The Colorado Supreme Court recently announced a decision that will hinder employers’ ability to reach final settlements in workers’ compensation claims. Though both employers and injured employees have an interest in reaching the final resolution of a claim, on occasion, the employee may need to reopen the claim for some reason. When negotiating a settlement, employers must know the circumstances under which an employee may reopen a settled claim. This is an evolving issue which the courts and the legislature have struggled with in the past.
In 1985, the Colorado Supreme Court ruled that a claimant may reopen a settled claim based on a worsened condition. The legislature responded to the decision by amending the Colorado Workers’ Compensation Act (“the Act”) to ensure settlements could not be reopened based on a worsening of condition, so long as the settlement agreement waived the right to reopen.
Now, in workers’ compensation cases, parties are required to submit a mandatory settlement agreement form which waives the right to reopen based on a worsened condition. However, the form does allow an employee to reopen a case in the event of fraud or “mutual mistake of material fact.” Even after amending the Act and creating the mandatory settlement form, there was still ambiguity concerning interpretation of the form. In the recent Colorado Supreme Court case, an employee suffered a shoulder injury at work. He settled his claim after having two shoulder surgeries, but he later learned that he had an injury at the time of the settlement resulting from the second surgery. Nobody knew of the injury at the time of settlement. The employee wanted to reopen his claim based on the new information about his injury, but the Colorado Court of Appeals determined that he had waived his right to do so by signing the mandatory settlement form waiving his right to reopen based on a worsened condition.
The Colorado Supreme Court reversed the lower court’s decision and held that the form cannot waive or limit an injured employee’s statutory right to reopen a claim based on a mutual mistake of material fact, including unknown injuries existing at the time of settlement. Employees are still prohibited from reopening claims based on injuries that arise after the settlement agreement is signed. Nevertheless, employers and employees are left in a similar position in which they found themselves in 1985, with their “full and final” settlements being far from final. The court’s decision leaves employers at risk, with many settlements once believed to be full and final now subject to future litigation. The decision renders settlement a less attractive option for employers unless the legislature takes action as it did in response to the Padilla decision.