Anchorage v. Stenseth – Felony Drug Conviction Impacts Workers’ Compensation Agreement

When accepting a workers’ compensation settlement, affected employees need to understand they are making a decision that could well impact the rest of their lives. Courts consider these “clincher” agreements to be binding, enforceable contracts. That means regardless of whatever complications or circumstances arise afterward, the agreement is going to stand. client1

That’s why it’s imperative that all possibly foreseeable expenses and outcomes be carefully weighed by claimant’s attorney before approving the terms.

Recently before the Alaska Supreme Court was the case of Municipality of Anchorage v. Stenseth. Here, claimant had to repay the city a portion of benefits and costs relating to his workers’ compensation claim after he was caught distributing some of the medications he received as part of the settlement.

According to court records, claimant worked for the city and was injured in the course of his employment many years ago. In 1996, he and his former employer – the city of Anchorage – entered into a “compromise and release agreement” in 1996. In exchange for $37,000, plaintiff waived all workers’ compensation benefits for his claim – except medical benefits. That included narcotic pain medication.

Ten years after entering that agreement, claimant was arrested and charged with several felonies relating to selling and/or delivering narcotics he acquired. Some he received directly from his workers’ compensation benefits, and some were forged prescriptions that were modeled on the prescriptions he received for his work injury.

He later pleaded guilty to several charges, served some time in jail and was released in 2010.

Two years later, the city filed a petition with the court, alleging plaintiff obtained workers’ compensation benefits through misrepresentation or false statement. It asked for reimbursement of all benefits, costs and attorney’s fees, as well as cutting off his future benefits.

Claimant insisted he never made any misrepresentations just to get benefits.

The parties entered mediation with the state workers’ compensation board hearing officer. The hearing officer asked both parties to come with the authority to settle or a way to obtain adequate authority during normal business hours. City was represented by its attorney. A workers’ compensation administrator for the city participated by phone, with the city attorney calling him periodically throughout the day to discuss the negotiations. Both believed they had authority to settle the case.

After a week, the parties reached some type of agreement, and claimant’s attorney received a request from the city attorney asking for a summary of the settlement reached in mediation. He responded with an agreement indicating the city would accept $30,000 in cash paid within three months or a promissory note for $40,000 secured with a confession of judgment and a deed of trust on his home, payable at $500 monthly.

In post-mediation, city attorney indicated the workers’ compensation administrator wanted to hold off on signing a release on the agreement until after the first payment is made. Claimant attorney indicated that changed the terms of the settlement, and stated he would agree to continue on the original terms.

A response from city attorney indicated her letter was to confirm the city’s response to the “new settlement proposal,” which involved a $30,000 cash payment in certified money would release claimant from any and all future liability for alleged fraud.

Claimant had money in hand and planned to meet to finalize the deal. But six days later, city attorney wrote to indicate an “internal glitch” in which she needed to “get higher ups to sign off.” Apparently she did not have the authority to finalize an agreement. She wrote back to say “Higher ups demand closure of narcotics,” and asked if that would be a problem. Claimant’s lawyer responded that actually it was because the offer had already been accepted. The funds had been tendered in two cashier’s checks, although the tender was refused.

Claimant filed a petition with workers’ compensation board, asking for dismissal of the city’s fraud petition because the city breached its contract of settlement terms. Municipality argued the settlement was void because, due to a misunderstanding by their attorneys, the lawyers did not in fact have the authority to enter into a settlement agreement.

The board dismissed the city’s pending petition, finding both parties entered an enforceable contract to settle the case. That decision was later affirmed by the state supreme court.

If you have been injured at work, contact the Lee Law Offices at 800-887-1965.

Additional Resources:

Municipality of Anchorage v. Stenseth, Nov. 25, 2015, Alaska Supreme Court

More Blog Entries:

Fatal North Carolina Workplace Accident Not the First at Transformer Plant, Dec. 6, 2015, Charlotte Workers’ Compensation Lawyer Blog

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