Louisiana Appellate Court Sets Aside Settlement Based on Confusion Over MSA

On October 27, 2014, the Louisiana Court of Appeal, First Circuit, published its opinion on McCarroll v. Livingston Parrish Council and Louisiana Workers Compensation Corporation, concluding that since all parties believed that the MSA amount could be used to pay for Mr. McCarroll’s surgery and that Medicare would pay for the surgical costs exceeding the MSA amount, there was no error in the Workers’ Compensation Judge’s finding that defendants’ misunderstanding regarding the MSA was a misrepresentation sufficient to set aside the settlement order of approval. Essentially, the settlement was set aside because there was no meeting of the minds between the parties as to what the MSA would pay for and what Medicare would pay for.

Wendell McCarroll was injured in a work-related accident on December 22, 2003, while employed with the Livingston Parish Council (Council). The Council’s workers’ compensation insurer, Louisiana Workers’ Compensation Corporation (LWCC), began paying medical and indemnity benefits soon thereafter. Mr. McCarroll treated with various doctors, including Dr. Lori Summers, who recommended cervical fusion surgery in July 2008.

Mr. McCarroll initially declined the surgery. Thereafter, in November 2008, LWCC began negotiating a settlement with Mr. McCarroll’s attorney. In early January 2009, the parties agreed to the terms of a settlement, including a MSA. The MSA projected future medical treatment and prescription drug treatment in the amount of $98,684.00. That amount was broken down into an estimate of $44,129.00 for future medical payments and $54,555.00 in future prescription costs. Of the $44,129.00 amount, $21,793.00 was allocated for Mr. McCarroll’s recommended surgery.

The MSA was to be funded through an annuity with seed money in the amount of $32,045.00 and an annual payment of $4,759.91 for a maximum of fourteen years. The MSA was submitted to CMS for review and approval. The MSA was approved by CMS on February 2, 2009.

Sometime after reaching settlement, Mr. Mccarroll decided to proceed with the cervical fusion surgery. LWCC was contacted by the hospital for approval of the surgery. Because of the pending settlement, the request was denied as not needed.

Concerned about the cost of the surgery, Mr. McCarroll’s attorney asked LWCC for an additional $10,000.00. In response, LWCC offered an additional $5,000.00, and Mr. McCarroll accepted that amount.  On February 10, 2009, $5,000.00 was approved for non-covered Medicare expenses.

Mr. McCarroll underwent the cervical fusion surgery on February 16, 2009. Apparently, there were complications, and Mr. McCarroll remained in the intensive care unit for an extended period of time. On March 2, 2009, Mr. McCarroll executed the Settlement Agreement and Release. The settlement documents were approved by the OWC on March 9, 2009.

Although not specifically spelled out in the appellate opinion, it looks like Medicare was billed but denied payment for the surgery because surgery was performed before settlement of the case was actually approved by the OWC and therefore remained the responsibility of the employer/carrier. Although unclear from the appellate opinion, since Medicare believed the cost of surgery was the responsibility of the primary payers, Council and LWCC, Mr.  McCarroll was also unable to use the MSA funds to pay for the surgery costs.

Two years later, on March 10, 2011, Mr. McCarroll filed with the OWC a Petition to Enforce Settlement Agreement or, in the Alternative, to Nullify Court Approval of March 9, 2009. In his petition, Mr. Mccarroll asserted that Medicare had 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 had refused to pay for any medical treatment from late January 2009 up to the March 9, 2009 approval of the settlement. Mr. McCarroll requested an order from the OWC ordering payment by LWCC of all medical expenses incurred prior to March 9, 2009, or, in the alternative, an order annulling the March 9, 2009 settlement agreement.

The matter went to trial on April 24, 2013. On June 17, 2013, written reasons were issued and a judgment signed by the OWC. The judgment vacated the settlement approved by the OWC on March 9, 2009. The Council and LWCC appealed.

The defendants contend that the OWC manifestly erred in vacating the settlement approved by the OWC on March 9, 2009. The defendants maintain that the cost of Mr. McCarroll’s expected future surgery was funded as part of the settlement. They assert that the clear language of the settlement resolved the entire claim and included past, present, and future medical and indemnity benefits. Because the cost of the cervical fusion surgery was included in the MSA, the defendants contend they are not responsible for anything further.

Mr. McCarroll contends, however, that not only did he think that LWCC and Medicare would pay for the costs of his surgery, but that LWCC also believed that the surgery would be paid out of the MSA, with any additional costs covered by Medicare. Mr. McCarroll asserts that the OWC correctly vacated the approval of the settlement because neither party anticipated that his surgery would not be covered by Medicare and the MSA and that he would be responsible for the costs of his surgery. Therefore, the settlement did not reflect a meeting of the minds.

Mr. McCarroll testified that when he signed the settlement agreement he thought that his medical expenses would be paid by Medicare or the MSA.  He stated that he would not have signed the agreement if he knew that he would have been responsible for the payment of any of his medical expenses.

The court concluded that it could not say that the OWC manifestly erred in vacating the Order of Approval signed on March 9, 2009. The OWC set the approval aside finding that all the parties believed that the MSA amount could be used to pay for Mr. McCarroll’s surgery and that Medicare would pay for the surgical costs exceeding the MSA amount. As a result, the appellate court found that a reasonable basis existed for the factual finding of the OWC, and could not find that it was clearly wrong. Accordingly, the court finds no error in the OWC’s finding that LWCC’s misunderstanding regarding the MSA was a misrepresentation sufficient to set aside the order of approval. For these reasons, the June 17, 2013 OWC judgment vacating the settlement approved on March 9, 2009, was affirmed.

This case is yet another reminder to litigants of the need to be absolutely clear and precise when settling a case where an MSA is involved. Very specifically, in addition to addressing the issues and concerns brought about by the possibility of a counter-higher by CMS, parties must address with specificity the time interval between submission of the MSA to CMS, what happens if the MSA is not approved as proposed, and if approval of the settlement by the work comp judge or court is required, terms regarding any medical bills incurred during this time period. Whether at mediation or hearing, litigants, their attorneys, mediators, and adjudicators must pay attention to such details in order to prevent results like those here. Helios can assist with recommended settlement language that addresses such concerns.

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