Workers Compensation

Workers' Compensation Settlements: What to Know

Learn what your workers' comp settlement should include and how to decide whether you should agree to a settlement.

If a job-related injury or illness has rendered your ability to work difficult or impossible, you may qualify for permanent disability benefits provided by your employer’s workers’ compensation insurer. Workers’ compensation operates as a no-fault system, allowing you to receive benefits even if the injury or illness was not your employer’s fault.

If a job-related injury or illness has rendered your ability to work difficult or impossible, you may qualify for permanent disability benefits provided by your employer’s workers’ compensation insurer. Workers’ compensation operates as a no-fault system, allowing you to receive benefits even if the injury or illness was not your employer’s fault.

If the workers’ compensation insurer presents you with a settlement offer for your injuries, you have a few choices:

  • You can accept the predetermined payment decided by the insurance company, typically resulting in receiving regular payments over a specified period.
  • Alternatively, you can attempt to negotiate a more generous settlement, either independently or with the assistance of an attorney.
  • You also have the option to request a hearing or trial where a judge will make a ruling on the dispute.

Before agreeing to a workers’ compensation settlement, it’s essential to have a clear understanding of how these settlements function, what they encompass, and their payment structure.

Workers' Comp Settlement Types

In many states, it’s possible to arrange a settlement where you receive a one-time lump sum of money instead of ongoing weekly permanent disability payments. This settlement can also cover future medical expenses, outstanding temporary disability benefits owed by the insurer, and medical costs that haven’t been reimbursed.

Alternatively, you can negotiate a structured settlement agreement that disburses payments gradually over a specified duration. The advantage of structured settlements is that you typically don’t have to forfeit all your future entitlements to medical care.

Benefits of Accepting a Workers' Comp Settlement

Here are the reasons why many individuals choose to accept workers’ compensation settlements instead of pursuing a workers’ comp hearing before a judge, expressed in bullet points:

  • The judge’s decision could potentially award you less money than what the insurance company initially offered, although this outcome is relatively uncommon. Given this uncertainty, many opt for the guaranteed payment instead of taking the risk.

Additional reasons for accepting workers’ comp settlements include:

  • Avoiding potentially lengthy delays, as it may take several months for your hearing to be scheduled. Settling can save you time, reduce hassle, and alleviate stress.
  • Certain states prohibit you from receiving a lump-sum payment if you prevail in your trial or hearing, limiting you to weekly payments over a designated period.
  • In a settlement, the insurance company may propose compensation in exchange for relinquishing your entitlement to future benefits that you may never utilize. For instance, if your doctor suggests a 20% chance of needing hand surgery in the future, you can negotiate for the insurance company to provide partial funding for the surgery now. This can result in financial gain if you ultimately do not require the surgery.

Disadvantages of Accepting a Workers' Comp Settlement

Entering into a settlement agreement has its own set of potential downsides. For instance, lump-sum settlements can be easily depleted if not handled with caution. Opting for a structured payment plan on a weekly basis could be a more suitable choice for individuals who are not skilled at managing their finances.

Moreover, relinquishing your entitlement to future medical treatment within a settlement can pose risks, particularly if there is a likelihood of requiring surgery or expensive medication in the future.

What Should Your Workers' Comp Settlement Include?

Reflect on whether each of the subsequent categories of benefits should be incorporated into your settlement.

Permanent Partial Disability Benefits

You don’t need to be entirely incapable of working to qualify for permanent disability benefits under workers’ compensation. If your injury permanently restricts your ability to work, you are likely eligible for permanent partial disability (PPD) benefits. For instance, if you experienced the loss of a finger or hand in a workplace incident, you would probably meet the criteria for PPD benefits. Furthermore, even if your injuries do not impose any work limitations, you have the option to request compensation for permanent scarring and disfigurement.

Permanent Total Disability Benefits

Certain states employ distinct regulations for determining benefits in cases where employees are completely disabled due to their injury or possess a Permanent Partial Disability (PPD) rating surpassing a specified percentage. In such instances, employees might be eligible for life pension awards in addition to their permanent disability payments.

If you find yourself dealing with total permanent disability, it is unwise to attempt settlement negotiations independently. The calculations involved are intricate, and the ramifications are significant, particularly when you are confronted with a lifetime of necessities without a source of income. In such cases, it is imperative to enlist the services of a workers’ compensation attorney to safeguard your rights and secure your future.

Permanent Disability Ratings

Prior to commencing settlement negotiations, the insurance company should provide you with a document known as a permanent disability rating. This rating can then be translated into the specific benefits owed to you in accordance with state law. For instance, in California, if you receive a 40% permanent disability rating, the insurance company would be obligated to pay you 280 weeks of Permanent Partial Disability (PPD) benefits at two-thirds of your average weekly earnings. It’s worth noting that the minimum and maximum benefit amounts may change periodically.

While the insurance company might use your rating as a basis for determining an initial settlement figure, you have the option to request a slightly higher amount for permanent disability compensation, along with the inclusion of future medical treatment costs and any outstanding temporary disability benefits.

Past-Due Temporary Disability

If the insurance company failed to provide you with the correct amount of temporary disability (wage loss) benefits during your period of recovery or neglected to make some of the required payments, your settlement should encompass the outstanding balance owed by the company.

Numerous states impose penalties for delayed payments, often calculated as a percentage of the overdue sum. These penalties can accumulate significantly, so it is advisable to seek legal counsel if the insurance company disbursed inadequate payments or payments that were delayed.

Medical Treatment

The settlement should encompass any outstanding bills for past medical treatment. Regarding future medical expenses, there are two distinct approaches:

  • One option involves reaching an agreement with the insurer on a disability payment amount while retaining your entitlement to have the insurance company cover your future medical care expenses.
  • The other choice entails settling for a lump-sum payment designated for future medical treatment, in exchange for forfeiting your right to have the insurer cover those expenses when they arise. It’s worth noting that some states do not permit employees to legally waive this right. In such states, employees can always return to the insurance company to seek reimbursement for any medical treatment related to the work-related injury or illness.

Settlement Structure

The language used in the settlement agreement can hold significance in safeguarding your entitlement to various benefits in the future, including Social Security disability benefits. In specific scenarios, the wording of your workers’ compensation settlement can impact the potential reduction of these benefits. If you find yourself in such a situation, it is highly advisable to enlist the services of a workers’ compensation attorney to navigate this potentially complex issue.

Additionally, before you affix your signature to any settlement agreement, ensure that you have clarity on the following two questions:

  • Will the settlement result in the complete closure of your workers’ compensation claim, or will it remain open (or have the potential to be reopened) for the purpose of covering future medical expenses?
  • Does the settlement amount solely encompass new funds, or does it also encompass advances for permanent disability that you’ve already received?

Judge's Review of the Workers' Comp Settlement

In the majority of states, a workers’ compensation judge is typically required to review your settlement before it is officially approved. This review typically occurs during an informal conference. If you do not have legal representation, the judge may take steps to ensure that the settlement is equitable and in your best interests.

Consult a Workers' Comp Lawyer for Settlement Advice

Navigating the negotiation and structuring of a workers’ compensation settlement can be a complex endeavor. Unless your permanent disability rating is assessed at 10% or lower, it is highly advisable to seek counsel from a workers’ compensation attorney. They can guide you through your settlement options and help determine a fair compensation amount considering your specific medical impairments.

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