Indiana: After Approval of Settlement Agreement By Board, Estate of Deceased Worker May Not Proceed Against “Employer” in Tort On Basis of Claimed Status as Independent Contractor

Because settlement agreements ordinarily cover only those claims or rights that are specifically mentioned within the four corners of the agreement itself [see Larson’s Workers’ Compensation Law, § 132.05], attention to detail is not just important; it’s vital to effective representation of both claimant and employer or carrier. Where the issue of the employment relationship is not specifically addressed in the settlement agreement, and where the representative of the estate of a deceased worker has filed no document with the Industrial Commission or Board admitting or acknowledging that any such employment relationship existed, may that representative sign settlement documents, have them approved by the Board, accept a lump sum payment, and subsequently proceed against the employer in a civil action sounding in negligence, contending at that later moment that the deceased worker was an independent contractor at the time of his death and that the issue of the employment relationship had remained unresolved?

In a recent decision from Indiana [Estate of Smith v. Stutzman, 2012 Ind. App. LEXIS 124 (Mar. 23, 2012)], an appellate court said “no.” 

Background Facts

Smith, who worked for Stutzman, sustained fatal injuries when he fell some 20 feet from a ladder. Stutzman filed an injury report with the state Workers’ Compensation Board. Subsequently, Smith’s widow and Stutzman’s carrier entered into a settlement agreement indicating that Smith’s workers’ compensation claim would be settled for a lump sum payment of $100,000. After review, the settlement agreement was approved by the Board.

Smith’s estate filed a complaint for damages against Stutzman in Superior Court alleging in part that while working for Stutzman as an independent contractor on March 26, 2010, Smith fell from a roof resulting in his death and that Stutzman was negligent in maintaining safe work premises which was the direct and proximate cause of Smith’s death. The Superior Court later entered an entry of default against Stutzman. Stutzman moved to set aside the entry, contending the court’s entry of default was void since the Board had exclusive jurisdiction over the claim. Stutzman also asserted that Smith’s estate was estopped from asserting that Smith was an independent contractor.

Following a hearing, the Superior Court found that the Board had exclusive jurisdiction of the matter and ordered the case dismissed.

Estate’s Contentions

The estate appealed, acknowledging that if the Indiana Worker’s Compensation Act applied to an injury, all other remedies are excluded, but contending in relevant part that the estate had never asserted Smith was an employee and that the sole argument Stutzman could make was that the settlement agreement, by its very existence, invoked exclusivity barring subsequent civil suit. The estate argued that although settlement had been made pursuant to Section 15 under the Worker’s Compensation Code, the issue of employment remained outside the Act and its status remained unresolved.

The estate conceded that it could not reopen an action under the Act for further benefits from Stutzman or its carrier by virtue of the settlement agreement, but maintained that there was nothing in the statute that prohibited a civil claim on the remaining disputed issue: the question of employment.

The Appellate Court’s Discussion

The appellate court noted that in one provision of the settlement agreement the parties specifically indicated that the Board had jurisdiction of the claim, that in another the parties the parties stated that “all matters with respect to [Smith’s] injury of March 26, 2010 shall be forever resolved, settled and ended,” and that in still another the estate’s representative indicated she understand that upon approval of the settlement agreement by the Board, she would not be entitled to receive from Stutzman, or the insurance carrier, or from the Second Injury Fund, any additional sum or sums of money on account of [Smith’s] claimed injury for compensation, or for medical, funeral, or burial expenses, regardless of whether there is a change of condition.

The court continued, indicating that while the parties acknowledged the existence of certain disputes, including whether Smith was an employee of Stutzman, the parties expressly agreed to resolve any such differences by entering the settlement agreement. The court pointed to paragraph 6 of the settlement agreement, which provided in part that “[b]y reason of these disputes and with knowledge of the uncertainty and expense of litigation of this claim, the parties seek to resolve their differences and are willing to give up any rights they may have in connection with this claim under the provisions of the Worker’s Compensation Act.”

Based upon the record, the court concluded that compensation had been accepted and received under the Act and the estate could not later claim that Smith’s injuries occurred outside the scope of employment.

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