WSIA

Court of Appeals upholds central provision of 2011 settlements law

Issue bedeviled the Legislature for last three years

Olympia – The Washington Self-Insurers Association (“WSIA”), the statewide trade group representing major employers in workplace safety and workers’ compensation matters, strongly applauds the Washington Court of Appeals’ decision this afternoon in the controversial Zimmerman case regarding voluntary workers’ comp settlements for workers with attorneys.

In 2011, facing a state workers’ compensation system weighed down by complaints about high costs, inefficient claims management, and long-term financial sustainability, the Legislature passed a series of significant but highly controversial reforms to the workers’ comp system.

The most important of the reforms for the business community was the ability for the first time in Washington, as in 44 other states, for employees and employers or the Department of Labor & Industries to settle the non-medical aspects of disputed workers’ comp benefit claims.

These so-called Claim Resolution Structured Settlement Agreements were enacted with a number of heavily negotiated and agreed-upon safeguards for injured workers, including an administrative review and approval by the Board of Industrial Insurance Appeals (the “Board”), a politically-appointed body that resolves workers’ comp and workplace safety appeals.

The Zimmerman case turned on the approval process for workers represented in their settlement by an attorney. For workers with attorneys, the Legislature provided a streamlined review process focusing on whether the settlement was freely and knowingly made. For workers without attorney representation, the Legislature provided a heightened safeguard – a conference and review by judicial staff of the Board, culminating in a determination by the judge whether the settlement is in the workers’ best interests.

The problem with Zimmerman is that a two-person majority of the Board began with that case applying the “best interests” standard for workers without lawyers to those with attorney representation, misapplying the law and creating a chilling effect on the negotiation of workers’ comp settlements by claimants with lawyers.

In fact, the initial uptake of the 2011 settlements law, hampered in part by the Board’s decision, was so disappointing that in 2013, the Department of Labor & Industries had to write off nearly $300 million in cost savings it had booked anticipating the settlement of claims that never happened, increasing the system’s liabilities and putting an upward pressure on its premium rates.

The settlements issue bedeviled the Legislature the last two years, with amendments, including a statutory “fix” to the Board’s decision, passing the Washington State Senate with bipartisan support both years, only to idle without a hearing in the House of Representatives. In the 2013 session, the issue helped carry the Legislature into two overtime periods as the Senate and House persisted in conflicting positions on workers’ comp reform.

After the Board’s 2-1 decision in Zimmerman, the self-insured employer, the South Kitsap School District, appealed the decision to the Kitsap County Superior Court, which reversed the Board’s interpretation of the law. Then the Board itself appealed that decision to the Court of Appeals.

WSIA, joined by the Association of Washington Business, filed an amici curiae (“friends of the court”) brief supporting the school district and explaining the history and rationale of the 2011 settlements law.

Striking down the Board’s interpretation today, the Court of Appeals unanimously wrote:

The statutory text before us extends certain safeguards to all workers, but only for those without counsel does it require the state to determine that the settlement is in their best interest. This approach assigns the determination of one’s own interest to those arguably best positioned to make that determination, workers with legal counsel. Inversely, it removes the same determination from those arguably most in need of an independent review of their own interests, those without counsel. Whether we think it better policy for the state to determine the best interests of all [settlement] applicants is beside the point. The legislature has adopted a detailed, rational scheme in which the state decides whether a structured settlement is in the interests of workers without legal counsel. . . . By asking us to approve that inquiry for all workers, the Board asks us to take a seat in the legislative chambers, an invitation we must decline.

“The Court got this one exactly right,” said Kris Tefft, Executive Director of WSIA and the attorney who represented both WSIA and AWB in briefing before the Court. “The Legislature still needs to take a look at ways to make workers’ comp settlements more user friendly, and live up to their intended promise,” said Tefft. “But hopefully, this decision takes this one specific dispute off the table so we can focus on more important things for injured workers and their employers.”

About the Washington Self-Insurers Association

The Washington Self-Insurers Association was founded in 1972 to educate and advocate on statewide issues related to workplace safety and workers’ compensation. Approximately one in three Washington employees is covered by a self-insured workers’ compensation program, and WSIA’s mission is to help members successfully implement and operate self-insurance programs, to keep Washington employees safe, healthy, and working. WSIA members include major public and private sector employers, such as cities, counties, hospitals, public and private schools, non-profit charities, and many of our state’s most visible and iconic companies and brands. For more information, visit www.wsiassn.org.

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