Lack of Medicare set-aside allocation foils enforceability of agreement

In Kentucky, a settlement agreement based on correspondence between the parties may be enforceable if the correspondence memorialized all of the terms to which they agreed and neither party asserts that the terms are incomplete.

Case name: Hudson v. Cave Hill Cemetery, No. 2010-SC-000223-WC (Ky. 01/20/11).

Ruling: The Kentucky Supreme Court held that the parties' settlement agreement was incomplete. They agreed to establish a Medicare set-aside account but did not agree on the allocation. Therefore, the court declined to enforce the agreement.

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What it means: In Kentucky, a settlement agreement based on correspondence between the parties may be enforceable if the correspondence memorialized all of the terms to which they agreed and neither party asserts that the terms are incomplete.

Summary: A worker suffered a work-related injury and settled his claim with his employer for previously paid temporary total disability benefits and a lump sum for permanent partial disability. The worker required post-award medical treatment and applied for Social Security disability benefits. The employer filed a medical fee dispute and reopening to contest causation and the reasonableness and necessity of ongoing prescription medications and psychiatric treatment. The worker's attorney claimed that he settled the dispute through exchanges with the claims adjuster for the employer's insurer and the employer's attorney. However, a settlement agreement had not been prepared. The Kentucky Supreme Court held that the parties' settlement agreement was incomplete, and therefore, the court declined to enforce it.

The employer argued that the parties failed to reach a final settlement because they did not agree on terms concerning an outstanding hospital bill or the Medicare set-aside. Correspondence between the parties showed that they agreed to a full and final resolution of the claim for $500,000 "to include set-aside." The court said that the parties did not come to terms concerning the portion of the lump sum to be allocated to the Medicare set-aside account. The court explained that the allocation might have legal and financial consequences for the parties, so the allocation was an essential element of the settlement.

Read more at the WorkersComp Forum homepage.

March 3, 2011

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