Settlement of VR - Hidden Danger

Sunday, December 8, 2002 | 0

The injured employee (post 1/1/03 injury) has just been determined P&S and QIW; you have accepted liability for VR. You call applicant's attorney to agree on a QRR and the attorney indicates his client is setting up his own business and wants to settle his right to VR benefits/services for $10,000 to help capitalize the venture. He mentions that his client would be willing to settle the case in chief as well if possible but he definitely wants to settle the VR matter as soon as possible. Should you "go for it?"

It sounds tempting. You have someone who clearly is entitled to VR. If you refer the case to a QRR, the employee's business venture may well be written into a plan - a plan that is likely to cost about $16,000. If you settle the VR liability, you won't have to worry about disputes, periods outside the cap, second plans, etc. $10,000 sounds like a pretty good deal - unless you happen to be the pre-injury employer that has a track record for providing modified or alternative work. If you are that employer, watching your insurer pay out $10,000 to settle VR liability may have you thinking about talking to your own attorney.

If the examiner in this example settles the VR liability without first contacting the insured employer, s/he may be creating significant financial costs for the employer. First among these is the impact of the $10,000 settlement on the employer's experience modification factor (Xmod). If the employee were offered modified or alternative work, there would be no cost and no impact on the employer's Xmod. If the employee returns to work in a modified or alternative capacity, the employer is entitled to a refund of premium that could amount to several thousand dollars. Assuming the program is funded, the employer might also be entitled to reimbursement for wages up to $1250 and for the cost of assistive or adaptive devices up to $1250 under the new L.C. sections 139.47 & 139.48.

The employer may also have expected the person to return and now must recruit a replacement at a potential cost of thousands more. The potential costs to the employer could easily exceed the $10,000 the examiner saved for the insurer - which is why the employer may be calling his attorney.

Before agreeing to settlement of the VR benefit, the examiner should contact the employer to discuss the availability of modified or alternative work. If such work is available, the examiner should initiate the RU-94 process rather than a settlement proceeding.

Contributed by vocational rehabilitation expert Allan Leno, Leno & Associates, (818) 370-8859 allanleno@leno-assoc.com.