More: To Revert or Not to Revert, That Is the Question

Tuesday, October 24, 2023 | 0

The legal definition of “reversion” is the right, especially of the original owner or his heirs, to possess or succeed to property on the death of the present possessor or at the end of a lease. While the origin of the word “reversion” comes from both the Latin word “reversio” (to turn back) and the French word “reversioun” (to return an estate to the heirs of the grantor on the expiration of the grant).

Keith More

Now, how many of us lawyers, myself included, have given or granted a reversion to a work comp insurance carrier at the time of settling a workers’ compensation case? Do not be shy, do not be ashamed and do not be embarrassed. Most of all, learn from what I am about to share with you.

The returning of what was leased or granted to the original lessor or the returning of an estate to the grantor upon the expiration of the grant have nothing to do with and have no part in the workers’ compensation system.

Let me back up here for a moment. What am I talking about and why?

Well, about five years ago, while I was handling a catastrophic work comp case for an injured worker, the insurance carrier through its attorney approached me with an offer to settle the case via a compromise and release. This would end the whole case and settle both the injured worker’s permanent disability and need for future medical treatment. The settlement would be made in a lump-sum payment, and the case is closed with one caveat: A worker’s compensation judge would have to approve the settlement.

By approving the settlement, the judge in essence is assuring and affirming the adequacy of the settlement. In other words, is it fair? Do the injured worker’s injuries and disabilities warrant the amount in the compromise and release? If yes, then an order approving is issued.

Adequacy is the key to the compromise and release. And, when we explore the compromise and release, we do not see any terms allowing or granting the possessor of property to have to revert it to the original possessor upon death or the termination of a lease. A settlement, as defined, is an official agreement intended to resolve a dispute or conflict, not a lease of property.

The Department of Industrial Relations provides a tab on its website for injured workers on how cases are resolved. The DIR states, “Your case is resolved when there is an agreement between you and the claims administrator or a judge issues an order about your workers’ compensation payments and future medical care.” Of compromise and release, the DIR goes on to say, “One payment — the claims administrator agrees on an amount to resolve your claim. If the sum includes the estimated cost of future medical care, the claims administrator will no longer pay your doctor. This becomes your responsibility. “

The C&R is a binding contract where consideration is given in exchange for a settlement and the closure of the case, a resolution. Does a case that is closed remain open upon settlement? No, of course not. But when an insurance company adds a reversion, this changes the entire nature of the workers’ compensation system.

A reversion is a term that is typically thrown into the settlement mix after the fact.

“Oh, my client is requiring a reversionary clause.”

“A what?”

“You know, a reversionary clause. A clause that allows the insurance carrier to basically lease the settlement money (used to close the case) to the injured worker and upon the death of the injured worker, allows the money to then revert to the insurance company and not flow to the injured worker’s family.”

Does this sound right? Does this sound fair? Is it constitutional?

Well, is it constitutional for a workers’ compensation insurance company to demand reversion or it will not settle the case? It almost feels like blackmail in a sense. Think about it: If you do not give us what we want, then we will not settle the case and you will be stuck in the workers’ compensation system until you die.

So is it constitutional? To answer that question, we must actually know that the workers’ compensation system is in Article XIV of the California Constitution.

The Legislature was given the plenary power to create and enforce a complete system of workers’ compensation. This complete system is to provide “adequate provisions for the comfort, health and safety and general welfare of any and all workers and those dependent upon them for support to the extent of relieving from the consequences of any injury or death incurred or sustained by workers in the course of their employment.” 

The provisions as outlined above set forth that the benefit of this system is to the workers and those dependent upon them for support. If there is no dependent, the Legislature shall have the power to provide for the payment of an award to the state in the case of a worker’s death. The ultimate say in workers’ compensation is in the state Constitution.

The Constitution does not say that an insurance company can receive a benefit from a worker’s injury or death. Think about this for a moment: Is a settlement by way of a compromise and release a loan, or is it a lease of money that should revert to the original possessor? It cannot and is not either.

When entering into that settlement, there must be mutual consideration. In exchange for the injured worker forgoing his rights to payments for permanent disability and lifetime medical treatment, the work comp insurance company, in consideration of this exchange, is obtaining certainty in the payment and finality of closing its claim. This is the bargain for consideration. To add language of a reversionary clause allows the work comp insurance company a vested right to work comp benefits that only the Legislature has the right to vest by way of its plenary powers. Without a clear amendment to the Constitution, no insurance company can receive a benefit from an injury to an employee on the job.

I am calling out to every lawyer, both applicant and defense, to join in protecting the state Constitution and abiding by the law. The law is clear and concise as to who has the right to receive workers’ compensation benefits under Article XIV.

Keith More is an applicants’ attorney and co-founder of Bentley & More in Newport Beach, California.