“An [un]compromise settlement: when the agreement signed is different than the terms of the parties’ original agreement.”

by | Jan 19, 2018

What happens when you reach a compromise settlement and the written agreement offers different terms than the settlement and is mistakenly approved by the workers’ compensation commissioner? The Iowa Court of Appeals recently addressed this issue in Reihe v. Midwest Viking, Inc.

In 2013, the claimant suffered an injury in the course of his employment. The employer offered a settlement of approximately $75,000 less a deduction of the payments which had been from June 3, 2014, until February 23, 2015, approximately $21,000. The claimant accepted the offer and the parties entered into an agreement requiring employer to pay the employee the $75,000 sum “less weekly payment made from March 5, 2015 until settlement approval.” The workers’ compensation commissioner approved the agreement and the employer provided the claimant a check. However, the employer noticed the error and filed a motion for a nunc pro tunc order correcting the error. The motion was denied for “lack of jurisdiction.” The Court noted that “[q]uite obviously, the written agreement differed in terms than the original offer, as the original offer would have credited [the employer] with benefits that were paid from June 3, 2014, while the written agreement only credited [the employer] with benefits paid from March 5, 2015.” The employer paid settlement benefits consistent with the original understanding.

In July 2016, the claimant filed a petition in district court requesting the unpaid portion of his awarded to be converted to a judgment and attorney fees. The employer filed a counterclaim for contract reformation to fix the error. Claimant admitted that the original agreement was that the employer would be credited with payments from June 3, 2014, but stated that was only the agreement until the point he signed the presented written agreement. The employer moved for summary judgment and the district court determined that the agreement did not accurately set the true agreement made between the parties. The district court determined the commissioner had jurisdiction to correct the errors with a nunc pro tunc order and remanded it back to the commissioner. The claimant appealed.

In claimant’s appeal, he argued that the district court improperly consider extrinsic evidence in making its determination. The Court of Appeals noted that parol evidence is admissible, however, as long as the evidence is relevant and material for reformation of legal instruments. It reiterated that the concern in contract reformation is whether the contract reflects that actual agreement of the parties. The claimant also contended that reformation was only allowed if the mistake was mutual, but the Court stated that mutuality of mistake does not apply to scrivener’s errors when reducing an agreement to writing.

The claimant also argued that Iowa Code section 86.42 limits the scope of what the district court can do and that the district court went beyond its authority. However, the Court reminded us that reformation actions for legal instruments are equitable in nature and that workers’ compensation commissioners do not have equitable jurisdiction. Therefore, the district court had jurisdiction and authority to grant the equitable relief of agreement reformation.

Consequently, the Court affirmed the district court’s decision that the agreement should be reformed to show the true agreement. The Court also remanded the case to the district court to enter an order reforming the agreement, declaring the commissioner’s prior order approving the agreement as null and void, and directing the commissioner to follow procedures of whether to approve the reformed agreement.

This determination shows the importance of ensuring settlement agreements accurately reflect that agreements between the parties, but also to show that scrivener’s errors can be corrected should they go unnoticed. If you have any questions regarding workers’ compensation cases, please contact Iowa Workers’ Compensation attorneys, Zach Anderson at zanderson@baylorevnen.com, or Paul Barta at pbarta@baylorevnen.com, or 402.475.1075.