Hearings, Appeals, and Valuation of Cases for Settlement
Workers’ Compensation in Connecticut
NBI Seminar 11/17/03 and 11/18/03
Workers’ Compensation Hearings, Appeals and Valuation of cases for settlement
Robert F. Carter
Carter & Civitello
One Bradley Road, Suite 301
Woodbridge, Connecticut 06525
- Preparation of the case for hearings.
Preparation of a case of course varies enormously according to the issues, factual, legal and medical. Generally, the best advice is to consider well in advance of the hearing what needs to be done, which typically includes:
- Writing physicians to ask the relevant questions to address the issues at hand;
- Making sure the medical reports, records and bills are obtained in time for the hearing, and preferably in time to be distributed to the opposing party and the commissioner prior to the hearing;
- Researching and briefing the law, where needed;
- Getting a clear version or versions of facts from the relevant parties and witnesses, and identifying areas of factual disagreement;
- Obtaining the relevant non-medical documents, such as wage and personnel records, marriage licenses, or death certificates, for proof of the claim;
- Obtaining independent medical examinations where appropriate.
Formal hearings additionally require:
- Obtaining depositions to be used at the formal hearing;
- Analyzing and researching evidentiary issues on admissibility of documents;
- Briefing legal issues for the commissioner, where an evidentiary issue is pretty certain to come up during the hearing;
- Preparing witnesses and copies of exhibits for the trial commissioner and opposing counsel, and subpoenaing witnesses where necessary;
- Calculating indemnity and medical benefits owed or paid;
- Preparing draft findings prior to the formal hearing to the possible. This practice highlights evidentiary and legal issues and is a valuable aid in thinking through what is needed for making a record in the formal hearing, step by step.
Finally, for any hearing, formal or informal, it is good and decent to practice to discuss the issues with the opposing counsel prior to the hearing, to make sure that all parties have the same understanding of what is at issue and what may be resolved by agreement, including evidentiary issues at the formal hearing and the scheduling of witnesses.
1. Informal Hearings.
Informal hearings are scheduled by the commission to attempt to resolve disputes between claimants, respondents, or third parties with an interest in a claim, such as medical providers. Informal hearings are also used to enlist the commissioner’s help in settlement negotiations. Informal hearings may be requested by any party in the commission district where the injury occurred by form available from the commission (or online: wcc.state.ct.us) or by letter. A sample request form is attached, illustrating the information necessary for the commission to schedule the hearing.
Good practice is to discuss the dispute with the opposing party, with full exchange of relevant documents, prior to requesting the hearing. In fact, failure to do so is branded an “impropriety” by commission regulation Sec. 31-279-6. Chairman Mastropietro has been increasingly vigorous, though largely unsuccessful, in discouraging the unnecessary scheduling of hearings. The scheduling of hearings over the last twelve years, however, has become more frequently necessary to get even the most rudimentary attention to a file.
Written agreements reached by parties at informal hearings are binding under C.G.S. Sec. 297a, although this procedure is rarely used in fact.
Otherwise, a commissioner’s power at an informal hearing is generally limited to persuasion. The exceptions are the grant or denial of a notice by a respondent to discontinue or reduce benefits (Form 36), where the commissioner may make an interim order concerning, most frequently, the termination of temporary total disability benefits. Such hearings have been given special priority over hearings on other issues in recent years pursuant to Sec. 31-296. The appropriateness of a commissioner’s decision on a Form 36 may be revisited de novo at a formal hearing. A hearing on a disputed Form 36 must be requested by a claimant within 10 days from receipt of the Form 36.
Commissioners at informal hearings may also authorize a change in treating physician, and may require a commissioner’s medical examination by a physician selected by the commissioner.
In practice, the bulk of the commissioners’ business is accomplished at the informal hearing stage. The Connecticut Commission for decades had prided itself on its ability to resolve the vast majority of disputes at this stage, relative to other jurisdictions.
Informal hearings usually take several weeks to occur after the hearing request has been made.
Claimants in requesting a formal hearing occasionally may have difficulty in identifying the appropriate insurance carrier. Commission staff are usually helpful; but identification of insurance carriers in the past may require reference to microfilm records available at some of the district commission offices.
