EEOICPA BULLETIN NO.02-20
Subject: Deducting payments received for final judgments or settlements from EEOICPA benefits.
Background: The Energy Employees Occupational Illness Compensation Program Act of 2000, as amended (EEOICPA), 42 U.S.C. § 7384 et seq., requires OWCP to “offset” or reduce the amount of EEOICPA benefits it pays to a claimant by the amount of any payment received from either a final judgment or a settlement in a lawsuit (except a lawsuit for worker’s compensation) seeking damages for any occupational illness covered by the EEOICPA. If the evidence in the case file suggests that this type of payment may have been received, the Claims Examiner (CE) will have to develop the case and determine if any EEOICPA benefits that are payable to the claimant(s) must be reduced, and if so, by how much.
Since a payment received from either a final judgment or a settlement in a lawsuit can be for multiple injuries and can be split among multiple parties, the actual amount of the reduction of EEOICPA benefits will depend on how much of the payment was for an occupational illness of a covered employee under the EEOICPA. It will also depend on much it cost the claimant(s) to get the payment (attorney fees and other costs of the lawsuit) since some of these costs can be applied against the payment to lower the amount of the reduction of EEOICPA benefits. Once these two figures are determined, any unpaid EEOICPA benefits must be reduced on a dollar-for-dollar basis. This guidance has been prepared to help the CE make these required reductions.
References: 42 U.S.C. § 7385 and 20 C.F.R. § 30.505(b).
Purpose: To explain how to make the required reduction of EEOICPA benefits.
Applicability: All staff.
1. All claimants are asked to state if they have received a payment from either a final judgment or a settlement in a lawsuit seeking damages for an occupational illness covered by the EEOICPA. This question is currently asked on Form EE/EN-15, so in many instances the CE will not see anything in the case file that suggests that such a payment has been made before the claimant returns the EN-15 to OWCP. Other claimants may state that they received this type of payment in response to the questions about civil lawsuits that are on the current version of Forms EE-1 and EE-2.
Once the case file suggests that this type of payment has been made to any person (not just the claimant), the CE must send a letter to the claimant asking for copies of any complaint that was filed in court, any settlement agreement or sheet, and an itemized list of any expenses or other deductions listed on any settlement sheet. The claimant should be asked to contact the attorney who represented him/her in the lawsuit to obtain this evidence if the claimant does not have it. The CE should ask for any further documents or explanations that may be needed to determine the actual dollar amount of the payment(s) made for the occupational illness covered by the EEOICPA, and to whom the payment(s) was made.
2. EEOICPA benefits are not to be reduced if the benefits awarded by the Department of Justice under section 5 of the Radiation Exposure Compensation Act (RECA) were reduced by the full amount of the payment received by the covered uranium employee or his or her survivor(s). In this type of case, the CE only needs to document that the RECA benefits awarded were reduced by the Department of Justice by the full amount of the payment. However, if the amount of the payment exceeded the $100,000 that can be awarded under section 5 of the RECA, the CE will have to reduce the claimant’s EEOICPA benefits to account for the amount of the payment that exceeded $100,000.
3. A settlement payment can include both an initial cash payment and future payments. These are called “structured” settlements. To determine the dollar value of a structured settlement, the CE must combine the amount of any initial payment and the present value of the future payments. If the future payments are funded through an annuity, the CE may accept the purchase price of the annuity as the present value of the future payments. If the claimant wants the CE to use a different method of computing the present value, the claimant may make a written request to the CE, but the claimant will have the burden to submit enough evidence and analysis to allow the CE to decide if the different method should be used.
4. Some settlements include payments that are contingent on a future event that may or may not take place, such as the diagnosis of an additional medical condition. The CE should not attempt to put a dollar value on a contingent payment; instead, any case that involves one of these must be referred to the National Office.
5. Settlements may be reached with covered employees that entitle them to payments for certain past medical expenses. In such cases, only payments for medical expenses that would also be payable by OWCP are to be included in the amount of the reduction of the claimant’s EEOICPA benefits. For example, medical expenses incurred prior to the date of filing under EEOICPA would not be payable by OWCP and should not be offset.
6. When a covered illness is aggravated by medical malpractice, any payment on a final judgment or settlement relating to the malpractice is an amount that must be reported to OWCP. However, no reduction of EEOICPA benefits is required if the only payments received by a covered employee were for medical treatment provided prior to the date the covered employee filed his or her claim for EEOICPA benefits. In all other claims involving a payment on a final judgment or settlement for medical malpractice, the CE should refer the case to the National Office.
7. If a payment for a final judgment or settlement has been made solely to a living covered employee, then the entire payment (except for any part that is a payment for something other than an occupational illness covered by the EEOICPA or for medical expenses for services provided prior to the date the EEOICPA claim was filed) is a payment for a covered illness.
