Pennsylvania Compromise and Release Agreements

Since 1996, Pennsylvania Act 57 has authorized the use of compromise and release settlement agreements for all workers’ compensation claims. The main idea is to expedite the claims adjudication process by avoiding litigation and allowing the parties to resolve contested issues without overburdening the workers’ compensation system. While C&R agreements play an important role in the workers’ compensation settlement process, they are not one-size-fits-all and may not be appropriate in every case.

Pennsylvania compromise and release agreements specifically allow the release of both indemnity and medical benefits. This means that in exchange for some form of compensation, an injured worker agrees to never request more money to cover their medical or other expenses arising from the underlying injury. A settlement requires compromise on both sides, which often means the insurer can pay less on the claim than it usually would. This is especially true when the payment is a lump sum amount.

Insurers have several incentives to resolve workers’ compensation claims with a compromise and release agreement, according to Louise Russell of the National Commission on State Workmen’s Compensation Laws. A C&R shortens the time the insurer holds open the claim, reducing the associated administrative costs. It also reduces the risk and uncertainty of future costs. By settling the case, the insurer avoids “litigating” factors such as causation, the injury’s severity and its long-term impact on the worker.

Judicial Oversight of C&R Agreements

Pennsylvania law requires that a judge approve all C&R agreements at a hearing. While this judicial oversight provides an extra layer of protection to injured workers, Pennsylvania law explicitly prohibits a “best interests of the worker” standard in reviewing C&Rs. Even when there is a “manifestly bad deal,” a judge can only probe enough to ensure the injured party understands the terms of the agreement and the legal consequences.

Payments from a C&R agreement can be structured in installments, lump sums or continued payments of medical expenses. Lump sum payouts account for approximately 25 percent of all Pennsylvania C&R agreements. One concern with lump-sum payments is that irresponsible claimants will spend the money too quickly, requiring government assistance down the road. Such critics favor staggered or on-going payments while others see regulating the form of payment as overly paternalistic.

C&R agreements can be efficient ways to resolve workers’ compensation claims. However, they are not always the best option. Contact an experienced Pennsylvania workers’ compensation attorney to discuss your unique situation and determine if a C&R agreement is right for you.