Prior to the informal hearing, and usually with the hearing request, relevant documents should be submitted to the commissioner, as well as to opposing counsel. Many commissioners, time permitting, will review a file prior to the hearing, to speed the hearing process. At the hearing, ordinarily the party requesting the hearing will explain the disputed issue, and both sides will be heard informally; commissioners usually at some point take over the inquiry and lead the discussion.
Brevity is important, since hearings are frequently scheduled at fifteen-minute intervals, and commissioners usually full dockets. Based on the evidence offered and the representations made, the commissioner will usually recommend a resolution of the dispute, or recommend the gathering of additional information and the scheduling of another hearing if necessary. It is frequently important to ask the commissioner to record in his or her notes the issues, any agreements, remaining disputed issues, and the commissioner’s decisions concerning scheduling (such as leaving the claim to be rescheduled for a pre-formal hearing on request).
Hearings may be postponed by agreement or for cause at the discretion of the commissioner.
Although multiple informal hearings may be scheduled at the discretion of the commissioner, disputed issues which cannot be resolved by agreement will be scheduled for formal hearing, the equivalent of a trial in the workers’ compensation commission.
2. Preformal Hearings.
So-called “preformal” hearings are a relatively recent creation of the commission; they are simply another informal hearing, designed in theory to narrow issues and identify evidentiary or scheduling problems in the conduct of an anticipated formal hearing. Originally, the aim of having such a preformal hearing was to encourage, with a stronger hand, compromise and resolution of issues. A preformal memorandum was for several years required from the party seeking a formal hearing, though this requirement has now been abandoned. The preformal hearing mechanism has proven not particularly effective in resolving issues, and can be waived where appropriate by the commissioner. Many commissioners; however, require a preformal hearing in every case, and commission staff will schedule a preformal hearing even though a formal hearing has been requested, unless the commissioner has decided that a preformal hearing may be bypassed.
A helpful practice is to prepare a preformal memorandum even though it is not mandatory. The preparation, like preparation of a proposed finding and award prior to a formal hearing, focuses one’s attention on the details of the case. Another important function is that the preformal memorandum, with copies given to the opposing party and to the commissioner, records in the commission file the issues for the formal hearing, obviating claims of lack of notice or surprise.
3. Formal Hearings.
Any party may, after appropriate informal and preformal hearings, request a formal hearing on specified issues. As discussed above, the identification of issues is important, since there is no formal pleading, such as a complaint and an answer, to designate the parties’ claims.
Parties are not required at law to be represented by an attorney in formal hearings; and in theory, parties may be represented by designated representatives, although proof of competence may be demanded by commissioners. In fact, however, attorneys are for all practical purposes considered necessary for the parties to conduct formal hearings, and commissioners routinely advise parties that they must obtain attorneys to litigate disputed claims or issues.
Formal hearings are in effect courtside trials before a commissioner. Although the rules of evidence are ostensibly relaxed by C.G.S. Sec. 31-298, in practice, and to some extent because of the requirements of due process, rules of evidence are ordinarily followed. One exception is that commissioners, under case law, may admit a favorable independent medical examiner’s report when offered by a claimant; otherwise, of course, the report is inadmissible as hearsay except by testimony or deposition of the physician or by agreement. Reports of treating physicians or depositions of physicians are admissible pursuant to C.G.S. Sec. 52-149a and Sec. 52-174. Prior statements of parties may be used at formal hearings if a transcript has been supplied in advance by the offering party.
As a matter of courtesy and collegiality among the majority of the workers’ compensation bar, conduct of formal hearings is more congenial than civil trials, and evidentiary nit-picking is disfavored by the better attorney and commissioners alike.
The commission operates on a system of free disclosure of records, including medical records as well as other documents to be submitted in evidence, and commissioners strongly disfavor withholding of records until the time of the formal hearing.
Similarly, commissioners disfavor failure by respondents to obtain an independent medical examination until after the first part of the formal hearing has been held. Respondents who do so without agreement of the claimant act at their peril, since the commissioner may refuse to schedule another formal hearing or to admit the deposition testimony of the independent medical examiner, in cases of dilatory behavior.
Surveillance evidence is increasingly offered by respondents at the formal hearing. The limits of the propriety of such evidence have not been clearly established by case law, but some surreptitious surveillance is generally considered permissible at present. Most commissioners, however, refuse to admit such evidence unless it has been disclosed in advance to counsel for the claimant for review.
