An electrician sustains a head injury on the job. He signs a mediation agreement absolving the employer of any workers’ compensation liability while he pursues a tort action against the warehouse owner.
Five years later, the man’s guardian files a workers’ comp claim for the head injury and argues that the mediation settlement should be voided because the worker wasn’t mentally competent at the time.
On Friday, the Alabama Supreme Court agreed. In Strickland vs. American Cast Iron Pipe Co., the court noted that even though Alabama law sets strict rules regarding a benefit review conference and agreement, including a 60-day window to rescind the agreement, those rules are abrogated by basic contract law.
“This court need look only to the plain meaning of the relevant statutory text to determine that the 60-day period in § 25-5-292(b) does not govern an action challenging a benefit-review agreement as void ab initio on the basis of the mental incompetency of a signatory,” Justice Sarah Stewart wrote for the majority in the Sept. 23 opinion.
The high court upheld a state appeals court ruling, which had overturned a trial court that had dismissed the comp claim for the head injury. The Supreme Court remanded the case to the trial court in Birmingham for further proceedings, to consider the argument that he mediation agreement was void.
Alabama is one of the few states that does not have a dedicated workers’ compensation court system, but utilizes circuit courts for all claims disputes. The state Legislature adopted the benefit-review conference approach in 1992 as a way to avoid court review on claims. The program allows an ombudsman from the state Department of Labor to mediate.
In this case, electrician John Gray sustained a serious head injury in 2014 while at work for the cast iron pipe company, known as ACIPCO. Two years later, he, his attorney, the employer and the ombudsman signed off on the agreement, letting the pipe company avoid responsibility for the claim while the suit against the warehouse was pending.
The employer also released any potential subrogation interest it may have had in Gray’s suit against the warehouse owner, the court explained.
In 2017, a federal court dismissed Gray’s tort suit against the warehouse. Two years after that, a probate court declared Gray mentally incompetent and appointed his mother-in-law to be his guardian. Strickland then filed the workers comp claim, arguing that the mediation agreement was void because of the electrician’s mental state.
Gray’s wife had said in an affidavit that he had difficulty understanding written instructions after his head injury, that he believed he was in the 1980s and did not recall that he had a wife and two children, the Supreme Court said. Alabama Cast Iron Pipe contented that, regardless, Gray and his attorney had signed the agreement in 2016, denoting that had read and understood it.
But the majority of the justices said state law is clear on contracts signed by mentally impaired people. The agreement is voided, so the 60-day window for cancelling the agreement does not apply.
“This court presumes that when the Legislature enacted the legislation creating the ombudsman program in 1992, it was well aware of the long-standing statutory and common-law principle that a contract is absolutely void if entered into by a person who lacked the requisite mental capacity,” the court wrote.
The justices quoted from a 1905 state Supreme Court decision: “This court is fully committed to the doctrine that the contract of an insane person is absolutely void.” For parties to agree to something, they must understand it, the court said.
The majority said that if the court adopted the pipe company’s interpretation of Alabama law, then Gray “will have (1) relinquished his right to pursue a potentially meritorious workers’ compensation claim by signing the 2016 agreement while mentally incompetent, (2) consented to a procedure, which he lacked the capacity to understand … and (3) waived any right to collaterally attack the 2016 agreement as void ab initio after the expiration of the 60-day period.”
Justice William Sellers dissented. He wrote that Gray’s attorney and wife were present when he signed the agreement.
“To further assure that Gray’s agreement to settle his claim against ACIPCO was appropriate, a neutral ombudsman reviewed the agreement and also concluded that it was fair,” Sellers said.
Alabama comp law allows two-thirds of a worker’s average weekly wage for permanent total disability, up to $983 a week, with no limit on the duration of benefits, according to a 2022 report by the Workers’ Compensation Research Institute.
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