There are a lot of dangers in Iowa Workers’ Compensation cases that can trip you up if you are not familiar with the system. There are also some nice opportunities that you can miss if you don’t regularly deal with the system.
Today I am going to write about one of those lesser known options that can be very beneficial in the right case: the partial commutation.
WHAT IS A PARTIAL COMMUTATION? A partial commutation allows an injured worker to receive a single lump sum payment rather than a stream of weekly payments; and also preserves the worker’s right to lifetime medical care for the work injury.
The possibility of a partial commutation comes in to play after a worker has settled his case or won an award at trial. Partial commutations are generally only used when a worker has received a large settlement or award that entitles the worker to receive hundreds of weeks of future permanent partial disability benefits.
For instance, a worker who is entitled to receive 300 weekly checks for $500, could use the partial commutation procedure to receive the present value of those payments. Under the current discount rate being used by the Iowa Workers’ Compensation Commission, those 300 weeks of $500 would entitle the worker to receive a lump sum payment of $141,042.50.
WHAT DO YOU HAVE TO SHOW TO QUALIFY FOR A PARTIAL COMMUTATION? Dameron v. Neumann Brothers, Inc., 339 N.W.2d 160 (Iowa 1993) is one of the big Iowa cases that established a lot of the commutation rules. Dameron explains that the decision of whether to allow a partial commutation is based on deciding what is in the best interest of the claimant, which in turn means looking at:
1. The worker’s age, education, mental and physical condition, and actual life expectancy (as contrasted with information provided by actuarial tables).
2. The worker’s family circumstances, living arrangements, and responsibilities to dependents.
3. The worker’s financial condition, including all sources of income, debts, and living expenses.
4. The reasonableness of the worker’s plan for investing the lump sum proceeds and the worker’s ability to manage invested funds or arrange for management by others (for example, by a trustee or conservator).
Determining the best interest of the claimant requires weighing the pros and cons of converting the right to receive weekly payments into a lump sum. The worker’s preference and the benefit to the worker of receiving a lump sum should be weighed against the potential detriments that would result if the worker invested unwisely, spent foolishly, or otherwise wasted the funds.
The Dameron analysis puts the emphasis on what is in the best interest of the worker, and not what is in the best interest of the employer or insurance carrier, unless the defendants can show financial hardship if they are required to make a lump sum payment rather than weekly payments.
Additionally, in numerous decisions the Iowa Workers’ Compensation Commission has found that it is reasonable to commute an award to an older worker or an ill worker that might not live out their life expectancy in order to assure that the worker receives the “full value” of their disability award by passing on the lump sum to their survivors. This is important because if a worker does not commute his settlement or award into a lump sum, and dies while he is still owed weekly benefits, then the right to receive additional weekly benefits dies with the worker, and his family does not receive the balance still owed.
As a practical matter these legal standards mean that if a worker’s financial situation is generally solid, and they have a reasonable plan for how to use a lump sum payment, the commutation request will be approved.
The commutation requests that tend not to be approved involve workers who have a poor history of taking care of their finances, and have risky plans for what they will do if they can receive a lump sum payment. In these situations the Workers’ Compensation Commissioner and the Courts generally feel that the workers are better off to get a definite amount of money each week to take care of their living expenses, rather than a lump sum that can be lost, and which leaves the injured worker without the security of a weekly check.
On January 24, 2013 the Iowa Court of Appeals issued a decision in the case of Pilgrim’s Pride Corporation and Zurich North American v. Johnie M. Eakins. This case is a good example of some of the arguments that the competing parties make in a partial commutation dispute. Although the defendants raised some potential concerns about whether the commutation was in the best interest of the injured worker, the Court deferred to the Iowa Workers’ Compensation Commissioner’s decision that on balance the benefits of the commutation outweighed the potential dangers.
CONCLUSION. A partial commutation is not right in every situation, and not everyone may qualify. However, it is an option to keep in mind if you have a serious injury that is going to lead to a substantial settlement or award.