Larry Black, Plaintiff-appellant, v. Richard S. Schweiker,* Secretary of Health Andhuman Services, Defendant-appellee, 670 F.2d 108 (9th Cir. 1982)

Black appeals from a judgment of the district court affirming a decision of the Secretary of Health, Education and Welfare (now Health and Human Services), to reduce Black's disability insurance benefits by the amount of his workers' compensation settlement. We affirm.

Black claimed to have been disabled by an injury he received while working. His employer denied liability for Black's condition, but agreed to a lump sum settlement of the claim in the amount of $20,000, pursuant to Or.Rev.Stat. § 656.289(4).¹  After this settlement, the Social Security Administration notified Black that, pursuant to 42 U.S.C. §§ 424a(a) & (b),²  the disability insurance benefits he had been receiving would be reduced to reflect the value of the settlement. Black contends that the offset was improper.

Black argues that the settlement with his employer was not "a commutation of, or a substitute for, periodic (workers' compensation) payments" within the meaning of 42 U.S.C. § 424a(b) and thus could not properly be offset against his disability benefits. Black insists that, under Oregon law, the lump sum payment he received was in settlement of a claim that was not yet established and therefore cannot be considered a substitute for periodic payments. He supports this contention by calling to our attention that, under Oregon law, a bona fide dispute over the compensability of the claim is a prerequisite to a valid workers' compensation settlement. See Schulz v. State Compensation Dep't, 252 Or. 211, 448 P.2d 551 (1968) (en banc). The Secretary, on the other hand, argues that the settlement is clearly a substitute for whatever periodic payments Black might otherwise have been entitled to receive pursuant to Oregon workers' compensation law.

We agree with the Secretary. Black does not, and cannot, contend that the settlement was for something other than a claim arising out of an injury he received while on the job. In his brief, he admits that, having agreed to the lump sum settlement, he is barred from asserting any claim for compensation under Oregon workers' compensation law. The settlement itself relieves Black's employer of liability for whatever payments may be due to Black under that law on account of injuries received in the accident. Where the right to and liability for periodic workers' compensation payments are thus extinguished by a voluntary settlement, the settlement can only be regarded as a "substitute" for the payments. Graves v. Richardson, 358 F. Supp. 1310, 1311 (W.D. Va. 1973). The fact that Black had no absolute right to receive such a substitute, and that the settlement was subject to the approval of a referee, the Board, or the court, Or.Rev.Stat. § 656.289(4), does not alter its nature. See Walters v. Flemming, 185 F. Supp. 288, 289-90 (D. Mass. 1960).

We need not and do not hold that every compromise of a workers' compensation claim is a substitute for periodic payments within the meaning of 42 U.S.C. § 424a(b). For example, it may well be that a lump sum settlement of a claim under Or.Rev.Stat. § 656.204(1), which provides for burial costs not exceeding $1,000, or a settlement of a final payment made to a surviving spouse under Or.Rev.Stat. § 656.204(2) (c), are not in lieu of periodic payments. But the case before us is different. Black claims disability as a result of psychological problems allegedly caused by an on-the-job injury. This injury could be either a permanent partial disability under Or.Rev.Stat. § 656.214 or a temporary partial disability under Or.Rev.Stat. § 656.212, both of which provide for compensation payments on a periodic basis.³  Since Black's settlement with his employer meant that he surrendered his claim to periodic payments under either of these sections, the settlement must be considered a "commutation of, or a substitute for, periodic payments" pursuant to 42 U.S.C. § 424a(b). We therefore affirm the decision of the Secretary to offset the amount of Black's settlement against his disability insurance benefits.

AFFIRMED.

FLETCHER, Circuit Judge, concurring in the result:

I agree with the majority's conclusion that Black has failed to prove that his settlement was not a substitute for periodic payments. I would, however, leave open the question of what workers' compensation payments, under Oregon law, are payable as a lump sum. The question was not argued to or decided by the district court. Accordingly, I would not decide it here. I nonetheless concur in the result since Black has not sustained the burden imposed on the claimant to show what part of a workers' compensation settlement is not a substitute for periodic payments. 20 C.F.R. § 404.408(d) (1980).