At the formal hearing, a commission reporter records the proceedings and transcribes the record. Parties may purchase transcripts from the reporter.
Ordinarily formal hearings are scheduled for a morning or afternoon session, with repeated sessions to follow where necessary. Most good practitioners discuss freely their plans for the hearing, to coordinate the presentation of evidence and scheduling of witnesses for the convenience of opposing counsel and the commission. The commissioner must give ten days’ notice of the hearing pursuant to C.G.S. Sec. 31-297, except where he or she deems an emergency to exist requiring a speedier hearing; or the ten days’ notice may be waived by the parties.
Most commissioners ask for post-hearing briefs and/or proposed findings, and set a date certain for a “pro forma” formal hearing for the submission of the briefs. The trial commissioner has 120 days in order to decide the case, and ordinarily prepares a lengthy “finding and award” or “finding and dismissal.” Decision within the 120 days is mandatory unless waived by agreement of the parties.
The trial commissioner’s authority is limited by the scope of the Workers’ Compensation Act. Commissioners are generally careful not to decide matters, such as contract disputes, outside the jurisdiction of the act. However, there are borderline areas concerning insurance coverage in which commissioners attempt to act reasonably to resolve the issues necessary for deciding the dispute.
Generally, the burden of proof for obtaining benefits is on the claimant. However, on some issues the burden is on the employer, such as when the employer asserts that the claim is not compensable because of the “serious and willful misconduct” or the intoxication of the claimant is alleged. The burden of proof is also on the respondent to prove “apportionment” of benefits, such as among prior carriers, or the reduction of benefits because of the receipt of prior compensation or because of the existence of prior occupational disease.
Interpreters may be required, and parties are required to supply competent interpreters. Family members or interested parties are usually ruled ineligible to be interpreters, unless the parties agree that they may be used.
There is little motion practice before the commission, and it is properly as antithetical to the spirit of compensation proceedings. So-called “motions to preclude” contest of compensability based on the absence of a timely disclaimer pursuant to Sec. 31-294c(b), motions to compel or allow a deposition, or to compel the production of evidence, such as wage, comparable wage, or personnel records, motions in limine to anticipate evidentiary issues, or other more creative requests are sometimes filed. The legal status of such motions is unclear. Decision on the issues raised any such motion, to be reviewable, must be made after a formal hearing, where the commissioner’s authority is legally clear, and where a record may be made. However, since interlocutory appeals usually delay proceedings, acting on such a motion at a formal hearing separate from the formal hearing on the merits of the case is unusual, except on a motion to preclude the respondent’s defenses, which may be dispositive of the claim.
The initial appeal from a commissioner’s decision is to the Compensation Review Board (CRB), except the appeals from decisions in discrimination claims under Sec. 31-290a are to the Appellate Court and are governed by the appellate rules. Appeals must be filed within 20 days from the date of the award or dismissal.
In order for an appeal to be reviewable under Sec. 31-301, a formal hearing must be held, an evidentiary record made, and a transcript produced of the formal hearing for review. The CRB in fact dismisses many appeals each year in which these requirements have been forgotten. Appeal forms to the CRB are governed by provisions of Sec. 31-301 et seq. and the associated regulations issued by the commission. The appeal forms are filed in the district commission where the case was decided.
Interlocutory appeals are available to the CRB, though disfavored, but are not available to the Appellate or Supreme Courts, except by certification of a novel legal issue.
Within ten days from the filing of the appeal petition, the appellant must file a statement of the reasons for the appeal with the CRB, unless excused by the CRB. Appellants frequently move to delay filing the reasons for appeal until the transcript of the formal hearing has been transcribed.
Where a party disagrees with the facts found by the commissioner, as opposed to the legal conclusion drawn by the commissioner, that party must file a motion to correct the findings, along with the portions of the evidence relevant to the disputed findings of fact and transcript of the formal hearing, within two weeks from the decision, pursuant to Reg. Sec. 31-301-4. Without such a motion, the CRB may decline to hear arguments addressed to erroneous fact-finding by the trial commissioner.
