W.C. No. 4-653-869.Industrial Claim Appeals Office.
March 25, 2011.

The claimant seeks review of an order of Administrative Law Judge Krumreich (ALJ) dated November 26, 2010, that denied the respondents’ request to reopen or set aside the medical provisions of a settlement agreement and denied the claimant’s claim for penalties. We affirm.

The claimant sustained alleged injuries or occupational diseases on or about June 8, 2005. The parties entered into a Workers’ Compensation Settlement Agreement. The Agreement was approved by the Director of the Division of Workers’ Compensation on September 2, 2009. The Settlement Agreement referenced Exhibits A and B. Exhibit B was a Medicare Set-aside Account (MSA). Exhibit B provided that the parties agreed that the respondents would fund a Custodial Medicare Set Aside Account for future Medicare-covered expenses in the amount approved by the Centers for Medicare/Medicaid Services (CMS).

The matter of future medical expenses was sent by the respondents to a third party vendor, Crowe Paradis, to have them prepare an MSA for future submissions to CMS. The allocation from Crowe Paradis for the total amount recommended for the future medical and medication expenses was in the amount of $29,476.75. The settlement agreement was approved on September 25, 2009 by the Director of the Division of Workers’ Compensation (Director). It took some time for the parties to receive the letter back from CMS regarding the MSA. The letter from CMS indicated that the MSA needed to be structured for a total of $488,168.00

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The respondents filed an Application for Hearing requesting that the MSA portion of the Full and Final Settlement Agreement be set aside due to the unexpected increase in the MSA by the CMS. The ALJ found that the respondents had failed to prove by a preponderance of the evidence that a mutual mistake of material fact existed with respect to the terms and conditions of the Settlement Agreement entered into between the parties and submitted to and approved by the Director. This part of the order is not under appeal.

At the same hearing the claimant sought penalties under § 8-43-304 C.R.S. contending the respondents had failed to comply with the order of the Director approving the settlement agreement. The claimant’s claim for penalties was based upon the argument that by refusing to fund the MSA in the amount required by the CMS the respondents were in violation of the Settlement Order of September 25, 2009. The ALJ denied the claim for penalties.

The claimant appeals the ALJ’s dismissal of her claim for penalties. The claimant contends the ALJ erred by finding that he does not have jurisdiction over the MSA. The claimant cites § 8-43-204(2) C.R.S. for the proposition that settlement documents must be approved by an ALJ. We are not persuaded that the ALJ committed reversible error.

We do not read the ALJ’s order as denying that he has jurisdiction to approve settlements of claims under the Act. Rather we read the ALJ’s order as follows. The claimant sought to impose penalties under § 8-43-304 C.R.S. for the respondents’ failure, neglect, or refusal to obey a lawful order. The penalty claim was premised upon a violation of the Director’s Settlement Order. The ALJ found that the content and approval for settlement agreements was for claims arising under the Workers’ Compensation Act (Act) and subject to W.C. Rule of Procedure 7-2, 7 Code Colo. Reg. 1101-3. The ALJ determined that Rule 7-2(A)(1) excluded from review and approval by the Director the MSA provisions provided for in the attachment to the Settlement Agreement. The ALJ further determined that the MSA and its provisions related to funding of the MSA by the respondents in an amount sufficient to satisfy CMS were not part of the Director’s Settlement Order. The ALJ concluded that because the Settlement Order did not address or approve the MSA, the respondents’ failure to comply with the provisions of the MSA and fund it in an amount necessary to satisfy CMS was not a violation of the Settlement Order. Consequently the ALJ concluded that the claim for penalties should be dismissed.

Rule 7-2 deals generally with the content and approval of settlement agreements and contains language excluding certain matters from the Director’s approval of a settlement agreement. Rule 7-2 generally provides that when the parties enter into a full and final settlement of a claim they must use the appropriate form prescribed by the Divisions of Workers’ Compensation and shall not alter the prescribed form except as

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specifically permitted. The parties are directed to include terms in Paragraph 9(A) that are both specific to that agreement and involve an issue or matter that falls within the Workers’ Compensation Act. However, Rule 7-2 also provides that the parties are allowed to attach other written agreements to the prescribed form and may refer to these agreements in Paragraph 9(B) of the settlement agreement. On the issue of these attachments Rule 7-2(A)(1) specifically provides as follows:

These other written agreements may include a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA), an agreement involving employment, or a waiver of bad faith. These other written agreements attached to a settlement agreement shall not be reviewed and approval of the settlement agreement does not constitute approval of any written agreement attached to the settlement agreement. If a represented claimant does not wish to waive the right to an appearance before the Director to review the terms of the agreement, a settlement proceeding shall be scheduled with the Division’s Pre-Hearing Unit.

The principles governing the interpretation of administrative regulations are the same as those concerning statutes. Gerrity Oil and Gas Corp. v. Magness, 923 P.2d 261 (Colo. App. 1995), affd. in part, rev’d. in part on other grounds, 946 P.2d 913 (Colo. 1997). Thus, the overall objective is to interpret the rules in a manner which effects the Director’s intent. Ray v. New World Van, W. C. No. 4-520-251(October 12, 2004). Because the language used is the best indicator of intent, the rules should be given their plain and ordinary meanings unless the result is absurd. Further, the rules should be read to give a consistent, harmonious and sensible effect to all their parts. Spracklin v. Industrial Claim Appeals Office, 66 P.3d 176 (Colo. App. 2002).

It must be remembered that the Director not only signed the Settlement Order in question but also promulgated Rule 7-2(A)(1) See Popke v. Indus. Claim Appeals Office, 944 P.2d 677 (Colo. App. 1997) (director may promulgate the rules and regulations governing administration of the Workers’ Compensation Act). The intent of the Director regarding MSA agreements is clearly set forth in Rule 7-2(A)(1). We perceive no ambiguity regarding what the Director’s approval of a settlement agreement covers and what his approval does not. In our view the Director, in promulgating the rules on settlement, has clearly provided that while other written agreements such as MSAs may be attached to a Workers’ Compensation Settlement Agreement the MSA shall not be reviewed and approval of the settlement agreement does not constitute approval of such Workers’ Compensation Medicare Set-Aside Arrangement.

The claimant argues that the exclusionary provisions of Rule 7-2(A)(1) are not applicable because the ALJ found that the settlement documents contain language that the

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carrier will be responsible for payment of all amounts deemed reasonable by CMS in order to secure approval from CMS of the MSA. The claimant further argues that that should be construed to be a binding agreement. Finding of Fact 12. It may be true that the MSA which was attachment to the Settlement Agreement approved by the Director is a binding agreement, the breach of which may give rise to a cause of action. However, the binding nature of the MSA does not mean that the MSA was approved by the Director in his Settlement Order necessarily giving rise to a claim for penalties under the Act. As noted above, as we understand the claimant’s appeal, it is only of the ALJ’s refusal to impose statutory penalties. The claimant has not appealed the ALJ’s refusal to set aside the agreement and that issue is not before us. Nor are any issues implicating enforcement of the provision. We express no opinions on any issue other than the ALJ’s refusal to impose statutory penalties for the respondents’ alleged violation of the Director’s order.

Therefore, we are unpersuaded to interfere with the ALJ’s determination that there was no violation of the Director’s Settlement Order. Consequently, we find no reversible error in the ALJ’s determination to dismiss the claim for penalties.

IT IS THEREFORE ORDERED that the ALJ’s order dated November 26, 2010 is affirmed.


__________________________ Curt Kriksciun

__________________________ Thomas Schrant

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