8. If a joint payment is made to both a living covered employee for a covered illness and to the spouse (or other family members) for “loss of consortium,” the payment must be allocated between the parties, since only the amount of the joint payment allocated to the covered employee will be the amount of the payment for the covered illness. If a judge or jury specified how to allocate the joint payment between the parties, the CE should usually accept that allocation if it appears reasonable. In any other case involving a joint payment, the CE will allocate 75% of the payment to the covered employee as the payment for the covered illness, with the remaining 25% representing the claim of the spouse or other family members for loss of consortium. The covered employee may accept this standard allocation or demonstrate good cause for a different one. Whether to make a different allocation is at the discretion of the CE. However, a different allocation cannot be made unless the claimant can establish that a cause of action for loss of consortium was actually asserted, and that such a cause of action is recognized by state law.
9. Where the claimant(s) is the survivor of a covered employee who received a payment for a covered illness under the EEOICPA while he or she was still alive, the CE should follow the directions described above in Items 7 and 8 to determine the amount of the payment for the covered illness. This means that any payment the covered employee received for his or her covered illness is the amount used to reduce the EEOICPA benefits paid to the survivor(s).
10. Where the claimant(s) is the survivor of a deceased covered employee and the claimant received a payment for a final judgment or settlement in a lawsuit where he or she did not seek damages for his/her own injuries, the payment the claimant received is actually for the deceased covered employee’s covered illness and the CE should follow the directions in Item 7 to determine the amount of the payment for the covered illness.
11. If a covered employee dies while a lawsuit is pending and the surviving claimant(s) is also a plaintiff in the same lawsuit, a payment received from a final judgment or a settlement may include amounts received for the claimant’s own cause of action. If a judge or jury specified how to allocate a joint payment between the parties, the CE should usually accept that allocation if it appears reasonable. In any other case, the CE will allocate 50% of the joint payment to the deceased covered employee as payment for the covered illness, with the remaining 50% allocated to the spouse or other family members for loss of consortium and wrongful death. The claimant(s) may either accept this standard allocation or demonstrate good cause for a different one. Whether to make a different allocation is at the discretion of the CE, and a different one will not be made unless it can be established that causes of action for loss of consortium or wrongful death were actually asserted in the lawsuit, and that such causes of action are recognized by state law.
12. After the CE has determined the amount of the payment for a covered illness, reasonable attorney fees and costs of the lawsuit may be deducted from this figure to arrive at the net amount of the required reduction of EEOICPA benefits. To determine the deduction for attorney fees, the CE should first divide the total amount of attorney fees that were actually paid by the total payments received due to the final judgment or settlement to arrive at the percentage of the total payments that is represented by the total fees. In general, any fee that exceeds 40% of the total payments will be deemed unreasonable and the amount allowed for attorney fees will be reduced to that percentage. To determine the amount of attorney fees to be deducted from the payment for the covered illness, the payment for the covered illness should be multiplied by the lower of the actual attorney fees percentage as calculated above, or 40%. If the attorney fee percentage exceeds 40%, the claimant should be informed and given an opportunity to establish that an attorney fee in excess of 40% is reasonable.
13. Only some of the costs of bringing a lawsuit may be deducted from the amount of the payment for the covered illness. Costs that are allowable are any out-of-pocket expenditures that are not part of the normal overhead of a law firm’s operation, such as filing fees, travel expenses, record copy services, witness fees, court reporter costs for transcripts of hearings and depositions, postage, and long distance telephone calls. Costs that are considered normal overhead costs of a firm will be disallowed, such as in-house record copying, secretarial or paralegal services, and co-counsel fees. THESE COSTS MUST BE ITEMIZED WHEN SUBMITTED TO THE CE FOR CONSIDERATION. Any costs that are not itemized will be disallowed. The costs of a lawsuit with multiple parties should be allocated among the parties in the same way that the total judgment or settlement is allocated. In any case in which costs are disallowed, the claimant should be given an opportunity to establish that such costs are reasonable and should be allowed.
14. These calculations will determine how much OWCP must reduce the amount of any unpaid EEOICPA benefits to which the claimant is entitled, beginning with the lump-sum payment. If the amount of the lump-sum payment is less than the amount of the required reduction (i.e., a “surplus” remains), ongoing EEOICPA medical benefits payable in the future will be reduced up to the amount of the remaining surplus. This means that OWCP will stop paying medical benefits and will apply the amount it would otherwise pay to reimburse a covered employee for ongoing EEOICPA medical treatment to the remaining surplus until it is exhausted. Covered employees should be encouraged to submit reimbursement requests for medical treatment, even though they will not be reimbursed, because the amounts they paid will reduce the surplus and shorten the time during which medical benefits cannot be paid.
15. During any period when medical benefits are not being paid because of the required reduction of EEOICPA benefits, and if the CE finds it necessary in the course of normal case management to obtain a second opinion examination, a referee examination, or a medical file review, the costs for these procedures will be directly paid by OWCP and any reasonable expenses incurred by the covered employee will be reimbursed without being added to the surplus.
Disposition: Retain until incorporated in the Federal (EEOICPA) Procedure Manual
PETER M. TURCIC
Director, Division of Energy Employees
Occupational Illness Compensation
Distribution List No. 1: Claims Examiners, Supervisory Claims Examiners, Technical Assistants, Customer Service Representatives, Fiscal Officers, FAB District Managers, Operation Chiefs, Hearing Representatives, District Office Mail & File Sections