You have just sent a claimant a check for $100,000 as consideration for a full and final settlement. The claimant then files a motion to vacate the settlement, but he has already cashed the check. What should you do?
The Virginia Workers’ Compensation Commission is very liberal when it comes to backing out of settlements. Either side has up to thirty (30) days after the settlement has been approved by the Commission to back out without penalty.
The most common reason an insurer might back out of a settlement is that it discovers fraud. For example, the insurer might find out that the claimant is working elsewhere and did not report that income. Or, surveillance might reveal that the claimant is not really injured.
The most common reason why a claimant might back out of a settlement is that the claimant discovers that her injury is much worse than she thought, and she will need expensive surgery in the future, or that the recent surgery failed.
In Radtz v. Crossroads Fuel Service Inc. (03/16/2023) the Full Commission addressed the issue of how to handle a matter when the settlement proceeds have been dispersed but the claimant wants to back out of the settlement.
In Radtz, the parties settled the claim. The settlement was approved by the Commission on 01/24/2023. The claimant timely moved to vacate the settlement because he needed additional surgery.
The Commission gave the claimant 60 days to remit the settlement proceeds to the insurer. If the proceeds were not returned, the settlement would not be vacated.
Practice Pointers:
- If you settle a matter favorably, pay the settlement proceeds to the claimant as quickly as possible. The quicker the proceeds are paid, the quicker the claimant will spend the proceeds and will not be able to back out of the settlement.
- If a claimant backs out of your settlement after the proceeds have been paid, have your attorney move the Commission to stay the vacation of the settlement until the settlement proceeds are remitted (and request a 30-60 day timeline for remittance of the proceeds). Don’t rely upon the Commission to do it, sua sponte.
- Provide your attorney with proof of payment and the cashing of the payment check by the claimant.
As always, the Workers’ Compensation Team at KPM Law is available to assist you with these types of motions, and to answer any of your questions.