State News : North Carolina

On August 17, 2006, Danny K. Allred was injured in a motor vehicle accident while working for Exceptional Landscapes Inc., which was not self-insured and did not have workers’ compensation insurance at the time. Allred filed a From 18 and a Form 33. At a mediated settlement conference in February 2007, the parties could not reach an agreement as to the workers’ compensation claim and instead, attempted to reach an agreement regarding the liability claim, purportedly based upon the assumption that Allred would withdraw his workers’ compensation claim. An agreement was reached in which Exceptional Landscapes agreed to pay Allred $26,000.00, but made no mention of medical bills. Payment was made and Allred never withdrew his workers’ compensation claim and the claim went to hearing.

On March 30, 2012, the Full Commission entered an Opinion and Award finding that the Commission had jurisdiction over the matter and that the settlement agreement did not comply with the requirements of N.C. Gen. Stat. § 97-17 inasmuch as it was not ‘fair and just.’ The Commission also found two shareholders and Exceptional Landscape’s secretary jointly and severally liable for the indemnity and medical compensation due in this case. Defendants appealed.

On May 21, 2013, in Allred v. Exceptional Landscapes, Inc.,the Court of Appeals first addressed the issue of jurisdiction and found that the Commission had jurisdiction over the claim even though the settlement agreement pertained to Allred’s liability claim. The Court noted that in order to invoke jurisdiction, an employee must either file a claim for compensation or submit a settlement for approval and by filing the Form 18 and Form 33 with the Commission for the August 2006 injury, Allred had invoked the Commission’s jurisdiction and the Commission retained continuing jurisdiction of all proceedings there initiated.

The Court also concluded that the Commission did not err in concluding that the settlement agreement was not "fair and just" as required by N.C. Gen. Stat.
§ 97-17. N.C. Gen. Stat. § 97-17 mandates that medical expenses be addressed in the settlement agreement. The parties’ settlement agreement did not make any provision for payment of Allred’s medical expenses, nor did it provide adequate indemnity compensation given Allred’s physical and vocational limitations at the time of the settlement.

As for the award of attorney’s fees under N.C. Gen. Stat. §97-88, the Court held that the Commission did err because none of the Defendants were ‘insurers’ as used in the statute and as such, no ‘insurer’ appealed the decision to trigger an award of sanctions. The Court also found that the Commission erred in piercing the corporate veil as to Exceptional Landscape’s treasurer since she was not a shareholder of the corporation. As treasurer, Defendant J. Wright did not exercise control over the business or maintain complete domination of policy, finances, and business practices, nor did she exercise such control over Exceptional Landscapes, Inc., that the corporate entity had no separate existence.

Risk Handling Hint: Employers are strongly advised to ensure that they are maintaining proper and adequate workers’ compensation coverage while conducting business in North Carolina. The Industrial Commission will not tolerate business owners that neglect their responsibilities. The Allred case is also a reminder to employers and risk managers to ensure that all terms of claim resolution are addressed in a mediated settlement agreement, especially payment of medical expenses. The Industrial Commission will scrutinize settlement agreements for the consideration paid to the employee and to ensure that the issue of payment of medical expenses is adequately addressed.