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Workers’ comp settlements do not bind dependents, Md. high court says

Maryland’s top court Tuesday offered advice for employers and their insurers when settling workers’ compensation claims: Make sure the injured employees and their dependents are parties to the settlement lest the companies and underwriters face a subsequent claim from the workers’ families.

The Huntingtown Volunteer Fire Department and its two insurers learned this lesson the hard way.

The Court of Appeals unanimously ruled that a firefighter’s widow can pursue a claim for death benefits though her late husband’s settlement agreement covered any and all claims that his wife might have of “whatsoever kind” related to the job-related heart disease that ultimately killed him. Peggy Collins was not a party to the agreement Bernard Collins signed with the department, Chesapeake Employers’ Insurance Co. and Selective Insurance Company of America two years before his fatal heart attack in June 2017, the high court noted.

In its 7-0 decision, the Court of Appeals cited a provision of Maryland law that makes settlement accords approved by the Workers’ Compensation Commission “binding on all parties to the agreement.”

“Thus, we believe it is clear that, in enacting (the law), the General Assembly has expressed its intent that a final compromise and settlement under the act shall not be binding on non-parties to the agreement,” Judge Jonathan Biran wrote for the high court.

“(T)his legislative scheme is consistent with the elementary proposition of the law of contracts that a contract cannot be enforced by or against a person who is not a party to it,” Biran added. “It follows that an employee may not unilaterally release his or her dependents’ claims for death benefits. Thus, Mr. Collins’s purported release of Mrs. Collins’s future death benefits claim is unenforceable.”

Attorney James K. MacAlister, who represents employees in workers’ compensation claims, hailed the court’s ruling for its straightforward application of contract law in its interpretation of the settlement agreement.

“A settlement with a party is not a settlement with a nonparty,” said MacAlister, who filed a brief  with the high court in support of Peggy Collins on behalf of the Maryland Association for Justice, an organization of plaintiffs’ attorneys.

MacAlister also praised the widow for recognizing she might have a death benefits claim despite the settlement agreement her husband reached.

“Most people think that ‘if my spouse settled a claim, why would I have a claim?’” said MacAlister, of Cohen, Snyder, Eisenberg & Katzenberg PA in Baltimore.

But “this is a separate action” brought by a dependent, he said. “’You killed my breadwinner so now you have to provide me with the bread.’”

Maryland Defense Counsel, an organization of civil defense attorneys, did not return a request for comment Wednesday on the high court’s decision. MDC had filed a brief with the high court in support of the fire department and its insurers.

Bernard Collins, having been diagnosed with heart disease, reached the nearly $200,000 settlement agreement in May 2015 with the fire department and its insurers, an amount that may have been augmented by his controversial waiver of any future claim by his wife. The Workers’ Compensation Commission approved the agreement in June 2015.

That same commission, however, would later dismiss Peggy Collins’ claim in 2017 for death benefits following her husband’s death at age 72. The Calvert County Circuit Court upheld the dismissal, citing the settlement’s waiver of future claims.

But the intermediate Court of Special Appeals reversed, saying Peggy Collins was not bound by the settlement agreement she did not sign.

The department and its insurers then sought review by the high court.

The Court of Appeals rejected their argument that employees can release their dependents’ right to bring a subsequent claim under the Workers’ Compensation Act.

“Given the parties’ differing interpretations of the pertinent release language, we suspect that the plaintiffs’ bar and the defense bar in workers’ compensation cases have each seen what they have wanted to see in this language,” Biran wrote. “We believe our ruling today will help ensure that, going forward, there is a true meeting of the minds regarding the scope of releases in workers’ compensation cases.”

Neither Michael H. Daney, who represented the department and insurers, nor Robin E. Hauptmann, Peggy Collins’s attorney,  returned messages Wednesday seeking comment on the court’s decision.

Daney is with Erlandson, Vernon & Daney LLC in Columbia; Hauptmann is with Downs Ward Bender Hauptmann & Herzog PA in Hunt Valley.

The Court of Appeals rendered its decision in In the Matter of Bernard L. Collins, No. 49, September Term 2019.

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