20 CFR 404.408
The claimant was injured in an industrial accident in September 1966, and was paid temporary total workmen's compensation benefits. She became entitled to disability insurance benefits beginning in June 1967. Her employer and its insurer questioned the nature and extent of disability suffered by the claimant as a result of the industrial accident. At a conference held in May 1968 before a referee of the Division of Workmen's Compensation, pursuant to the Revised Statutes of Missouri (1959) section 287.380, a lump-sum compromise settlement of her claim under the Missouri Workmen's Compensation Law was reached. Notified of this settlement in October 1968, the Social Security Administration informed the claimant that her disability insurance benefits would be withheld from November 1968 through 1971 since she received a lumpsum workmen's compensation payment as a substitute for periodic payments. The claimant objected to this reduction in her benefits.
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Section 404.408(d) of the Social Security Administration Regulations No. 4 (20 CFR 404.408(d)), prior to amendment in January 1970, provided that amounts included in the workmen's compensation award which are specifically identifiable as being for medical, legal, or related expenses paid or incurred by the individual in connection with his workmen's compensation claim, or the injury or occupational disease on which it is based, are excluded in computing the reduction. As amended, the section provides that such expenses incurred by the individual in connection with his workmen's compensation claim, or the injury or occupational disease on which the award or agreement is based, are excluded in computing the reduction to the extent that they are consonant with State law. Such medical, legal, or related expenses for purposes of exclusion from the workmen's compensation award or compromise agreement may be established by the compensation award, compromise agreement, or court order which specifies or itemizes the amount of such expenses included in the workmen's compensation award or agreement. In addition, amounts specified or itemized in the workmen's compensation award or compromise agreement as reimbursement for anticipated medical expenses are excluded from such award or agreement in computing the reduction, but anticipated medical expenses not so specified or itemized may not be excluded. In the event that a compensation award, agreement, or court order does not specify the amount of reimbursement included for the aforementioned expenses paid or incurred, and the individual alleges such expenses were paid or incurred by him, they may be established by a detailed statement from the individual's attorney, physician, or the employer's insurance carrier, or bills, receipts or cancelled checks, or other clear and convincing evidence indicating the amount of these expenses included in the award or compromise agreement, or any combination of the foregoing evidence from which amounts of such expenses are determinable.
The record discloses that the claimant was paid temporary total workmen's compensation of $1,966.50 from December 19, 1966 to October 21, 1967 and was provided medical aid amounting to $5,181.86. The compromise agreement provides for the payment of a lump-sum settlement in the amount of $7,350 which, in addition to the amount paid previously, constitutes an aggregate workmen's compensation payment of $9,316.50. Although the compromise agreement allows 25% of the lump-sum payment for legal fees pursuant to Missouri statute, no additional allocation is specified for medical expenses paid, incurred, or anticipated in connection with the claimant's workmen's compensation claim or the injury on which it is based.
The claimant contends that reduction under section 224 against her disability insurance benefits should not be made because the compromise settlement was not a commutation of, or substitute for periodic payments.
The Revised Statutes of Missouri (1959) reads, in pertinent part of section 287.390:
Specifically, this section of the State statute does not prevent parties to workmen's compensation claims from making voluntary agreements in settlement of such claims. However, such agreement of settlement or compromise of any dispute or claim for compensation becomes valid only when approved by a referee or a commission in accordance with the rights of the parties established by the Missouri Workmen's Compensation law. The appellate court of Missouri has held in Mosier v. St. Joseph Lead Co., 205 S.W. 2d 227 (St. Louis Ct. of App., Mo., 1947), that the above quoted subsection of the Missouri Workmen's Compensation law contemplates the settlement of the entire workmen's compensation claim and the discharge of the employer's entire liability resulting from the industrial accident. In addition, approval of such compromise settlement by the commission or referee includes a finding that the claim was compensable. Morgan v. Duncan, 361 Mo. 683, 236 S.W. 2d (1951). Furthermore, lump-sum compromise settlements approved in accordance with the Missouri Workmen's Compensation law are binding on the parties and not subject to review by the courts. General Motors Corp. v. Holler, F.2d 297 (8 Cir., 1945).
The claimant's contention that reduction under § 224 should not be made because the compromise settlement was not a commutation of or substitute for periodic payments, was previously considered by the courts. In Walters v. Flemming, 185 F. Supp. 288 (D.Mass., 1960), the plaintiff had received weekly workmen's compensation payments until a lump-sum amount was agreed on between plaintiff and his employer's insurance company and approved by the Massachusetts Industrial Accident Board. The court held that this lump sum was not a commutation, but a substitute for periodic payments to which the plaintiff would otherwise be entitled, and hence that reduction was proper:
It is apparent that in the instant case the compromise lump-sum payment was a substitute for periodic payments provided by the Missouri statute to which the claimant was entitled. Accordingly, the Appeals Council held that reduction from the claimant's disability insurance benefits is required under section 224 of the Social Security Act until absorption of the lump sum compromise settlement has been completed, less the legal expenses incurred by the claimant and specifically identified in the agreement.
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