Pursuant to Reg. Se. 31-301-9 the CRB may for good cause admit and consider additional evidence not presented at the formal hearing. In practice, the CRB has rarely granted motions to submit additional evidence.
During the pendency of the appeal, respondents are required to pay benefits which are not disrupted, where the appeal addresses issues which may affect only some of the benefits awarded. Under Sec. 31-301(f), where the claimant requests it, respondents are required to pay even the disputed benefits during the pendency of the appeal, subject to a right of recoupment plus 10% interest should the respondent’s appeal be successful.
Appeals from decisions of the CRB are available by right to the Appellate Court, subject to the Appellate Rules of the court, and to the Supreme Court by certification. The CRB may and occasionally does certify novel questions of law or constitutional issues directly to the Supreme Court of decision.
E. Settlement valuation and stipulations.
The infinite variation in cases precludes any simple formula for valuing cases for settlement purposes. Generally, of course, settlement is based on establishing the present value of likely future indemnity and medical benefits, and then discounting this value somewhat so that the carrier has sufficient incentive to part with the cash necessary for settlement. The cost of continuing administration of a claim is contested as not compensable, an additional discount is applied in consideration of the probability of loss.
1. Recognizing probabilities.
The actual valuation of each element of a case, however, is also a matter of estimation and juggling with probabilities: how likely is it that a claimant will have a second knee replacement and how soon is that likely to occur? How likely is it that a claimant with a lumbar fusion will have a rupture of an adjacent non-fused disc? That such a rupture will require additional surgery? How likely is it that such a claimant will be able to prove causation with respect to the need for the additional surgery? How likely is it that a surviving spouse will want to remarry? Advice from physicians, particularly the treating physicians, may be helpful in clarifying the likelihood and timing of future medical expenses, but in the end the analysis is still based on educated guesswork.
2. Present value issues.
Similar vagaries apply to present value issues. How much will a knee replacement cost in 20 years? Historically, the costs of medical care have been rising faster than the inflation rate; so there should be little or no discount for present value: in fact, based on the logic of past experience, a higher amount than the current value of the medical or surgical treatment should be calculated as the “present value” if we expect that medical costs will continue to rise disproportionately.
The discount rate which should be applied to future indemnity benefits may also be disputed, since the choice of discount rate is really a bet on the average rate of return on investments over many years. Further, the parties’ perspectives differ radically: present value to whom? Clearly the carrier is only interested in the present value of future payments measured against its own internal rate of return on capital; that is, what rate of return will the carrier make by retaining and investing the premium cash and paying the benefits out over time? Since the claimant will be unable to invest at as high a rate of return as the carrier (unless he or she is a wizard or lucky), the incentive to settle for a lump sum will be diminished for the claimant, if the settlement value is considered rationally.
Where cost-of-living allowances apply to potential future benefits, such as temporary total disability benefits of more than five years’ duration or surviving spouse benefits, the calculation of present value is obviously quite different. Since the dollar value of the future benefit rises by a certain percentage each year, this inflationary rate should be deducted from the chosen discount rate to find the true discount rate which should be applied to these types of future benefits. The average cost-of-living increase applicable to Connecticut benefits between 1970 and 2003 was more than 6%, which would offset a discount rate of 6%. If the effective discount rate is therefore 0%, the present value is simply the aggregate dollar value of future benefits, with no discount to present value.
Related issues bearing on net value.
Valuation of claims also requires examination of related third-party financial issues which affect the strategy of negotiations and the feasibility of settlement, if not the strict value of the claim. The most common issue is where a third party payor has paid some or all of the medical bills for treatment of the injuries which are claimed to be compensable. Whether the third-party payor must be reimbursed, either by the carrier or the claimant, clearly affects the mechanism of the settlement, and the desirability of the settlement. A third-party payor who has paid for costs of treatment of a work-related injury has a right to reimbursement and a lien on compensation proceeds if it files a notice of lien with the employee, carrier and workers’ compensation commission pursuant to Sec. 38a-470. Medicare has an automatic lien under federal law, which may apply to the carrier and claimant’s counsel as well as to the claimant; therefore, it is incumbent on the parties to determine what Medicare claims to have paid for treatment of the compensable injuries and to deal with Medicare on the reimbursement issue.
