## Facts

- Teodoro Valles was injured on the job and sought workers’ compensation benefits.
- Valles filed a workers’ compensation action against his employer, Daniel Construction Company (Daniel), and Daniel’s workers’ compensation carrier, Aetna Life & Casualty Insurance Company (Aetna).
- At the time, Tennessee law (former T.C.A. § 50-1023) allowed periodic workers’ compensation payments to be commuted to a lump sum if the parties agreed and the court approved.
- Valles and Daniel agreed that Valles’s benefits would be paid in a lump sum.
- Aetna objected to paying benefits in a lump sum and maintained it was not bound by an agreement it did not join.
- The trial court approved and ordered payment of a lump-sum commutation despite Aetna’s objection.
- Aetna appealed.

## Issues

1. Under former T.C.A. § 50-1023, may a trial court approve and order a lump-sum commutation of workers’ compensation benefits when the insurer, a defendant responsible for payment, objects and did not agree to the commutation?

## Decision

- The Tennessee Supreme Court reversed the trial court’s approval of lump-sum commutation to the extent it required Aetna to pay in a lump sum without Aetna’s agreement.
- The court held that, under the statute as it then existed, commutation to a lump sum required agreement of the parties affected by the commutation, including the insurer that would have to fund the award.
- Because Aetna did not agree, the statutory condition for commutation was not met, so the trial court lacked authority to compel a lump-sum payment from Aetna.

## Legal Principles

- Periodic payment of workers’ compensation benefits is the standard method of payment; lump-sum commutation is a limited exception permitted only under statutory conditions.
- Under former T.C.A. § 50-1023 (before the 1979 amendment), a lump-sum commutation required both (1) agreement of the parties and (2) court approval.
- When the employer’s insurer is a defendant in the workers’ compensation action and is responsible for paying compensation, the insurer is among the “parties” whose agreement is required for lump-sum commutation under the former statute.
- Courts should treat lump-sum awards with caution because they depart from the wage-replacement structure of periodic payments and may not serve the worker’s long-term welfare if quickly spent.

## Conclusion

The Tennessee Supreme Court held that, under the pre-1979 version of T.C.A. § 50-1023, a court could not order workers’ compensation benefits commuted to a lump sum based only on an employee-employer agreement when the insurer, a defendant obligated to pay, objected; without the insurer’s consent, the statutory prerequisite of party agreement was missing.


Valles v. Daniel Construction Co., 589 S.W.2d 911 (1979)