effect of inflation vs. drugs going generic. But parties can compromise on those things. There are ways to prepare for contingencies in a Compromise & Release. An experienced mediator can help you.

Perhaps this issue is in the NSS category. On the other hand, I see so many parties come to mediation unprepared, I’m taking the time to spell it out.

Discovery Is How You Find Out Things
The Principal Treating Physician (PTP) submitted a report recommending expensive future surgeries and treatment. The PTP was deposed—multiple times. Experts for the employer were deposed and of course said that the need for those procedures was non-industrial. Did anyone ask those experts what such a surgery or treatment might cost?

There’s This Thing Called the Internet
As an experiment, I Googled “cost of fusion surgery los angeles”.  I also Googled “how much does Medicare pay for fusion surgery los angeles.”

I didn’t spend a lot of time on this, but I did browse:
https://www.healthcarebluebook.com/page_ProcedureDetails.aspx?cftId=22&g=SpinalFusion+(lumbar)
https://www.beckersspine.com/spine/item/35786-spinal-fusion-price-in-30-largest-us-cities.html
https://health.costhelper.com/back-surgery.html

Mediation participants often bring in printouts from various websites showing medication costs.

A person might want to argue about the numbers shown on these pages. For one, it isn’t clear that Worker’s Comp wouldn’t get it cheaper. In other words, the value to the employer is different than the value to the injured worker.

Also, many injured workers have Medicare or Medi-Cal (Medicaid) coverage. This means they have lots of room to negotiate.

Informed negotiators negotiate. Uninformed ones throw out numbers without support. You could be using a number that’s too high or too low. When your position lacks credibility, the case is unlikely to settle.

Claims Organizations Have Data
Claims organizations are in the business of paying for medical treatment. Claims professionals see bills for the same procedures again and again. They set reserves based on data. Ask for that data from your client or your opponent. If you are the Applicant’s Attorney, the worst that can happen is that they refuse. That says a lot, too.

No Excuses
There’s no excuse for coming to mediation while clueless about the value of the case. You should repeatedly re-evaluate throughout the case’s pendency. Preparation and good faith negotiation can end cases earlier, saving everyone time, money and stress.

Flavors of Workplace Injuries

Workplace injury benefits come in many “flavors.” Most California workers are covered by workers compensation, administered by the state. However, federal law provides workplace injury benefits to others.

A narrow definition, subject to many refinements, of these groups includes:

  • Jones Act- maritime workers
  • Longshore Act- dockworkers
  • Defense Base Act – civilian employees working abroad on a U.S. military base or under contract with the U.S. government for public works or national defense
  • Federal Employers Liability Act- railroad workers

There are important differences among these laws, including what triggers compensation and available benefits. All workplace injury claims, however, can be resolved through mediation.

When The Injured Worker Calls- Ethical Implications

I get calls at least once a month from represented injured workers who don’t know what is going on with their claims. Stop and think about that in light of the Rules of Professional Conduct.

Typically, in violation of existing rules, the AA has not communicated with the client. Sometimes the attorney has given the client false information. Recently an IW told me his lawyer said there was no such thing as mediation for workers’ compensation cases.

Many of these IW’s are reaching out directly to the employer’s counsel to try to resolve their issues. This puts the employer’s counsel in a difficult ethical position. New Rules 4.2 (represented person) and 4.3 (unrepresented person) lay out the restrictions on defense counsel for that communication.

Frustrated injured workers who want to resolve their claims are seeking information on the internet. That’s how they get to me.

I am not an advocate for anyone; I am a professional neutral. I have always made that role clear to callers. New Rule 2.4 requires mediators to inform unrepresented parties of the mediator’s neutrality. All I can do is assure the workers that I am available to mediate and to talk to their lawyers or adjusters about starting the process.

If you get a call from someone who wants to mediate, don’t brush off that inquiry. There is no charge to talk to me about whether mediation is right for your case. I’ll give you the information you need.

