To C&R or Not C&R – That is the Question
A compromise and release (C&R) agreement is essentially a contract between an injured worker and a party that is paying workers’ compensation benefits to the injured person. By signing the agreement, the injured party settles his workers’ compensation claim in exchange for a lump-sum check. This panel at the 2016 California Workers’ Compensation & Risk Conference provided case studies that argued the effectiveness of C&R agreements with employees who return to work.
Speakers included:
- Kristi Montoya, Risk Manager, UPS
- William Zachry (Retired), Albertsons/Safeway and Board Member of the Self-Insured Security Fund
- Debra Russell, Director Workers’ Compensation Program, Schools Insurance Authority
- Angela De Bortoli, Program Manager, Workers’ Compensation, University of California
- Michael Sullivan, General Managing Partner, Michael Sullivan & Associates, LLP (moderator)
The University of California utilized C&R successfully. With 10 campuses, the University of California has over 190,000 employees. In 2004, they had over 6,000 open claims. In an effort to reduce that number, they changed their settlement philosophy to C&R all claims for all employed and retired employees. They arranged personal discussions with the doctors, if needed. They also only used stipulation as a last resort. This was very successful. Since 2004, 5,089 of those claims were settled by C&R for employees over a six-year period. 5% of those employees did file new claims for the same body part, however, open indemnity has reduced by 47%.
Schools Insurance Authority is a joint-powers authority with 70 school districts with 26,000 employees who also has success with C&R. Initially, they took a traditional public agency mindset, which is to not C&R any cases for still-employed workers. After reviewing their numbers from 1977-1997, they were C&R-ing 40% of employees. Formally self-insured, in 1997 they became fully insured with a total of 1,848 open claims. They decided to proceed with caution, using carefully-crafted language in their agreements. In 2001, they returned to self-insurance and had new claims coming in. They continued their careful C&R strategy, with 87 per year on average. They consider the use of C&R a success because it did help reduce old claims. In 10 years, the average severity was $6,900. They were closing claims 40% faster and the average cost declined by 39%. By closing the claims, they were also able to avoid medical cost inflation. They project that they are saving $1.6 million per year with the use of C&R.
UPS does not C&R the majority of their claims because of their work environment and culture. The company retains most of their employees. In fact, they have an average of a 15-25 year employee, which represents 80% of their claims. 50% of drivers have five or more injuries and 30% of drivers have multiple injuries to the same body part. They only attempt to C&R open claims of retiring employees and certain categories of claims, including anything to do with the heart and psych claims. This is due to the fact that, because they have active workforce, reinjury is likely. For their environment, they do not believe it makes sense.
Albertsons/Safeway stipulates most claims. In 2002, the pending inventory nationwide yielded 15,300 open files. Outstanding reserves and collateral were approximately $1 billion dollars. They considered C&R-ing claims as a method to avoid problems. Within 10 years, they were able to lower open claims to approximately 2,000 files. Currently, they only have around 90 open claims. They believe it is easier to stipulate rather than C&R claims and stipulating saves a lot of money. Overall, this culture of closure was able to have a huge financial impact on the company. They also think C&R is mentally healthier for the injured worker because it gets them out of the system and they stop thinking of themselves as an injured worker.