Mutual And Unilateral Mistakes Of Fact In The Context Of A Pennsylvania Workers’ Compensation Compromise & Release Agreement

In the case of Hoang v. WCAB (Howmet Aluminum Casting), (will refer to case as Hoang hereinafter) filed by the Commonwealth Court on August 20, 2012, an injured worker sought to have an Order approving a Compromise & Release Agreement (ie, settlement agreement) overturned based on a “mutual mistake of fact” regarding unpaid medical bills.  The factual predicate is set forth fully in the Decision, but essentially what happened is that after the Work Comp Judge approved the settlement, (which provided for a lump sum of $9,900) an unpaid medical bill surfaced for $37,674.00. The language in the Compromise & Release Agreement, however, specifically stated, “This Agreement resolves all indemnity and medical to which [Claimant] may have been entitled for any injury that [Claimant] sustained while working for [Employer]. This represents a full and final settlement of any claim, both past, present, and future, that [Claimant] had against [Employer]. Complicating the matter was the fact that Claimant’s testimony regarding his understanding of the C & R Agreement, was done through his son acting as translator. Based on that testimony, the Work Comp Judge found that the Claimant understood the full legal significance of the Agreement (this is the legal standard for the settlements).

Thereafter, the Claimant filed review and penalty petitions which got assigned to a new Work Comp Judge. Claimant argued that the WCJ should rescind the C & R Agreement based on a mutual mistake of fact since, as Claimant alleged, both parties were mistaken as to the fact that medical bills remained unpaid as of May 7, 2009- the date of the settlement. The WCJ rejected Claimant’s arguments finding that there was no evidence Employer was mistaken at the time of the C & R Agreement was executed and no discussion was entered into at the C & R Hearing regarding medical expenses. Claimant appealed to the Work Comp Appeal Board which agreed with the WCJ, holding Claimant failed to produce clear evidence that Employer was mistaken as to the unpaid bills or that Employer knew of a unilateral mistake on Claimant’s part.

The mutual mistake of fact theory, posited by Claimant, rests on the idea that both parties were mistaken regarding the fact that medical bills remained unpaid as of May 2009 – that this fact is material and has a material effect on the parties’ bargain because the medical bills are substantial and Employer was obligated to pay them under the PA Work Comp Act. The Commonwealth Court in Hoang noted that evidence demonstrating a mutual mistake of fact must be clear, precise and indubitable. (citing Thrasher v. Rothrock, 377 Pa. 562, 105 A.2d 600 (1954) (holding that evidence of a confusing dictation of contract terms were not clear, precise and indubitable evidence of a mutual mistake).  The Court looked to the North Penn Sanitation case to analyze a fact pattern where the Court upheld a Work Comp Judge’s determination that a mutual mistake was present, and distinguishing it from the case at hand.  In North Penn Sanitation, the parties failed to include Claimant’s blindness among his work-related injuries. But the Claimant didn’t read the C & R Agreement and proceeded pro se (without counsel). The Court also noted that Claimant had presented credible testimony and medical evidence showing he had lost the use of both eyes for all intents and purposes as a result of the work injury and that Employer’s insurer was aware of the Claimant’s injuries before the parties negotiated the settlement. In Hoang, however, the Court found that Claimant failed to produce any credible evidence showing the Employer was mistaken regarding the unpaid medical bills at the time of the settlement.

As an alternative theory, Claimant argued to the Commonwealth Court that he operated under a unilateral mistake of fact regarding a material element of the agreement- the unpaid medical bills, and that Employer had good reason to know of Claimant’s mistake at the time of the settlement. Here, the Court looked to Farner v. WCAB (Rockwell International), 869 A.2d 1075  (Pa Cmwlth. 2005) where it held that collateral estoppel barred a claimant’s petition to set aside a C & R on the basis of mutual mistake. In that case, the doctrine of unilateral mistake was discussed- with the Court holding “Generally, a unilateral mistake which is not caused by the fault of the opposing party afford no basis for relief. However, if a party to a contract knows or has reason to know of a unilateral mistake by the other party and the mistake, as well as the actual intent of the parties, is clearly shown, relief will be granted to the same extent as if a mutual mistake existed.”

In Hoang, the Court, applying the concept above, found that Claimant failed to present credible evidence concerning Employer’s intent.  Importantly, the Court also found that the record did not contain evidence that Claimant communicated to Employer, before or at the time of settlement, his belief that the C & R Agreement did not apply to unpaid pre-existing bills.

Before concluding, the Court also analyzed Claimant’s final argument that two paragraphs of the C & R Agreemet conflicted, and that therefore the agreement should be construed in favor of the more specific provision which the Claimant contended, results in a finding that the C & R Agreement foreclosed only Employer’s responsibility for future medical bills. The Court rejected the argument, finding that Clamant failed to demonstrate conflicting language that would require the Court to interpret the C & R as applying only to future medical expenses.

What is the moral of the story here? Be specific in the Compromise & Release Agreements! Spell out language regarding past medical bills and what happens with them. For example, try to include language such as “the parties agree that all reasonable, necessary, and related medical bills for treatment prior to the C & R Hearing will be paid by Employer/Insurer so long as the bills are properly presented in accordance with the Act”.  This situation arises frequently. Medical bills often surface after a settlement hearing and you need to make sure there is language in the C & R addressing the issue ahead of time. Additionally, make sure that when you are on the record at the C & R Hearing, that you question Claimant about this situation. Compromise & Release Agreements can become routine for work comp practictioners, but don’t let that routine cause your guard to drop. Carefully craft case- specific language covering all of your bases.

For more information about Pennsylvania Work Comp Settlements or other areas of PA Work Comp Law, call or email Michael Cardamone at 215-206-9068 or mcardamone@krasno.com 7 days a week.

 

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