08 Mar 2019

California: What Can Sink a Compromise and Release: Lack of Mutual Intent

In Morales v. Universal Furniture, 2019 Cal. Wrk. Comp. P.D. LEXIS --, the WCAB affirmed its prior decision [see Morales v. Universal Furniture, 2017 Cal. Wrk. Comp. P.D. LEXIS 591 (Appeals Board noteworthy panel decision)], wherein the WCAB found that applicant’s claim of internal injury was not resolved as part of the 6/13/2016 Compromise and Release, which settled applicant’s cumulative orthopedic and psychiatric claims incurred during the same period, and that applicant was, therefore, not barred from pursuing an internal injury claim against defendant.

The WCAB reasoned that the Compromise and Release, when read as a whole, did not indicate the parties’ mutual intent to settle applicant’s internal injury claim, where Paragraph 1 of the Compromise and Release did not list an internal injury as part of the cumulative trauma claim, Paragraph 3 of the Compromise and Release expressly limited the settlement only to those claims listed in Paragraph 1, notwithstanding contrary language elsewhere in the settlement agreement, and the handwritten language added by the parties to the Compromise and Release, stating that the settlement agreement resolved all liability/claims against defendant, was insufficient to supersede the provisions in Paragraphs 1 and 3.

The WCAB further noted that even if defendant intended to resolve applicant’s claim for internal injuries, there was insufficient evidence to support a finding that applicant fraudulently induced defendant to enter into the Compromise and Release because the settlement was jointly drafted by the parties, and defendant had the obligation and opportunity to ensure that the written terms of the settlement accurately reflected its understanding of the settlement agreement.

PRACTICE POINT: The unequivocal take away from the recent unanimous panel decision [Commissioner Razo joined the majority in this decision] is that attorneys/representatives are obligated to pay scrupulous attention to detail when drafting and reviewing a Compromise and Release (C&R) to ensure that the written terms of the C&R accurately reflect the totality of the settlement agreement. The scope of the settlement agreement must be set forth in detail in Paragraph 1 of the C&R form. Each date of injury and the corresponding injured body part, condition or system intended to be included in the settlement must be clearly stated. If a dispute later arises as to the scope of the settlement, Paragraph 1 of the C&R form controls, despite any language to the contrary in the document or an addendum thereto.

Don’t expect sympathy from the WCAB should you fail to include a particular date of injury or body part, system or condition within Paragraph 1 of the C&R. This panel cautions that it is the obligation of the attorneys/representatives to carefully draft and/or review the written settlement document to ensure that it fully and completely reflects the settlement agreement.

Admittedly, many settlements occur during the course of a hearing at the WCAB and the C&R is drafted on the spot. Mistakes, like failing to list a certain date of injury or a body part within Paragraph 1 of the C&R can and do occur, especially where multiple claims are being settled by the agreement. Such mistakes can be minimized by drafting a proposed C&R before the hearing.

(The PDF for Morales can be found at the end of this article.)

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