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M21-1, Part IV, Subpart ii, Chapter 3, Section D – Disability Compensation Under 38 U.S.C. 1151

Overview

In This Section
This section contains the following topics:

1.  General Information on the Prohibition Against Duplication of Benefits

Introduction
This topic contains general information on the prohibition against duplication of benefits, including

Change Date
September 5, 2008

IV.ii.3.D.1.a.  Applicability of Prohibition Against Duplication of Benefits
The prohibition against duplication of benefits applies whenever a claimant receives a sum of money or property to settle a legal claim arising from the injury or death of a Veteran and then files a claim for compensation with the Department of Veterans Affairs (VA) for that same injury or death.
Reference:  For information on the adjudication of death claims involving 38 U.S.C. 1151, see M21-1, Part IV, Subpart iii, 1.B.2.

IV.ii.3.D.1.b.  Considering the Consequences of Civil Action
When a Veteran is injured under circumstances that result in possible entitlement to benefits under 38 U.S.C. 1151, the Veteran may also seek a judgment against the U.S. in a civil action, called a tort claim.  The Veteran may sue and recover damages after
  • a trial, or
  • agreeing to a settlement or compromise.
Note:  When a Veteran agrees to a settlement or compromise, he/she signs away the right to sue in court in return for payment of an agreed-upon amount for damages.

IV.ii.3.D.1.c.  Definition:  Judgment
A judgment includes all of the following:
  • settlement
  • compromise
  • administrative award, and
  • tort award.

IV.ii.3.D.1.d.  Considering Different Types of Judgments
It makes no difference
  • what the judgment is called, or
  • whether the judgment compensates for economic loss, such as the loss of income, or non-economic loss, such as pain and suffering.
Note:  Attorney’s fees, contracts, and other expenses incident to the claim are not deductible from the total amount awarded per VAOGCPREC 7-1994.

IV.ii.3.D.1.e.  Who Resolves Tort Claims
A tort claim against the government is resolved by the
  • General Counsel
  • U.S. Attorney General, or
  • Regional Counsel.
Note:  The circumstances of the individual case determine who is responsible for resolving the tort claim.

IV.ii.3.D.1.f.  Notice of Favorable Resolutions
In any case that is resolved in favor of the Veteran, the Regional Counsel is responsible for providing the results of the tort claim to the Veterans Service Center Manager (VSCM) of the regional office (RO) having jurisdiction of the claims folder.

2.  Award Actions Involving the Prohibition Against Duplication of Benefits

 

Introduction
This topic contains general information on handling award actions involving the prohibition against duplication of benefits, including

Change Date
May 19, 2015

IV.ii.3.D.2.a.  Deferring the Award Action
Disability compensation awards under 38 U.S.C. 1151 are subject to offset effective the first of the month after the month during which the judgment becomes final.  Because of this
  • defer a compensation award if there is reason to believe a tort claim for damages may have been finalized, but
  • do not defer a compensation award just because a tort claim has been filed, unless there is reason to believe it has been finalized.

IV.ii.3.D.2.b.  Effect of Prohibition on Pension Beneficiaries
No offset is required if a tort claim is concluded in favor of a Veteran who is
  • in receipt of pension, or
  • eligible for compensation under 38 U.S.C. 1151, but elects to continue to receive pension in lieu of compensation.
However, the net proceeds of the settlement or judgment are considered countable income for pension purposes under 38 CFR 3.262(i) and 38 CFR 3.271(g).
Note:  Do not adjust a pension award to count the proceeds of a settlement or judgment without a notice of proposed adverse action unless the Veteran
  • is the source of the information, and
  • understands that the judgment will affect the amount of pension payable.

IV.ii.3.D.2.c.  Tort Claims Concluded Before December 1, 1962
An administrative award or settlement that became final before December 1, 1962, is a bar to all further payments of compensation under 38 U.S.C. 1151.
A court judgment that became final before December 1, 1962, is not
  • a bar to payment of compensation under 38 U.S.C. 1151, or
  • subject to offset, unless a bar or offset is provided for by the terms of the judgment under 38 CFR 3.362.
Important:  When a case is encountered in which payments were continued despite an administrative award or settlement that became final before December 1, 1962, stop or reduce the award on the first of the month following the month for which VA last paid the beneficiary under 38 CFR 3.500(b)(2).
Note:  For claims received before October 1, 1997, the offset of benefits under 38 U.S.C. 1151 was governed by 38 CFR 3.800.

IV.ii.3.D.2.d.  Who Has Responsibility for Determining Distribution of Monies to Other Beneficiaries
If a judgment is made to, or for, two or more persons (either in individual capacities or as a personal representative(s) of the estate) and involves a claimant subject to offset, the individual distribution of the monies must be determined.
Use the information in the table below to determine who has the responsibility to determine the distribution of monies to other beneficiaries.
If the claims folder is in the …
Then the …
RO when the question of distribution arises
VSCM asks Regional Counsel to determine the individual distribution of the
  • judgment award
  • settlement, or
  • compromise payment.
jurisdiction of VA Central Office when the question of distribution arises
Office of General Counsel determines the distribution.