Humility Leads to Mediation Success

Here’s an oxymoron for you: the humble litigator. Like jumbo shrimp and military intelligence, it may seem ridiculous to pair humility with any litigator. But for anyone trying to settle a claim, a little humility can help get you to the finish line.

Most of the time that dispute will eventually settle without court intervention. The parties want to resolve the issue with the smallest expenditure of time and money. Incivility, bias, prejudice and anger are inconsistent with humility and get in the way of settlement.

Acting with humility does not admit fault. The most successful litigators are courteous and respectful.

I’m The One Who’s Right
Of course you are.

Then why is the other side fighting so hard to say the opposite? Of course they’re completely wrong, but maybe, just maybe, you could pretend they have a reasonable point of view. Or—here’s a shocking concept—try to see their point of view.

 

Students learning to debate (or get through law school) may be asked to argue a position with which they disagree. While preparing for mediation, try to outline the other side’s position and think about all the reasons supporting that position. This is an excellent way to marshal your own arguments.  It is also an exercise in empathy.

You Want Me To Do What??
Think about forgiveness. When you feel wronged, your desire for vindication may make negotiation difficult. Forgiveness must be internal and not necessarily verbalized.

Forgiveness is about moving on, doing the best thing for you and those you represent, not for the benefit of the offender. Forgiveness keeps you in control of your emotions rather than surrendering control to the volatility of others. Forgiveness does not validate the other side’s behavior or minimize the damage it has caused. It doesn’t mean you were not wronged or that the parties will have a good future relationship.

Conversely, a well-phrased apology has helped settle many a case. For example, I watched one litigator, without any prompting and without admitting fault, express sorrow that the injured worker had experienced a lengthy delay in getting treatment. That may not be right for your case; for his, it was. Don’t forget that everything said in mediation is confidential and cannot be used for evidence in any forum.

Good People, Strong Emotions

You’re a good person, right? Yet, difficult situations can spark rage and other extreme emotions in the best of people who then behave without humility.

In mediation you can state your position in the strongest terms in a private session with the mediator. The mediator can then skillfully communicate those emotions to move parties to settlement.

A bit of humility can improve your effectiveness in formulating and reacting to those communications.

What’s Wrong With Telephone Negotiation?

A litigation analysis found that lawyers used telephone negotiation in 72% of the cases studied resulting in settlement only 35% of the time. That means that phone negotiation sessions or other settlement processes had to be used multiple times to get to settlement. We can assume that repetition resulted in a loss of time and money for the participants.

In contrast, mediation resulted in resolution 100% of the time in the studied cases. Yet, lawyers used mediation in only 2% of the cases.

Lack of Visual Information
You can’t share documents or other visuals over the phone. Even if all participants to the call are supposed to have the documents in their possession, you can’t be positive they are actually looking at it, even if they say they are, or if it’s the right one.

Body language provides visual cues to the negotiator about how things are going. Facial expressions can show surprise, anger, or anxiety as parties exchange information. You can’t look someone in the eye over the phone. Without the visuals, it may be easier for people to dissemble. Likewise, over the phone you are unable to enhance your own message with gestures or other body language. In mediation, the mediator interprets participants’ body language to better facilitate negotiation.

Getting Negotiators to Pay Attention
Listening is hard work. When negotiators use the phone, they may not be focused. There could be active interference, e.g., flashing lights and text messages on the phone, incoming emails, other notifications from multiple devices, or co-workers coming by. Even without those distractions, people’s attention may drift.

Technology Can Get In the Way
What about using Facetime, WhatsApp, Skype or another video call utility? Theoretically, this could overcome some of the deficits of voice-only negotiation. On the other hand, have you seen the hilarious Tripp & Tyler video about video conference calls? Even when the technology is working perfectly, body language can be difficult to interpret or convey through video.

Video conferencing might be helpful during mediation if, for example, the adjuster or injured worker is in another state and unable to travel to the mediation, assuming the principal negotiators are physically present.

What About Meeting At The Board?
Meeting at the board could resolve some of these issues if the parties come with adequate authority, fully prepared, with all relevant information available to them, and with no time pressures.

