NEW CASE LAW IN IOWA REGARDING COMPROMISE SETTLEMENT AGREEMENTS ABSENT THE SECOND INJURY FUND

In Kingsbury v. Second Injury Fund, the employee settled with the employer via a compromise agreement without concurrently settling with the Second Injury Fund. As a result, the Deputy found that the settlement with the employer, absent the Second Injury Fund, made it impossible for the employee to maintain her Second Injury Fund claim. As a result, the Deputy dismissed the employee’s petition against the Second Injury Fund. On 9/25/2024, the Commissioner affirmed the Deputy’s finding.

The issue in Kingsbury had to do with the specific facts of the case and the specific terms of the settlement agreement that was reached between the parties.

In Kingsbury, the employer argued that the employee only had a temporary aggravation without permanent disability. The employee argued that she sustained a permanent injury to her right lower extremity of 36% and to her right upper extremity of 15%. The parties agreed to settle the case for a lump sum of $52,000.00. However the settlement documents contained no information about how they reached that number. The parties did not stipulate to an impairment rating for settlement purposes.

After the compromise settlement was approved, the Fund filed a motion for summary judgement on the theory that the employee could not meet her burden of proof to sustain an award against the Second Injury Fund. An award from the Fund cannot be assessed unless the employer’s liability is fixed. The Fund argued that the changes to Section 85.35 for Compromise Settlements did not change the case law in Iowa that in order to establish liability against the Fund, the extent of impairment from the employer must be “fixed.”

The Deputy found that since the compromise settlement documents did not contain any agreement on the extent of impairment to the body parts that the parties were agreeing to, the employer’s liability was not “fixed.” Without any fixed amount of impairment from a first qualifying injury, the combined impairment could not be established with the second qualifying injury for Second Injury Fund benefit purposes. As such, the Deputy found that the employee could not, as a matter of law, meet her burden of proof since the extent of the first injury with the employer was not “fixed” in the settlement documents. The motion for summary judgment was granted.

The impact of Kingsbury is significant for Iowa workers’ compensation. Recently both the Commissioner and the Supreme Court found that settling with the Fund or with the employer, absent the other, via a compromise settlement agreement no longer deprives the Division of the jurisdiction of the remaining matter. For more information on those cases, click here for our blog post on the Commissioner’s holding in Milbrant v. R.R. Donnelly and here for our blog post on the Supreme Court’s holding in Tweeten v. Tweeten.

Kingsbury is distinguishable from those prior holdings. In Kingsbury, the issue was whether the employee could meet her burden of proof without the employer stipulating to the existence and extent of the alleged permanent impairment. The issue in Milbrant and Tweeten was whether the compromise settlement agreement deprived the Division of jurisdiction to hear the remaining claims.

Post-Kingsbury, it is still possible for an employee to settle with the employer without waiving the employee’s Second Injury Fund claim. How to do that successfully is going to be the subject of some debate for the time being. While the claimants’ bar is sorting through those issues, employers and carriers might have more success getting their cases settled through other means of resolution in Iowa as opposed to a compromise settlement. For example, commutations may be a way to provide employees with a fixed impairment rating (so as to maintain their Second Injury Fund claim) while also having the added benefit for employers and carriers of a closed file.

If you have questions about how Kingsbury may affect your case, or if you have questions about settlements in general, please reach out to Paul Barta or Micah Hawker-Boehnke at (402) 475-1075.