Settlements: Reopening: Mistake of Fact

MONTANA SUPREME COURT DECISIONS

Keller v. Liberty Northwest, Inc., 2010 MT 279 The test for mutual mistake is an inquiry into whether the parties considered or relied on a fact in making their bargain, not a mere chronological examination into whether parties knew of a fact prior to entering into the agreement.  The parties’ reliance on a misdiagnosis can suffice.  In the present case, even if the parties were mutually aware of the contents of the claimant’s medical records, it is entirely possible that they entered into the settlement agreement under a mistaken impression as to the nature and extent of her injuries.

Keller v. Liberty Northwest, Inc., 2010 MT 279 If parties to a workers’ compensation settlement agreement are mutually mistaken as to a material fact concerning the nature and extent of the claimant’s injury—as in the case of a misdiagnosis—then the settlement agreement may be set aside.

Kruzich v. Old Republic, 2008 MT 205, 344 Mont. 126, 188 P.3d 983 Failure to predict a future condition is not a mistake regarding the nature and extent of a claimant’s injury.
Kruzich v. Old Republic, 2008 MT 205, 344 Mont. 126, 188 P.3d 983 Parties to a contract make a mutual mistake of fact only if they are unconsciously ignorant or forgetful of a fact that existed prior to or at the time of settlement. Ignorance of a future event does not amount to a mistake of fact. A party’s prediction or judgment as to events to occur in the future, even if erroneous, is not a “mistake.” The mistake must relate to a material fact, past or present, and not to a future contingency.
Kruzich v. Old Republic, 2008 MT 205, 344 Mont. 126, 188 P.3d 983 Although substantial credible evidence supported the WCC’s finding that Petitioner’s Parkinson’s disease was caused by his 1988 injury, Petitioner was stable and had no problems with motor skills and his Parkinson’s disease undisputedly did not exist at the time the parties entered into the settlement agreement. Therefore, there was no mutual mistake of fact. Failure to predict the future is not a mistake of fact as contemplated by the mutual-mistake-of-fact doctrine.
Harrison v. Liberty Northwest Inc. Corp. [04/01/08] 2008 MT 102 Where prior to the execution of a settlement agreement, the claimant had been diagnosed with early degenerative changes in his lumbar spine but had been told by two physicians that surgical intervention was not indicated at that time, and where the diagnoses of these physicians are undisputed, but a more comprehensive diagnosis later determined that corrective surgery was required, the Montana Supreme Court concluded that the Workers’ Compensation Court did not err in concluding that a re-opening of the settlement agreement was warranted based on a material misunderstanding of the nature and extent of the claimant’s condition at the time of the settlement.
Harrison v. Liberty Northwest Inc. Corp. [04/01/08] 2008 MT 102 Where the Workers’ Compensation Court determined that the parties to a settlement agreement did not believe the claimant’s injury would require surgery and therefore the settlement terms did not include consideration of this possibility, the Montana Supreme Court upheld the WCC’s conclusion that the parties were operating under a material mistake of fact.
Gamble v. Sears, 2007 MT 131, 337 Mont. 354, 160 P.2d 537 Where it is undisputed that the parties mutually believed the claimant had reached MMI at the time of settlement, and that if the claimant’s odontoid fracture existed at the time of settlement that the claimant had not actually reached MMI, it is consequently undisputed that if the fracture existed at the time of settlement, the parties were mutually mistaken as to a material fact and the settlement agreement must therefore be rescinded.
Miller v. State Fund, 2000 MT 19N (unpublished, nonciteable opinion.) In an unpublished, nonciteable opinion, Supreme Court affirmed WCC conclusion that two-year statute of limitations of section 27-2-203, MCA (1983) barred injured worker's attempt to reopen settlement on basis of mistake of fact regarding his ability to operate a ranch where claimant knew the back condition preventing his ranch work existed more than two years before filing petition to reopen.
South v. Transportation Insurance Co., 275 Mont. 397, 913 P.2d 233 (1996) Full and final settlement agreements are contracts and are subject to contract law. A contract may properly be rescinded if the parties were laboring under a mutual mistake regarding a material fact at its inception. A mutual mistake occurs when, at the time of its inception, the parties share a common misperception about a vital fact upon which they based their bargain. In order to justify rescission, the mistake must be so substantial and fundamental as to defeat the object of the parties in making the contract.
South v. Transportation Insurance Co., 275 Mont. 397, 913 P.2d 233 (1996) In Kienas v. Peterson (1980), 191 Mont. 325, 624 P.2d 1, and a string of subsequent cases applying the reasoning set out in Kienas, the question was whether or not a mutual mistake existed regarding the nature and extent of claimant’s injuries. This is not the only ground of mistake, however, that may justify setting aside a workers’ compensation settlement. If a party can show a mutual mistake of any material fact, impacting the contract to such an extent that the intended bargain of the parties is defeated, the contract may be rescinded.
South v. Transportation Insurance Co., 275 Mont. 397, 913 P.2d 233 (1996) Where settlement agreement contemplated that claimant would train as a massage therapist in order to pursue a medically approved career, but re-injured her back in training, the settlement agreement was set aside for mutual mistake of material fact about the propriety of “massage therapist” as a potential career for someone with an injured back. Although insurer argued there were other approved jobs that might remain suitable for claimant, Supreme Court noted those jobs may no longer be suitable where claimant re-injured her back in massage therapy training.
 
