SSR 85-6c: SECTION 224 (42 U.S.C. 424a) DISABILITY -- REDUCTION OF BENEFITS DUE TO RECEIPT OF A LUMP-SUM WORKERS' COMPENSATION SETTLEMENT -- FINALITY OF DECISION -- REOPENING FOR ERROR OF LAW

20 CFR 404.408, 404.969, 404.987, 404.988, and 404.989(a)(3)

SSR 85-6c

Munsinger v. Schweiker , 1A Unempl. Ins. Rep. ¶ 14,633 (8th Cir.

1983)

BRIGHT, Circuit Judge:

Ethel Munsinger appeals from the district

court's [1] judgment affirming

the decision of the Social Security Appeals Council to reduce Munsinger's

disability insurance payments. For the reasons outlined below, we affirm

the judgment of the district court.

I. Background

On February 18, 1976, Ethel Munsinger sustained a back injury while at

work. Beginning on February 18, 1976, she received temporary disability

benefits pursuant to the Iowa workers' compensation statute. Iowa Code

Ann. § 85 (Supp. 1983). Munsinger's worker's compensation benefits ceased

October 7, 1977. On December 29, 1977, Munsinger filed an application with

the Social Security Administration (SSA) to obtain disability insurance

benefits. Following the SSA's denial of her claim, Munsinger filed for

reconsideration. During this period, Munsinger also pursued an Iowa

workers' compensation action against her employer and its insurance

carrier. Munsinger subsequently entered into a settlement of her disputed

claim with the insurance carrier. On April 21, 1978, the Iowa Industrial

Commissioner entered an order approving the settlement, awarding $32,500

to Munsinger.

On November 1, 1978, the SSA denied Munsinger's application for

reconsideration. On January 30, 1979, however, an Administrative Law Judge

(ALJ) found Munsinger to be disabled and awarded her benefits based on a

period of disability beginning February 18, 1976. The SSA subsequently

informed Munsinger of the monthly amounts of her disability insurance

benefits and that her first payment, which represented retroactive

benefits, amounted to $4,085.70

reconsideration. On January 30, 1979, however, an Administrative Law Judge

(ALJ) found Munsinger to be disabled and awarded her benefits based on a

period of disability beginning February 18, 1976. The SSA subsequently

informed Munsinger of the monthly amounts of her disability insurance

benefits and that her first payment, which represented retroactive

benefits, amounted to $4,085.70. On August 3, 1979, however, the SSA

notified Munsinger that they had overpaid her $423.80 due to her receipt

of a "workmen's compensation lump-sum settlement" of $32,500, and that

future disability insurance benefits would be reduced accordingly.

Munsinger requested the SSA to reconsider its determination. On

reconsideration, the SSA affirmed the offset of Munsinger's lump sum

settlement. The SSA stated:

The reconsideration decision also stated that the SSA had deducted from

Munsinger's $32,500 worker's compensation settlement a total of $16,915.14

for attorney's fees, medical and other related expenses, and that the

balance of $15,584.86 would be prorated so that Munsinger's full

disability insurance benefits would resume n July 1982. On May 19, 1980,

Munsinger appealed the SSA's decision to an ALJ. After conducting a

hearing, the ALJ, on July 23, 1980, issued a decision finding that the SSA

had improperly reduced Munsinger's disability benefits. On January 19,

1981, however, the appeals council of the SSA notified Munsinger that it

had reopened her case because of an error on the face of the record. On

March 4, 1981, the appeals council reversed the ALJ's decision.

ision to an ALJ. After conducting a

hearing, the ALJ, on July 23, 1980, issued a decision finding that the SSA

had improperly reduced Munsinger's disability benefits. On January 19,

1981, however, the appeals council of the SSA notified Munsinger that it

had reopened her case because of an error on the face of the record. On

March 4, 1981, the appeals council reversed the ALJ's decision.

Munsinger then sought review of the Secretary's decision in federal

district court. Munsinger asserted that (1) the appeals council lacked

jurisdiction to reopen her case because it failed to act within sixty days

of the ALJ's decision, and (2) Munsinger's worker's compensation

settlement did not constitute a commutation of, or substitute for,

periodic payments, and, consequently, was not subject to disability

benefit offset.

Both parties moved for summary judgment. The district court granted the

Secretary's motion and entered judgment in favor of the Secretary. The

district court specifically found that the appeals council had

jurisdiction to reopen Munsinger's overpayment decision and that the

settlement constituted a substitute for periodic payments within the

meaning of 42 U.S.C. § 424a(b), and therefore, that the Secretary was

entitled to offset the settlement against Munsinger's social security

benefits. This appeal followed.

II. Discussion

A. Appeals Council Review

Munsinger contends on appeal that the appeals council lacked jurisdiction

to decide her case because it failed to act within sixty days of the ALJ's

decision as prescribed by 20 C.F.R. § 404.969 (1981). The Secretary

construes the regulations as permitting the appeals council to reopen a

case within four years of the initial determination when the ALJ's

decision contains an error of law.

