Offsets, Insolvency and Third Party Settlements

The Industrial Claim Appeals Office (the “Panel”) issued a decision affirming Respondents’ obligation to continue paying workers’ compensation benefits to Claimant without an offset from money received from a third party settlement.

In Teti, the claimant had been involved in work-related motor vehicle rollover accident resulting in severe injuries in June 1989. The claimant at the time was employed by a wholesale floral business owned by the claimant’s family. The employer’s workers’ compensation insurer at the time of the accident was Millers First Insurance (“Millers”). Millers admitted liability and began paying benefits. The claimant, through his parents, also filed a civil tort action against Ford Motor Company in Colorado federal district court as related to the Bronco II that the claimant was driving at the time of the accident. During this time, the employer’s compensation attorney signed an affidavit to Ford Motor Company indicating that he believed payment of benefits by Millers operated as an assignment of the cause of action against the third party tortfeasor. In June 1993, Millers and Ford entered into a global settlement of the workers’ compensation claim and the third party tort claim that was approved by an ALJ. As a part of the agreement, Millers waived their subrogation rights in exchange for payment and agreement to continue paying workers’ compensation benefits without taking an offset. The settlement settled any disputes between Ford and Millers and Ford and the claimant. Following the settlement, the claimant continued to receive workers’ compensation benefits from Millers in accordance with the agreement. However on August 30, 2017, an Illinois Circuit Court found Millers insolvent. Following Millers’ insolvency, Colorado Insurance Guaranty Association (“CIGA”) took over the claim and began paying indemnity and medical benefits. During this time, medical evaluations determined the claimant was permanently and totally disabled as a result of a 1989 car accident.

The case proceed to hearing and CIGA argued there were settlement errors that rendered the agreement between Millers and the claimant invalid. Specifically, CIGA argued the claimant did not sign the agreement or attend the advisement hearing. CIGA accordingly argued the agreement did not bind CIGA. The ALJ disagreed and found the alleged errors were harmless.

CIGA appealed arguing again that it was not bound by the settlement agreement between Millers and the claimant because it was invalid under the Workers’ Compensation Act and under general contract principles. The Panel found that the 1993 ALJ’s order was entitled to a presumption of validity. In that Order, the ALJ found there was also substantial compliance with the settlement. The ALJ also properly found that the amounts paid to the claimant pursuant to the agreement did not constitute duplication of recovery. The Panel also clarified that although the claimant was a designated payee for the annuity payments from the third party settlement with Ford, this did not constitute a claim against an insurer under any provision in any insurance policy that is also a covered claim. The Panel affirmed the annuity purchased by Ford in the claim was simply a vehicle for the third party settlement proceeds and not an insurance policy for a covered claim. The Panel upheld the ALJ’s order finding CIGA was bound by the prior settlement agreement and could not claim an offset for benefits paid against the third party settlement.

Teti v. Colo. Gold Wholesale, W.C. No. 3-948-315-003 (I.C.A.O. Nov. 20, 2020).

Want to know more? Contact Karina Prigge at or 877-259-5693.

February 2021 Newsletter