WORKERS' COMPENSATION COURT DECISIONS

Griffin v. Liberty Northwest Ins. Corp. [04/29/13] 2013 MTWCC 11 Where Petitioner did not prove by a preponderance of the evidence that he had not reached MMI for his industrial injury, the Court concluded that it could not find the “fact” that Petitioner was not at MMI to be a mutual mistake of fact invalidating Petitioner’s settlement.

McGlinchey v. Montana State Fund [12/30/11] 2011 MTWCC 30 Although Petitioner contended that a Social Security determination that she was disabled from the time of her industrial accident forward meant that the parties entered into a settlement agreement under a mutual mistake of fact because neither party believed at the time that Petitioner would be able to return to work, the evidence in this case indicates that Petitioner was capable of returning to work after her industrial accident and that she did so, albeit not in the same type of physically demanding labor which she had previously performed. No mistake of fact occurred as Petitioner’s industrial accident did not leave Petitioner unable to return to work. Therefore, Petitioner is not entitled to reopen her indemnity settlement.
Stokes v. Liberty Mutual [12/17/09] 2009 MTWCC 39 The Court found no mistake of fact where Petitioner’s back condition was properly diagnosed and treated prior to settling his claim. The fact that Petitioner required additional treatment after he settled the indemnity portion of his claim was not unanticipated by the parties, as evidenced by the fact that Petitioner’s medical benefits were reserved.

Stokes v. Liberty Mutual [12/17/09] 2009 MTWCC 39 Although Petitioner contended that he was mistaken in relying on the job analyses which were approved by his treating physician because he believed he could obtain one of the approved positions after he settled his claim and his job search has so far been fruitless, the Court concluded that Petitioner had not proven that similar jobs within his restrictions do not exist, nor had he proven that both he and the insurer were mistaken as to the existence of those jobs.

Distad v. Montana State Fund [03/20/09] 2009 MTWCC 11 In order to have a settlement agreement set aside on the basis of mutual mistake of fact, the claimant must first establish that a mutually mistaken fact exists. Therefore, where Petitioner alleged that his back condition was mistakenly left out of a settlement agreement, Petitioner must first prove that his back condition was caused or aggravated by the industrial accident at issue. Since Petitioner has not proven the underlying causation issue, he has not proven that a mutual mistake of fact exists.

Kruzich v. Old Republic Ins. Co. [06/01/06] 2006 MTWCC 23 Where both Petitioner’s wife and Petitioner’s claims adjuster testified that they believed Petitioner’s injuries to be cognitive, and Petitioner later developed a movement disorder as a direct result of the traumatic brain injury he suffered in an industrial accident, the mistake of fact is mutual rather than unilateral.
Kruzich v. Old Republic Ins. Co. [06/01/06] 2006 MTWCC 23 Petitioner developed a distinct physical ailment as a direct result of his industrial accident, the possibility of which neither party was aware at the time the claim was settled. The settlement agreement is set aside and Petitioner’s claim is reopened where a mutual mistake of fact regarding the nature of Petitioner’s injuries occurred.
Kruzich v. Old Republic Ins. Co. [06/01/06] 2006 MTWCC 23 At the time they entered into the settlement agreement, the parties were clearly unaware of the nature and extent of Petitioner’s traumatic brain injury. Both Petitioner’s wife and Petitioner’s claims adjuster testified that they were unaware Petitioner would develop a movement disorder as a result of his injuries, and they believed Petitioner’s injuries were cognitive.
Gamble v. Sears [01/30/06] 2006 MTWCC 5 Where the record illustrates that both parties were mistaken as to the status of Petitioner’s neck injury, and mistakenly determined that Petitioner was at MMI for a soft-tissue injury or neck strain when she actually had an undiscovered odontoid fracture, the settlement is properly set aside for mistake of fact.
Frazer v. Montana State Fund [07/20/05] 2005 MTWCC 41 Where a claim was denied for the claimant’s alleged failure to timely report his industrial injury to his employer, the claimant then settled with the insurer on a disputed liability basis, and the claimant has consistently maintained since the time of the accident that he timely reported the accident, the claimant was not operating under a mistake of fact concerning the timeliness of his report of injury.
Hansen v. Liberty Northwest [05/09/05] 2005 MTWCC 27 The fact that chronic back pain is later diagnosed as fibromyalgia is immaterial where the nature of the back pain has not materially changed and the new diagnosis does not result in any new, successful treatment of the pain. A change in diagnostic labels is not in itself sufficient to prove a mistake of fact for purposes of rescinding a settlement.
Hansen v. Liberty Northwest [05/09/05] 2005 MTWCC 27 Where the claimant believed that he was unable to work and permanently totally disabled at the time he entered into a settlement, he is not entitled to reopen the settlement simply because he continues to believe he is permanently totally disabled.
Hansen v. Liberty Northwest [05/09/05] 2005 MTWCC 27 To reopen or rescind a workers’ compensation settlement the claimant must prove the parties were mistaken as to facts material to the settlement.
Oens v. Employee Benefits Ins. Co. [6/5/03] 2003 MTWCC 40 Where respondent asserts the statute of limitations as a defense to a claim to reopen a settlement, the Court refuses to grant summary judgment where the Court would be required to make inferences about claimant's knowledge or diligence without full development of the record.
Burgan v. Liberty NW [8/20/02] 2002 MTWCC 41 Where the parties enter into a settlement agreement which expressly provides for the possibility that the claimant may need shoulder surgery, and it is subsequently discovered that the claimant in fact needs shoulder surgery, there is no mistake of fact justifying reopening of the settlement.
Preston v. Transportation Ins. [2/13/02] 2002 MTWCC 10 Insurer moved for summary judgment on ground claimant did not file petition for hearing within two years of when she knew, or should have known, basis for claim to reopen settlement agreement. Motion denied where undisputed evidence does not establish that claimant knew or should have known of the extent of her allegedly work-related mental condition and inability to work more than two years prior to filing date.