We observed in Oglala Sioux Tribe of Indians v. Andrus , 603

F.2d 707 (8th Cir. 1979):

case because it failed to act within sixty days of the ALJ's

decision as prescribed by 20 C.F.R. § 404.969 (1981). The Secretary

construes the regulations as permitting the appeals council to reopen a

case within four years of the initial determination when the ALJ's

decision contains an error of law.

We observed in Oglala Sioux Tribe of Indians v. Andrus , 603

F.2d 707 (8th Cir. 1979):

Accordingly, we must determine whether the Secretary's interpretation

sustaining jurisdiction is plainly inconsistent with the wording of the

regulation.

Regulations promulgated by the Secretary authorize the appeals council to

initiate direct review of the determination of an ALJ "[a]nytime within 60

days after the date of a hearing decision or dismissal * * *." 20 C.F.R §

404.969 (1981). Sixty days passed before the appeals council reviewed the

ALJ's decision. The regulations, however, provide for a later reopening

under certain circumstances. Section 404.988 provides in pertinent

part:

"Good cause," as is relevant to this action, exists if "[t]he evidence

that was considered in making the determination or decision clearly shows

on its face that an error was made." 20 C.F.R. § 404.989(a)(3) (1981).

Munsinger urges that the reopening provisions of section 404.987 are

limited to claimants. While we agree that a claimant may utilize the

reopening provisions of section 404.987, we do not believe these

procedures are limited to claimants. Section 404.987 does not expressly

preclude reopening initiated by the administration, nor does it contain

language that inescapably leads to that conclusion. Indeed, section

404.988 contains several conditions upon which a determination can be

reopened which one would expect to be raised by the Secretary and not the

claimant. See e.g., 20 C.F.R. § 404.988(c)(1) (1981) (fraud or other

fault)

n 404.987 does not expressly

preclude reopening initiated by the administration, nor does it contain

language that inescapably leads to that conclusion. Indeed, section

404.988 contains several conditions upon which a determination can be

reopened which one would expect to be raised by the Secretary and not the

claimant. See e.g., 20 C.F.R. § 404.988(c)(1) (1981) (fraud or other

fault). Accordingly, we conclude that sections 404.987c permit the appeals

council to reopen sua sponte a prior final decision within the

circumstances outlined in 20 C.F.R. § 404.988.

The appeals council predicated reopening of Munsinger's case upon the

provisions of 20 C.F.R. §§ 404.988(b)-.989(a)(3). These sections permit

reopening within four years of the initial determination where "[t]he

evidence that was considered in making the determination or decision

clearly shows on its face that an error was made." 20 C.F.R. §

404.989(a)(3) (1981). Munsinger asserts that "error on the face of the

evidence" allows reopening only to revise factual errors appearing

in the record, and that the issue before the appeals council was

essentially a legal question, that is, whether a settlement of a disputed

worker's compensation claim is a commutation of, or substitute for,

periodic worker's compensation payments within the meaning of 42 U.S.C. §

424a(b). The Secretary urges, on the other hand, that errors of law are

errors on the face of the evidence within the meaning of section

404.989(a)(3).

appeals council was

essentially a legal question, that is, whether a settlement of a disputed

worker's compensation claim is a commutation of, or substitute for,

periodic worker's compensation payments within the meaning of 42 U.S.C. §

424a(b). The Secretary urges, on the other hand, that errors of law are

errors on the face of the evidence within the meaning of section

404.989(a)(3).

We have held that "error on the face of the evidence" occurs when

injustice has been done a claimant or there exists manifest error in the

record. Lauritzen v. Weinberger , 514 F.2d 561, 563 (8th Cir.

1975). In establishing this standard, we looked to judicial decisions and

the administration's Social Security Claims Manual. Courts of appeals

which have construed this or an analogous standard have generally involved

cases of alleged errors of fact or ultimate fact. See e.g., Wallace v. Weinberger , 528 F.2d 700, 705 (6th Cir. 1976): Ortego v. Weinberger , 516 F.2d 1005, 1017 (5th Cir. 1975); Lauritzen v. Weinberger, supra , 514 F.2d at 563-65. These cases do not,

however, bar the interpretation urged by the Secretary in this

action. [2]

The Social Security Claims Manual defines "error on the face or the

evidence" as follows:

A case may not be reopened "if the only reason for reopening is a change

of legal interpretation or administrative ruling upon which the

determination or decision was made." 20 C.F.R. 404.989(b) (1981) (Emphasis

added). However, the Claims Manual does not preclude reopening to revise a

determination based upon the application of an incorrect legal standard or

the misinterpretation of law existing at the time of the determination.

