Robert P. Mike, Jr. v. CBI Servs. No. WC24-6575 (W.C.C.A April 1, 2025)
The Employee settled his workers’ compensation claim on a full final and complete basis in 2005. As part of the settlement, the Employee received a lump sum, less attorney fees, and period payments from an annuity which guaranteed five payments. The settlement agreement contained a compromise agreement that assigned the Employer & Insurer’s obligations to make the annuity payments to Liberty Assignment Corporation, specifically stating that Employer & Insurers duties, responsibilities and obligations were assigned to Liberty Assignment Corporation. The settlement was approved, and the first three annuity payments went out without issue.
The Employee did not receive the fourth payment and filed a Claim Petition. From the claim footnotes, it appears neither party could locate Liberty Assignment Corporation. While the Claim Petition was pending, the fifth payment did not arrive either. The hearing took place on April 23, 2024, with the issues being 1) did the Employee receive the final two payments, 2) did the Employer and Insurer have a duty to make the final two payments, and 3) was the Employee entitled to 30% penalty and interests on the past due payments.
The compensation judge found 1) the Employee did not receive the final two payments, 2) that the Assignee, Liberty Assignment Corporation, assumed the obligation to make the payments, and 3) and accordingly, Employer & Insurer did not have liability for penalties and interest.
As a question of law reviewed de novo on appeal, the Court of Appeals stated that you cannot waive mandatory provisions of the WCA through contract. If you want to assign responsibility for payment of benefits to a third party, you must strictly adhere to the provisions of Minn. Stat. §176.171. The statute requires the deposit of a sum equal to the present value of all future installments at a financial institution approved by DOLI, a judge, or the WCCA. That sum, plus any interest accrued, is then held in trust for the Employee/their dependents. The trustee must file a receipt with the commissioner of the Department of Labor and Industry verifying receipt of the funds in the trust. The Employee/their dependents have preference over choice of trustee. Only if the Employer & Insurer follow the requirements of §176.171, are they relieved of their obligations.
In short, as the procedures were not filed, the assignees promise to make payments in the compromise agreement did not relieve the Employer & Insurer’s responsibility for the payments, nor preclude a claim for penalties and interest.
Takeaway: If paying an annuity as all or a portion of a settlement, if assigning responsibility for payment of the annuity to a third party, you must follow the requirements of §176.171, particularly requiring the trustee to file with the commissioner specific information identifying who is paying the benefits, to absolve yourself of ultimate responsibility for the payments.
More frequently, annuities are set up in the administration of a Medicare Set Aside Agreement. Although not addressed in this claim, the same principle applies – what if the MSA annuity vendor fails to make payments and cannot be located? A prudent course of action would be to inquire with the commission if a similar receipt filed by the trustee is recommended/required, otherwise the Employer/Insurer may find themselves ultimately responsible.