E-Alert Case Updates

A Settlement Agreement With An Employer Does Not Accelerate The Commencement Of The Subsequent Injury Fund’s Weekly Payments

Shaffer v. Subsequent Injury Fund
Court of Special Appeals of Maryland, No. 548 (Md. App. Sept. 4, 2012)
by Kevin M. Cox, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Russell T. Schaffer (“Mr. Schaffer”) appealed a judgment of the Circuit Court for Baltimore County, which affirmed a ruling of the Workers’ Compensation Commission (“WCC”) that held that the Subsequent Injury Fund (“SIF”) would not have to accelerate the commencement of payments to him, notwithstanding the fact that his employer’s payments had been accelerated to a lump sum settlement. The Court of Special Appeals of Maryland affirmed the judgment of the Circuit Court.

The SIF was created to provide full compensation for an injury to an employee who already had a permanent impairment at the time of suffering another accidental injury. It was statutorily enacted to encourage employers to hire persons with existing disabilities and only required those employers to pay a permanently impaired employee for the compensation payable for the subsequent injury who suffers a subsequent occupational injury that results in a permanent disability that is substantially greater, due to the combined effect of the previous impairment and the subsequent injury.

Mr. Schaffer had pre-existing conditions at the time he was employed by Town & Country Driving School (“Town & Country”). On December 15, 2006, he was involved in a serious automobile accident during the course of his employment with Town & Country. He filed a claim for workers’ compensation, and because, prior to the accident, he had conditions that were not related to his employment, he sought part of his compensation from the SIF. Mr. Schaffer ultimately settled with his employer for a lump sum payment of $91,025.00. The WCC determined that 55 percent of Mr. Schaffer’s disability resulted from the accident, and the remaining 45 percent of his disability was attributable to his pre-existing existing conditions. Had there been no lump sum settlement between Mr. Schaffer and Town & Country, this award would have obligated Town & Country to pay its portion of the award at the rate of $339.00 per week, over a period of 365 weeks. On April 13, 2009, the WCC ordered that the SIF was required to make weekly permanent disability payments to Mr. Schaffer at the rate of $339.00 per week, commencing on October 9, 2009.

The SIF objected to the commencement date for its payments, and filed a motion for a re-hearing. Because benefits from the SIF are to be paid after payment of the employer’s share, it was SIF’s position that its payments should not commence until the date the employer’s weekly payments would have ended had there been no lump sum settlement with the employer. If the SIF’s weekly payments were accelerated to commence on October 9, 2009, then the SIF would be obligated to pay for an additional seven (7) years of benefits for the sole reason that Mr. Schaffer had entered into a settlement to which SIF was not a party.

The WCC agreed with the SIF and required it to begin making payments on June 23, 2015 — the date requested by the SIF — which would have been the date the employer’s share benefits would have been fully paid if they had been weekly instead of being paid in a discounted lump sum. Mr. Schaffer filed a petition in the Circuit Court for Baltimore County, seeking judicial review of the WCC’s Order of October 9, 2009. The SIF filed a cross-petition for same. Both parties filed motions for summary judgment. The Court ruled in favor of the SIF. Mr. Schaffer appealed.

MD. CODE ANN., LABOR & EMPL. § 9-802(c) provides: “Compensation from the Subsequent Injury Fund shall be paid after the completion of payments of compensation by the employer or its insurer.” (Emphasis added.) Further, MD. CODE ANN., LABOR & EMPL. § 9-804(a)(3) provides that, “[i]n an award against the Subsequent Injury Fund, the Commission shall find specifically. . . the date when the Subsequent Injury Fund shall begin payments.”

Mr. Schaffer contended that, because he settled with his employer for a lump sum payment, the WCC could have, and, pursuant to MD. CODE ANN., LABOR & EMPL. § 9-802(c) should have, ordered the SIF to begin making payments thirty (30) days after October 8, 2008, which is the day that the WCC approved the settlement with the employer. The SIF contended that interpreting the statute in such a manner “would result in a costly expansion of the Subsequent Injury Fund’s liability far beyond what was intended by the General Assembly, all due to a settlement to which the [SIF] was not a party.”

The Court then commented on what the result of Mr. Schaffer’s position would be. If Mr. Schaffer’s position were adopted, then the period during which the SIF was required to make weekly payments would be expanded to cover the weeks from November 2008 through June 23, 2015, which will result in Mr. Schaffer receiving an additional six (6) years and seven (7) months of payments. This would increase the potential liability of the SIF by the approximate amount of $117,000.00.

Based upon this analysis, the court concluded that the statutory scheme which calls for the apportionment of liability between the SIF and the employer, and provides for the SIF’s payments to be made after the conclusion of the employer’s payments, does not permit the employee to accelerate the commencement date for the SIF’s weekly payments by entering into a settlement agreement with the employer. The Court aptly noted that if it were to rule otherwise, an employee could circumvent the statutory benefit computations, and reap a windfall by forcing the SIF to pay additional weeks of compensation. Accordingly, the Court rejected Mr. Schaffer’s contention that the WCC committed an error of law, and affirmed the decision of the Circuit Court.