Mind Matters: Mental Competency Considerations in Alabama Workers’ Compensation Settlements
By: Carson Campbell
Once a workers' compensation settlement is reached in Alabama, the parties generally seek settlement approval through a benefit review conference (BRC) with an Ombudsman from the Alabama Department of Labor. Under Ala. Code §25-5-292(b), any written agreement signed at a benefit review conference is final and binding. However, a party can challenge the agreement on a finding of fraud, newly discovered evidence or other good cause within 60 days of the conference. We often refer to this as the “60-day rule.”
The Alabama Supreme Court recently addressed the validity of benefit review conferences when an injured worker is mentally incompetent in Ex parte American Cast Iron Pipe Company, 2022 WL 4395533 (Ala. 2022). Specifically, in a plurality opinion, the court affirmed the court of civil appeals, holding a benefit-review agreement entered into pursuant to the Alabama Workers’ Compensation Ombudsman program may be declared void ab initio (from the beginning) on the basis of mental incompetency despite the action not being challenged within the 60-day period set forth in Ala. Code §25-5-292(b).
This case involved an injured worker who sustained a compensable head injury in the line and scope of his employment. The injured worker properly filed for workers' compensation benefits, reached a settlement and attended a benefit review conference through the Ombudsman program, at which he signed a written benefit review agreement releasing his employer from liability related to his work injury.
Later, concerns arose regarding the worker’s mental capacity, leading to the court appointment of a guardian/conservator. Acting on behalf of the injured worker, the guardian/conservator filed a lawsuit arguing the worker lacked the mental capacity to understand and make an informed decision about the settlement agreement. Conversely, the employer argued the injured worker failed to properly challenge the benefit review agreement under Ala. Code §25-5-292(b).
The Alabama Supreme Court analyzed the relevant provisions of the Alabama Workers’ Compensation Act, specifically Ala. Code §25-5-292, which governs benefit-review agreements, and Ala. Code §8-1-170, which declares contracts entered by incompetent person void ab initio. The court determined Ala. Code §25-5-292(b) governs only binding agreements and said agreements must involve mutual understanding and assent, which the injured worker lacked if he was mentally incompetent. Consequently, the court concluded the 60-day period in Ala. Code §25-5-292(b) did not apply to an action seeking to declare a benefit-review agreement void ab initio based on mental incompetency. The court’s interpretation of the statute was supported by the plain language of the law and established principles of statutory construction.
In essence, this legal precedent now allows any workers' compensation claimant who can prove mental incompetency to void their settlement agreements at any time after the BRC. Moving forward, this ruling should be taken into consideration when settling claims involving head injuries or in cases where an injured worker already has diminished mental capacity. To ensure the protection of all parties involved, it is advisable to obtain settlement approval at a formal settlement hearing with the presiding circuit court judge in lieu of utilizing the Ombudsman program. In more complex cases, it may be appropriate to petition the court to appoint a guardian ad litem, who will impartially review the facts and make a recommendation to the court as to whether the proposed settlement is in the best interest of the injured worker. Implementing these additional safeguards increases the difficulty for claimants seeking to void their settlement agreements.
Attorney Contact Info
Carson Campbell
carson.campbell@swiftcurrie.com
205.314.2411
