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ORDER DENYING CROSS-MOTIONS FOR SUMMARY JUDGMENT
DISMISSED PURSUANT TO SETTLEMENT AGREEMENT
Summary: Claimant and the insurer entered into a settlement agreement under which the insurer paid claimant $60,000.00 in settlement of his claims for permanent disability and rehabilitation benefits. Later on both parties discovered that claimant suffered from a hip condition that neither party contemplated when reaching the settlement. They agreed to rescind the settlement. Upon rescission, the insurer restored claimant's temporary total disability benefits but credited $33,412.07 of the settlement against its obligation for retroactive TTD benefits. Claimant then brought the instant petition seeking a determination that the insurer is not entitled to offset his TTD benefits.
Held: As a general matter, the insurer is entitled to offset the settlement paid claimant against benefits due or to become due claimant, including TTD benefits. However, it may not offset the minimum amount plainly due claimant in future permanent disability benefits since those benefits will be due the claimant irrespective of the rescinded settlement agreement. In this case, the Settlement Recap Sheet and vocational reports of the insurer indicate that the claimant will be due a minimum of $28,595 in permanent disability benefits, or an amount close thereto. Since the insurer's offset against his TTD benefits left claimant with less than that he is entitled to the difference, however, there are potential factual issues concerning the minimum amount of his entitlement and the matter is set for trial to determine that minimum amount.
¶1 Before the Court are cross-motions for summary judgment. The matter in dispute is whether the insurer is entitled to a credit for monies paid claimant under a rescinded settlement agreement.
¶2 The salient and material facts are not in dispute. Other, immaterial facts which the parties have set out, or which are unsubstantiated and inadmissible due to lack of personal knowledge or evidentiary support, (see Liberty's Second Motion to Strike and Supporting Brief), are disregarded.
¶3 The uncontroverted facts which are material to the motions are as follows:
¶4 In this case, the Court is asked to determine the right of an insurer to offset the amount paid a claimant pursuant to a settlement agreement when the settlement agreement is rescinded due to mutual mistake of fact. Claimant, who has been returned to TTD status, contends that none of the settlement payments can be deducted from his past due, present, or future TTD benefits. Liberty contends that it is entitled to take a credit for the full amount of the settlement against TTD and any other benefits it may owe claimant. As noted in ¶ 3j, it has already taken a credit of $33,412.07 with respect to TTD benefits accrued prior to the date of rescission.
¶5 Settlement agreements are contracts. Kienas v. Peterson, 191 Mont. 325, 328, 624 P.2d 1, 2 (1980). As a general proposition, upon rescission of a contract, each party is required to restore everything of value received from the other. § 28-2-1713, MCA. But, as noted in Abell v. Ford Motor Company, 39 St. Rep. 1347 (D.C. Mont. 1981), the requirement that a party return everything received under a settlement agreement is not an invariable one. In his decision, Judge Battin said, "[T]the Montana Supreme Court has recognized . . . that such a requirement [of full restitution] should not be taken too literally and that exceptions exist." Id. at 1351 (citing O'Keefe v. Routledge, 110 Mont. 138, 103 P.2d 307 (1964).) The two exceptions cited in Abell are (1) where fraud is alleged and (2) "where the party seeking rescission would be entitled to retain the contract consideration even without the release." Id. The second exception is in play in this case, however, neither party has properly applied it.
¶6 Initially, unless one of the exceptions applies, Liberty is entitled to set off the full amount of the settlement against amounts it owes claimant as a result of the rescission. There is nothing in section 28-2-1713, MCA, or in the cases cited by claimant that limits Liberty to recouping from permanent disability benefits. Recoupment from TTD benefits is not prohibited.
¶7 On the other hand, it is fairly clear from the uncontroverted facts that even after reaching maximum healing the claimant will be entitled, at minimum, to the full amount of PPD benefits calculated as due in the Settlement Recap Sheet which accompanied the Petition for Settlement. (See ¶ 3f.) The Settlement Recap Sheet, correspondence, and vocational rehabilitation reports attached to Jamie Kern's two affidavits indicate that the only potential dispute over claimant's minimum entitlement to PPD benefits was with regard to the 18% impairment rating, and that rating came from Liberty's IME physician. The PPD calculation was done before the discovery of claimant's additional medical condition involving his hip. The likelihood that his PPD status will improve on account of the hip condition is nil; more likely it will increase or stay the same. It therefore appears that, at minimum, claimant is entitled to $28,595.00 in PPD benefits, or, even assuming there is a genuine dispute over the 18% impairment rating, an amount close to that figure. As a result of Liberty's taking a $33,412.07 credit against accrued TTD benefits, claimant is left with less than that, to wit: $26,587.93. Unless Liberty is able to show that there is a legitimate dispute over the 18% impairment rating and that the impairment rating is likely to be less than 18% even considering claimant's hip condition, it must advance claimant the additional amount of $2,007.07, which is the difference between claimant's minimum permanent disability entitlement and what he was left with after Liberty took a credit for accrued TTD benefits. If claimant can show that his minimum entitlement to PPD and rehabilitation benefits is greater than $28,595.00, then he may be entitled to the difference between that minimum amount and the $26,587.93 he has retained from the rescinded settlement.
¶8 Since there may be factual issues as to claimant's minimum entitlement, neither party is entitled to summary judgment. Therefore, the cross-motions for summary judgment are denied and this matter is set for trial in accordance with the foregoing discussion.
DATED in Helena, Montana, this 6th day of February, 2002.
c: Mr. Geoffrey C. Angel
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