If a work-related injury or illness left you with some type of lasting impairment—a physical or mental problem that limits your ability to work—you may be eligible to receive permanent disability benefits from your employer’s workers’ comp insurer. You can simply accept what the insurance company has decided to pay you, in which case you’ll receive weekly checks for a certain period of time. But if you disagree with the amount of money you’re owed or you want a different payment set-up, you have two options:
There are advantages to settling, but there are potential pitfalls as well. Before you agree to a settlement, you should understand the consequences.
In most states, you can negotiate a settlement that will provide you with a lump-sum of money rather than continuing weekly permanent disability payments. The settlement may also include an amount for future medical care, as well as money the insurer owes you for overdue temporary disability benefits and unreimbursed medical expenses.
You can also negotiate an agreement for a structured settlement that will provide you with payments over a period of time. In these settlements, you don’t need to give up all of your future rights to medical care (in fact, you can’t do that in some states; more on this below).
There are several advantages to workers’ comp settlements, including:
Agreeing to a settlement also carries some potential hazards, such as:
Consider whether each of the following types of benefits should be a part of your settlement.
You don’t have to be completely disabled or unable to work at all in order to receive any permanent disability benefits through workers’ comp. You’ll probably be entitled to permanent partial disability (PPD) benefits if you lost a body part (like a finger or hand) or you’re limited in what you can do at work. For instance, your doctor may have said you shouldn’t lift anything over 25 pounds, walk on uneven surfaces, or sit for longer than two hours at a time. Your limitations could lower the amount you can earn in the future. Even if you aren’t restricted in any way from your injuries, you can ask for compensation for permanent scarring and disfigurement.
Before settlement negotiations begin, the insurance company should send you what’s known as a permanent disability rating. That rating can then be converted into the amount of benefits you’re owed under state law. In California, for example, if you have a 40% permanent disability rating, the insurance company will owe you 280 weeks of PPD payments at two-thirds of your average weekly earnings, with minimum and maximum amounts that change regularly. (Cal. Labor Code §§ 4453, 4658(e) (2021).)
The insurance company may use your rating to come up with a starting settlement amount, but you may want to ask for a moderately higher amount for permanent disability compensation, plus the cost of future medical treatment and any past-due temporary disability benefits.
Some states have different rules for calculating benefits when employees are totally disabled as a result of their injury, or they have a PPD rating above a certain percentage. Often, the employees may receive life pension awards in addition to permanent disability payments.
If you have total permanent disability, you shouldn’t try to handle settlement negotiations on your own. The calculations are complicated, and the consequences are serious when you’re facing a lifetime of needs without income. You need to hire a workers’ comp lawyer to protect your rights and your future.
If the insurance company didn’t pay you the right amount of temporary disability (wage loss) benefits while you were off work and recovering—or just didn’t make some payments—your settlement should include the balance that the company owes you.
Many states require a penalty for late payments (calculated as a percentage of the past-due amount). That penalty can add up to a lot of money, so you should consult with a lawyer if the insurance company paid you too little or too late.
The settlement should include any unpaid bills for past medical treatment. As for future medical costs, there are two different ways of dealing with them in settlements, depending on the law in your state:
If you choose the lump-sum option, you should estimate your future costs for doctors’ visits, hospital stays, physical therapy visits for flare-ups, surgery, and medications. Then consider what the worst-case scenario would be if your medical condition deteriorates. The insurance company won’t pay 100% of your anticipated costs and may in fact try to pay only around 25%. But you can ask for 75% of your estimated future medical expenses. It helps your negotiating position if you can provide a strong opinion from your doctor that you’ll need continued medical care or surgery in the future.
The actual wording of the settlement can be important to protect your right to other types of benefits in the future. This is where the fee for a workers’ comp attorney can really pay off. For example, say you apply for and receive Social Security disability benefits. Those benefits could be lower because of your workers’ comp settlement—if it wasn’t worded in a certain way. (For more information about this, see our article on minimizing the workers’ comp and Social Security disability offset.)
Also, before you sign any settlement agreement, make sure you know the answer to these two questions:
The details of a workers’ comp settlement can be tricky. Unless your permanent disability is rated 10% or less, you should strongly consider speaking to a workers’ comp lawyer about your options for settlement and what a fair amount would be for someone with your medical impairments.
In most states, a workers’ comp judge will have to review your settlement before it becomes official. This will take place at an informal conference. If you’re not represented by a lawyer, the judge may attempt to make sure the settlement is fair to you. But without knowing your medical history, the judge is limited in helping you.
It’s a good idea to consult with an attorney in your area who works with workers’ compensation applicants to find out if the settlement offer is fair. Often an attorney can negotiate a higher settlement with the insurance company than you could do on your own. In that case, you’ll still come out ahead after the attorney’s fee is taken out of your settlement, because workers’ comp lawyers generally charge a percentage of what you receive.