Where the effects of the injury are clear, such as a finger amputation, the cost of such medical treatment is easy to determine; but other situations are much less clear, as for example, exacerbation of pre-existing hypertension or diabetes by a work-related injury or disease. In such gray areas, or where the case is contested and the liability uncertain, it is inappropriate, and often impossible, to pay the entire amount of the potentially compensable medical expenses. Negotiation with the third-party payor or even post-stipulation litigation may be necessary to resolve these difficult reimbursement issues. At minimum, the issues should be foreseen and sometimes be addressed explicitly in the stipulation, as for example recognition that because of dubious causation or compensability, none or only a portion of these contested medical expenses is being paid as part of the settlement. Most importantly, the burden of dealing with these third-party reimbursement claims must explicitly be assigned by agreement to the claimant or respondent in the stipulation.
The effect on the potential settlement of liens by other third parties, such as state agencies for child support or public assistance, Medicaid, or unpaid medical providers, must be also considered. Although the value of the claim is not affected, the practical effect of these liens often determines whether and how a case may be settled.
Related civil actions.
Where the compensable injury gives rise to a civil action against a third party by the employee, the employer or both, settlement is more complicated. If the workers’ compensation case is being settled prior to the resolution of the civil action, the parties must take into account the size of the compensation lien against the potential proceeds in the civil action, discounted by the probability of an unfavorable outcome in the civil action. The parties also must consider the likelihood of a substantial recovery in the civil action, which would provide a significant moratorium for the workers’ compensation carrier in the payment of future workers’ compensation benefits until the net recovery by the claimant in the civil action is amortized.
Where the civil action is settled prior to the settlement of the workers’ compensation claim, the parties must negotiate the issues outlined above: how much is the workers’ compensation carrier to be reimbursed? How much moratorium will be provided to the workers’ compensation carrier? In practice, many times the settlement of the civil action prompts a settlement of the workers’ compensation case, frequently with the equal division of the proceeds of the civil action among the employee, his attorney, and the workers’ compensation carrier. In such cases, the workers’ compensation carrier reduces the amount of its lien in exchange for settlement of the workers’ compensation case for zero dollars. The settlement of the workers’ compensation claim in such cases must still be approved by the commissioner. The variety of strategic consideration which may arise where there is a third-party civil action is very great. The only general rule is that negotiation of each aspect of the puzzle may be possible, as well as necessary, to resolve the cases.
Other third-party issues.
The consideration of the vast number of third-party issues related to stipulations is beyond the scope of this valuation topic; but they are often crucial. The receipt of a lump sum workers’ compensation settlement, or periodic “structured” post-stipulation payments, may affect, among other things, the claimant’s Social Security disability benefits, long-term disability benefits, disability and retirement pension benefits, and future medical benefits from Medicare or a future group health carrier.
Occasionally, the parties will agree to settle only part of a case by stipulation, as for example preserving to the claimant the right to future medical treatment for the body part affected by the compensable injury. Similarly, interim resolutions of some of all disputed issues in a case are memorialized by a so-called “stipulation to date,” which records the agreement but leaves the claimant free to claim future benefits.
The settlement agreement itself is usually entitled a “stipulation” or more accurately “finding and award by stipulation.” Mechanically, after it is drafted and signed by the parties, several copies are submitted to the commissioner for approval, along with a completed commissioners’ questionnaire and executed “stipulation and what it means” form. These latter are reasonably self-explanatory; copies are attached. A hearing will be noticed for the commissioner to canvas the claimant, to determine for the record that the claimant understands the full and final nature of the settlement and the implications of the settlement. The respondent may waive appearance at the hearing, which usually speeds scheduling.
An out-of-state claimant originally may appear by affidavit (and with notarization of the claimant’s signature on the stipulation and the “stipulation and what it means” form) confirming his or her understanding of the nature of the settlement and approval of the attorney’s fee. Commissioners in some cases canvas non-resident claimants by telephone.
Other issues arise, of course, where the claimant is a minor or incompetent, and may require probate court involvement.
Finally, one mechanical issue which should be addressed, but is easy to forget, is whether, when a claimant is receiving weekly benefits, these benefits will continue until the stipulation is approved, or to a date certain, or be dealt with as a credit against the gross amount of the stipulation after a certain date. This is usually a minor issue, but can cause trouble unless specifically discussed.