Board Upholds Settlement Over District Director's Objections

In a decision broadly supporting the parties’ determination of the adequacy of a settlement, the Benefits Review Board approved a settlement over the objections of the District Director. 

The claimant and the employer reached an agreement to settle a partial disability claim, and submitted the settlement to the District Director.  The District Director determined that the settlement was inadequate.  The District Director found that the $140,000 proposed was well below the present value of the claimant’s benefits, calculated using an eight percent discount.  Thereafter, the parties sought a hearing before an administrative law judge, added an insignificant $500 to the settlement amount, and the ALJ approved the settlement.  The Director appealed this decision.

In urging affirmance of the ALJ’s order, the parties agreed that the settlement was adequate, particularly considering the risk of a decision from the Department adverse to the claimant’s interests.  The Board approved the ALJ’s reliance on the determination by the claimant and her attorney that the claim presented meaningful disputed issues.  The Board stated that the ALJ “found that claimant and her attorney are in the best position to assess her litigation risks, her life expectancy, and her future earnings, and that neither is ‘obliged to explain to the Department the detailed specifics of the assessment of why she thinks she might lose her case.’”  The Board also emphasized the importance of the Act’s provision for automatic approval of settlements when the claimant is represented.  “As claimant is represented by counsel who explained the pros and cons of her choices, and as the Act contains an automatic approval provision for settlements when claimants have legal representation, absent a specific disapproval of the settlement, it was reasonable for the administrative law judge to conclude that claimant is entitled to rely on the advice of her attorney.”

The Board also noted that approval of the particular settlement at issue did not hinge on an actuarial analysis of the settlement.  The Board explained that the actuarial analysis is mandated by Section 702.243(g) of the Regulations, which only applies to cases being paid pursuant to a final compensation order in which no substantive issues are in dispute.

Richardson v. Huntington Ingalls, Inc., BRB No. 13-0476 (5/22/14).