Getting a Fair Amount From Your Workers' Comp Settlement

Don’t sign a workers’ comp settlement agreement without researching the law or hiring a lawyer, because it can’t be undone.

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:

  • negotiate a settlement with the insurance company, or
  • go to a hearing or trial and have a judge rule on the dispute.

There are advantages to settling, but there are potential pitfalls as well. Before you agree to a settlement, you should understand the consequences.

Types of Workers’ Comp Settlements

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).

Pros of Accepting a Settlement

There are several advantages to workers’ comp settlements, including:

  • If you go to trial (called a workers’ comp hearing in some states), the judge could end up deciding that you’ll get less money than what the insurance company offered. It doesn’t happen often, but it’s a risk.
  • It can take a long time to get to a hearing, and the process can be difficult. Agreeing to a settlement can save you time, hassle, and anxiety.
  • In some states, you can’t receive a lump-sum payment after you win at trial; you’ll be limited to receiving weekly payments for a number of weeks or years.
  • In a settlement, the insurance company may agree to pay you money in exchange for giving up your right to future benefits that you might never use. For example, if your doctor says that there’s a 15% chance you’ll need hand surgery in the future, you can ask the insurance company to pay you part of the cost of the surgery now. You probably won’t need the surgery, in which case you’ll be ahead financially.

Cons of Accepting a Settlement

Agreeing to a settlement also carries some potential hazards, such as:

  • Some people who’ve agreed to a lump-sum permanent disability payment will need or be tempted to spend the money right away. Then they’ll be left without weekly payments to help make up for lower wages because of the ongoing disability.
  • If there’s a good chance that you’ll need surgery or expensive medicines down the road, it could be risky to give up your right to payments for future medical treatment in return for a lump-sum (more on that below). If it turns out that you do need that medical treatment, the amount you received in the settlement may be long gone or simply not enough to cover your bills for copays and deductibles under your regular health insurance.
  • If you aren’t careful, the settlement could reduce other types of benefits in the future (more on that later).

Amounts to Settle

Consider whether each of the following types of benefits should be a part of your settlement.

Permanent Partial Disability

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) (2018).)

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.

Permanent Total Disability

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.

Past-Due Temporary Disability

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.

Medical Treatment

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:

  • You may be able to settle your right to disability payments but keep your right to have the insurance company pay for your future medical treatment.
  • You might instead settle on a lump-sum payment now for future medical treatment, in return for giving up your right to have the insurer pay those bills when they come up. In some states, however, employees can’t legally waive that right; they can always go back to the insurance company to get reimbursed for any medical treatment for the work-related injury or illness.

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.

Structuring the Settlement

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:

  • Will your workers’ comp claim be completely closed following the settlement, or will it stay open (or can it be reopened) to pay for future medical costs?
  • Does the settlement amount represent all new money, or does it include permanent disability advances that you’ve already received?

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.

Judge’s Review of the Settlement

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 better 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.

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