How often does that happen?

3 Ways to Evaluate Future Medical Care

Evaluating future medical care is usually the most challenging component for parties trying to settle a workers compensation claim by Compromise & Release. If your crystal ball is in the shop for repairs, try one of these methods.

Medicare Set-Aside
You don’t need a Medicare Set-Aside for claims outside the review thresholds, but claims professionals often order one to get the medical expense analysis. If the report’s only use will be for internal purposes, there is no requirement to share it. If you disagree with a report, you can provide further information to the provider and request revision. Or you can order another report from a different provider. Applicant’s counsel can request the claim professional order an MSA.

Don’t forget that the Medicare Set-Aside amount does not include amounts for co-pays, deductibles, or non-Medicare-eligible expenses.

 

 

Historic Expenses
Don’t be shy about requesting a copy of the print-out of expenditures. Spending some time with the medical expense print-out can be revealing. Total the expenses for the last two or three years and divide by the number of months being reviewed to obtain the average monthly expenditure. You can include claim administration expenses to show what the employer has been spending or omit those expenses to better reflect the actual expenses likely to be incurred post-settlement.

Review the expenses to see if some items are atypical. Is there a major surgery which will not recur? Has the injured worker stopped taking expensive opioids? Omit those items from your calculation, but include the expense for substitute treatments or medications. Conversely, if credible medical reports indicate a future large expense, the evaluation can be increased.

Revisions are not usually a problem because it’s easy to omit a past surgery from the historic total or to change the time period under review. One-time future large expenses can be added as a lump sum.

Once you have determined the average monthly medical expense, your structured settlement broker can quickly calculate the present value of future lifetime care, including an inflation factor to account for rising prices. This figure can purchase monthly payments to be paid to the injured worker or a medical expense account. The broker’s services are free, but be sure to keep that broker in the loop for future settlement discussions.

 

 

Health Insurance Premiums
Many injured workers can get health insurance for their medical expenses after workers compensation coverage stops. Some may already have that insurance. Injured workers who lack health insurance should check with a health insurance agent or www.coveredca.gov to determine their access to an appropriate policy and the cost.

Once you know the premium amount, add in a generous inflation factor plus an allowance for any co-pays and deductibles. Again, your structured settlement broker can calculate a present value, and, voilá!, you have your medical expense evaluation.

 

 

No Claim Too Difficult
Every claim can be evaluated and settled. It’s only a question of how to calculate the settlement components. Whether the disagreement is about DOI, AWW, underpayments, overpayments, scope of the industrial injury, or the cost of future medical care, we can figure it out together in mediation.

Turn Workers Comp Straw Into Gold

Remember the story of Rumpelstiltskin, a little man who could turn straw into gold? The mediation process does the same thing. When provided with the basic ingredients, the mediator can create gold: a win-win settlement.

But the parties have to provide the “straw”:
 
An Open Mind
One reason a case stays open may be that parties are not paying attention to what the other side views as important. Try to discard pre-conceived notions of what the other side needs and come to mediation willing to listen.

Preparation
What does your side really need to settle this case? Is it purely a dollar figure—or are there non-monetary concerns?  Which issues must parties resolve for settlement to happen? Communicating those issues to the mediator in advance makes for an efficient mediation.

A Willingness to Settle
The right people need to be at the mediation with adequate authority. Parties need to spend time calculating a reasonable settlement range in light of all factors before negotiation can bear fruit—or gold. The decision-maker must be at the mediation as well as any necessary support people. That might include family members, clergy, or other advisors to the injured worker, a nurse case manager or structured settlement broker for the employer. If the decision-maker can’t/won’t close the deal without the support person’s input, that person needs to be there or at least available by phone. Coming to mediation with the right people and proper authority shows respect for others at the table and enhances the opportunity for a good result.

When everyone brings the right straw to the bargaining table, they are likely to walk away with a golden settlement. Rumpelstiltskin is the bad guy of his story, but your mediator can be the hero of yours.