3.  Determining Offset Effective Dates and Amounts

 

Introduction
This topic contains information on determining offset effective dates and amounts, including

Change Date
May 19, 2015

IV.ii.3.D.3.a.  Principles for Determining the Offset Amount Under 38 U.S.C. 1151
The amount of offset must not deprive a Veteran of any part of the compensation payable to him/her if a claim under 38 U.S.C. 1151 had not been filed.
Do not offset any amount if the disability compensable under 38 U.S.C. 1151 does not increase the total amount of compensation.
The offset provisions are applicable if compensation for a particular disability is payable solely under 38 U.S.C. 1151.  If compensation is otherwise payable for that particular disability, regardless of previous evaluation, then no offset is required.
Reference:  For an example of a situation in which an offset is not required, seeM21-1, Part IV, Subpart ii, 3.D.3.i.

IV.ii.3.D.3.b.  Effect of State Laws on Offset Decisions
Under Federal Tort Claims Act (FTCA), liability is determined by the law of the state where the negligence or wrongful act or omission occurred.
Damages recovered under a state survival statute are subject to claims of the decedent’s creditors; therefore, the amounts recovered are not subject to Dependency and Indemnity Compensation (DIC) offset under 38 U.S.C. 1151.  This includes cases in which the personal representative is the surviving spouse.
Damages recovered under a wrongful death statute are survivors’ benefits and are not subject to estate claims; therefore, amounts recovered may be offset against DIC.  This includes cases in which a wrongful death claim is filed by a personal representative for the survivors.
Reference:  For more information on determining an offset amount, seeVAOPGCPREC 79-1990.

IV.ii.3.D.3.c. Damages Recovered under the FTCA
The full amount of damages recovered by an individual under the FTCA is subject to offset against benefits payable to that individual under section 38 U.S.C. 1151, regardless of whether those damages compensate for economic or noneconomic loss.
Reference:  For more information on determining an offset amount, see VAOPGCPREC 52-1991.

IV.ii.3.D.3.d.  Determining the Offset Amount Under 38 U.S.C. 1151  
If an increase in the evaluation of a service-connected (SC) disability is awarded, such that the existence of the disability compensable under 38 U.S.C. 1151 no longer increases the total amount of compensation payable, then
  • determine the total compensation payable for all disabilities (SC and those compensable under 38 U.S.C. 1151)
  • determine the total compensation payable for SC disabilities only
  • withhold the difference between the two totals, and
  • discontinue the previously established offset.

IV.ii.3.D.3.e.  Determining the Final Date of a Judgment
The effective date of the offset is the first of the month after the month during which the judgment becomes final when a withholding is required.
Use the information in the table below to determine when various judgments are considered final.
If the judgment is …
Then the …
a VA administrative award
judgment is considered final on the date of approval.
an Attorney General agreement
settlement or compromise entered into by the Attorney General after a suit has been filed is considered final when the agreement is approved by the court, even though a final order of dismissal may not be entered until a later date.
Note:  If, after reviewing the evidence of record, there is any question as to the date the judgment became final, request clarification from Regional Counsel.

IV.ii.3.D.3.f.  Handling Retroactive Adjustments
Do not offset compensation for any period before the month following the date on which the settlement or judgment becomes final.
Note:  If an accounts receivable amount is declared invalid or waived, do not apply the invalid or waived portion of the debt to reduce the amount required to be offset from future VA benefits.
Reference:  For more information, see VAOPGCPREC 1-2010.

IV.ii.3.D.3.g.  Example:  Retroactive Adjustment
Situation:  A judgment is final on June 15, 2014.  The rating activity later awards entitlement to compensation effective March 16, 2014.
Action:  Do not offset any portion of the Veteran’s compensation benefits prior to July 1, 2014, the month following the date the judgment became final.

IV.ii.3.D.3.h.  Example:  Unchanged Combined Evaluation
Situation:  A Veteran has two SC disabilities, each evaluated as 60-percent disabling, and disability compensable under 38 U.S.C. 1151 that is evaluated as 30-percent disabling.  The combined evaluation of all disabilities is 90 percent.  The combined evaluation of the SC disabilities alone is 80 percent.
Result:  VA offsets the difference between the rate payable for disabilities rated 90-percent disabling and the rate payable for disabilities rated 80-percent disabling.
Effect on offset:  If one of the SC disabilities increases from a 60-percent to 70-percent evaluation, then the combined evaluation for the SC disabilities alone is increased to 90 percent, even though the combined evaluation for all the disabilities still remains 90 percent.  In this situation, discontinue the offset.
Note:  If the situation were reversed so that the 70-percent evaluation was reduced to 60 percent, the offset would recommence.

IV.ii.3.D.3.i.  Example 1: Situation in Which an Offset Is Not Required
Situation:  A Veteran
  • is rated 10-percent disabled because of an SC foot disability, and
  • enters a VA medical center for treatment of the disability.
The evaluation is increased to 30 percent due to an aggravation of the injury as a result of the medical or surgical treatment.  The Veteran successfully sues the hospital and recovers damages.
Result:  No offset is required because the foot disability is SC without regard to 38 U.S.C. 1151.