Miller v. State Fund [11/17/00] 2000 MTWCC 72 Allegation that insurer did not consider wages from concurrent employment in entering into a settlement may state a ground for reopening the settlement; at least it entitles the claimant to be heard as to whether or not it does.

Romans v. Liberty Mutual Fire Ins. Co. [6/1/00] 2000 MTWCC 32, aff'd 2001 MT 64N (nonciteable opinion) No mistake of fact regarding claimant's medical condition at time of settlement where no credible evidence suggests significant pathology requiring surgery or further treatment and claimant's testimony of total disability was not credible and was in conflict with overwhelming medical evidence.
Rollins v. Liberty Northwest Ins. [2/3/00] 2000 MTWCC 5, aff'd Liberty v. Rollins 2001 MT 14N (nonciteable opinion) Where claimant argued parties had been mistaken prior to settlement on his ability to work, and claimed he had been and continued to be permanently totally disabled, claim to reopen rejected where claimant did not convince the Court he was PTD.
Morrissette v. Zurich American Ins. Co. [1/12/00] 2000 MTWCC 2 Where the factual record leaves no question that both the insurer and claimant were mistaken on the status of a fusion of vertebrae in claimant's lumbar spine, and as to his having reached MMI, the parties were mutually mistaken as to claimant's medical condition at the time they entered settlement. The mistake was material where representatives of the insurer testified that MMI was a prerequisite to considering settlement and claimant testified he would not have settled if he had known his fusion had failed and there might be objective reason for his continued experience of pain. Claimant's attorney's attempt to halt settlement upon learning of the possible mistake regarding medical condition was also strong evidence that the mistake was material from claimant's perspective. Settlement set aside on the basis of mutual mistake of fact.
Miller v. State Fund [3/11/99] 1999 MTWCC 21 Claimant's demand to reopen his 1988 settlement agreement for mutual mistake of fact regarding his ability to work a ranch is barred by the two-year limitations period of section 27-2-203, MCA. Although the statute does not commence running until the claimant discovers facts constituting fraud or mistake, actual knowledge of mistake is not necessary; the statute commences when the claimant would have discovered the mistake had he used reasonable diligence. Here, claimant was aware within a year or two of his settlement that he could not physically work a ranch. Further, claimant and his attorney were aware of the relationship between his back condition, which prevented his ranch work, and his injury by as early as 1995. The petition was not filed until more than three years after that date.
Hayes, Thompson Owen, Sleath and Truesdell v. State Fund [1/21/99] 1999 MTWCC 7 A petition to reopen a workers' compensation settlement because of mutual mistake of fact is subject to the two-year limitations period set out in section 27-2-203, MCA. The statute commences running when the facts are such that the party bringing the action would have discovered the mistake had he or she exercised ordinary diligence. Here, as shown by allegations in an amended complaint filed in a civil action in District Court, petitioners were aware more than two years before filing the WCC petition that they were exposed to Dursban and that Dursban causes some of the specific health problems about which they complained. A petition alleging mutual mistake in the form of ignorance of those facts is time-barred.
Kress v. State Fund [12/27/95] 1995 MTWCC 112 Recitation in settlement that both parties assume the risk that claimant’s condition is otherwise than what they believe does not prevent reopening where claimant’s testimony and persuasive medical evidence convinces the Court that claimant’s groin condition was caused by his injury and that the injury aggravated a pre-existing back condition, facts previously rejected by medical providers.
Kress v. State Fund [12/27/95] 1995 MTWCC 112 The fact that claimant insisted all along that groin condition was related to an accident does not negate reopening for mutual mistake of fact regarding groin condition where medical providers had rejected possible connection at the time of settlement.