Indeed, the Manual contemplates a determination or decision that was

reasonable not only on the evidence but also on "the statute, regulations,

instructions, precedents, etc., existing at the time and the determination

or decision was made * * *." Social Security Claims Manual § 7015 (July

1979)

t legal standard or

the misinterpretation of law existing at the time of the determination.

Indeed, the Manual contemplates a determination or decision that was

reasonable not only on the evidence but also on "the statute, regulations,

instructions, precedents, etc., existing at the time and the determination

or decision was made * * *." Social Security Claims Manual § 7015 (July

1979). If the evidence clearly shows the result reached to have been

legally erroneous at the time it was reached, then it may fairly be said

that "[t]he evidence that was considered in making the determination or

decision clearly shows on its face that an error was made." 20 C.F.R §

404.989(a)(3) (1981).

Accordingly, we determine that the Secretary's interpretation of section

404.989(a)(3) to permit reopening for legal errors is not plainly

inconsistent with those regulations. We conclude, therefore, that the

appeals council had jurisdiction to reopen Munsinger's overpayment

decision to correct an error of law.

B. The Merits

Munsinger further argues on appeal that the district court erred in

concluding that the settlement of a disputed worker's compensation claim

is a substitute for periodic worker's compensation payments within the

meaning of 42 U.S.C. § 424a(b) to be offset against social security

disability benefits.

Section 424a requires offset of social security disability payments

against worker's compensation so that the total benefits received by the

worker do not exceed eighty percent of the claimant's predisability

income. 42 U.S. C. § 424a; see also Freeman v. Harris , 625

F.2d 1303, 1306 (5th Cir. 1980). Section 424a commutation is geared to

periodic payments received by the claimant. Section 424 a(b), however,

provides:

social security disability payments

against worker's compensation so that the total benefits received by the

worker do not exceed eighty percent of the claimant's predisability

income. 42 U.S. C. § 424a; see also Freeman v. Harris , 625

F.2d 1303, 1306 (5th Cir. 1980). Section 424a commutation is geared to

periodic payments received by the claimant. Section 424 a(b), however,

provides:

Under Iowa law, the settlement of a disputed worker's compensation claim

is not construed as a payment of weekly compensation. Iowa Code Ann. §

85.35 (Supp. 1983); see Rick v. Dyna Technology, Inc ., 204

N.W.2d 867, 870 (Iowa 1973). Munsinger argues that Iowa law is dispositive

of the issue before this court. We disagree. Whether Munsinger's federal

disability benefits can be offset by a portion of a lump sum settlement

authorized pursuant to state law is a federal question. The answer must

therefore be sought in the federal statute and its underlying policy,

notwithstanding conflicting sate law. Sola Electric Co . v. Jefferson Electric Co ., 317 U.S. 173, 176 (1942).

In enacting section 424a, Congress sought to eliminate the duplication of

benefits that it saw as threatening state workers' compensation programs

by encouraging the disabled not to return to work nor attempt any

rehabilitation. Richardson v. Belcher , 404 U.S. 78, 82-83

(1971); Freeman v. Harris, supra , 625 F.2d at 1306. The Iowa

workers' compensation law, with exceptions not relevant to this case,

provides the exclusive remedy for an employee against her employer for

injuries arising out of her employment. Iowa Code Ann. § 85.20 (Supp.

1983). [3] The settlement

absolved her employer from any liability under Iowa workers' compensation

law. We conclude that in settling her disputed claim, Munsinger received a

lump sum which represented periodic payments. Consequently, without an

offset, Munsinger would receive duplicative benefits

st her employer for

injuries arising out of her employment. Iowa Code Ann. § 85.20 (Supp.

1983). [3] The settlement

absolved her employer from any liability under Iowa workers' compensation

law. We conclude that in settling her disputed claim, Munsinger received a

lump sum which represented periodic payments. Consequently, without an

offset, Munsinger would receive duplicative benefits. To deny the

Secretary an offset of the settlement would frustrate congressional

intent. We determine that the Secretary's interpretation is consistent

with the purposes underlying section 424a(b), and therefore hold that the

settlement was a substitute for periodic payments within the meaning of

section 424a which the Secretary was entitled to offset against

Munsinger's social security benefits.

III. Conclusion

Accordingly, we affirm the judgment of the district court.

[1] The Honorable Harold D.

Vietor, United States District Judge for the Southern District of Iowa.

[2] We observe, however, that

two district courts have concluded that an error of law is not "error on

the face of the evidence." George v. Schoenker , 3-82 Civ.

495 (D. Minn. Aug. 4, 1982); Russell v. Califano , No.

C77-1059 (N.D. Ohio Sept. 19, 1978).

[3] Munsinger could not have

initiated her action against her employer as an independent tort action.

Her sole recourse existed under Chapter 85 for workers' compensation

benefits. Munsinger's ability to obtain a settlement in her case therefore

arose as a function in the workers' compensation statute. See Iowa Code

Ann. §§ 85.35 (Supp. 1983).