IV.ii.3.D.3.j.  Example 2:  Situation in Which an Offset Is Not Required
Situation:  A Veteran
  • is SC for a severe pulmonary condition, which requires the administration of significant doses of steroids
  • later develops cataracts and claims that the cataracts are due to the steroid treatments, and
  • files a compensation claim under 38 U.S.C. 1151.
Result:  The rating activity should consider whether the cataracts are proximately due to, or the result of, an SC disability.  If the rating activity does award service connection for cataracts under 38 CFR 3.310, no offset is required.

4.  Preparation of Awards

 

Introduction
This topic contains information on the preparation of awards, including

Change Date
May 19, 2015

IV.ii.3.D.4.a.  Location of Instructions for the Preparation of Awards
The instructions in M21-1, Part III, Subpart v, 4.B concerning the preparation of awards involving readjustment and disability severance pay, generally apply to the preparation of awards under 38 U.S.C. 1151.
The provisions in this topic apply specifically to the preparation of awards under 38 U.S.C. 1151.

IV.ii.3.D.4.b.  Instructions for the Preparation of Awards Under 38 U.S.C. 1151 With an Offset
Follow the steps in the table below concerning the preparation of awards under 38 U.S.C. 1151 with an offset.
Step
Action
1
On the RECORD DECISIONS page in the AWARD ADJUSTMENTS screen, click the DISABILITY PAY tab.
2
Click the ADD button.
2
Select Tort in the PAYMENT TYPE field.
3
Enter the amount that will be recouped in the ORIGINAL BALANCE field.
4
In the AWARD EFFECTIVE DATE field, enter date the adjustments begin.
5
When finished, click ACCEPT to save the entry to the decision grid.
6
  • For awards processed in the Veterans Service Network (VETSNET) Awards, select OK to save the decision and close the screen.
  • For awards processed in the Veterans Benefits Management System-Awards (VBMS-A), click the DONE button when finished.
References:  For more information on processing awards under 38 U.S.C. 1151 in

IV.ii.3.D.4.c.  Entitlement to Ancillary Benefits if Compensation Is Awarded for a Disability Under 38 U.S.C. 1151
If compensation is awarded for a disability under 38 U.S.C. 1151, the Veteran, if otherwise eligible, may receive
There is no entitlement to the following ancillary benefits unless the Veteran is entitled based on disabilities for which compensation is payable without regard to the provisions of 38 U.S.C. 1151:

5.  Providing Notice of Awards

Introduction
This topic contains information on providing notice of awards, including

Change Date
March 1, 2019

IV.ii.3.D.5.a.  Preparing a Locally-Generated Letter for Claims Filed Under 38 U.S.C. 1151
When required, prepare a locally-generated letter, referring to the benefit as “compensation under 38 U.S.C. 1151” and not “service connection.”
When using a locally-generated letter to inform a claimant of the formal denial of a claim filed under 38 U.S.C. 1151, include all required notification elements as detailed in M21-1, Part III, Subpart v, 2.B.1.b.
Important:  Do not refer to entitlement under 38 U.S.C. 1151 as “service connection.”
References:  For more information on

IV.ii.3.D.5.b.  Providing Notice of an Offset Requirement
Use the information below to provide the notice of an offset and the related requirements.
If the award …
Then …
includes an offset
include the offset information in the locally-generated letter to the Veteran.
Example:  Our records indicate that you received payment resulting from a Tort action. As a result, we will withhold all or part of your VA benefits until the Tort payment is offset. After this amount is paid back, you will start receiving your full VA compensation.  (38 CFR 3.362)
does not include an offset
inform the Veteran that VA must be notified of any court judgment or tort award resulting from this disability or injury.
Note:  Include this information whether or not there is any indication that a tort claim has or will be filed.
is a zero-rate award, meaning that a total offset is in effect until an amount equal to the judgment has been recouped
advise the Veteran to keep VA informed of any changes of address.
Historical_M21-1MRIV_ii_3_SecD_3-24-15.doc May 21, 2019 131 KB
Change-March-24-2015-Transmittal-Sheet-M21-1MRIV_ii_3_SecD_TS.docx May 21, 2019 39 KB
Change-May-19-2015-Transmittal-Sheet-M21-1IV_ii_3_SecD.docx May 21, 2019 42 KB
3-1-19_Key-Changes_M21-1IV_ii_3_SecD.docx May 21, 2019 52 KB
Historical_M21-1IV_ii_3_SecD_5-19-15.doc May 21, 2019 145 KB
Transmittal-Sheet-12_13_05.doc May 21, 2019 62 KB
Transmittal-Sheet-pt04_sp02_TS_10-05-10.doc May 21, 2019 92 KB
in Chapter 3 Authorization Issues and Claimant Notification, Part IV Compensation, DIC, and Death Compensation Benefits, Subpart ii Compensation
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