At some point during your Colorado workers’ compensation claim, the issue of settlement will arise. A workers’ comp settlement has its benefits: You receive a lump sum payment, you no longer have to deal with the insurance company, and you avoid the uncertainty of a workers’ comp hearing. However, there are also risks involved in settling your claim. It’s important that you understand what rights you are giving up before you sign a settlement agreement.
In Colorado, most workers’ comp settlements are full and final. This means you agree to give up all of your rights in your workers’ compensation case in exchange for a sum of money. Occasionally, an insurance company will agree to a more limited settlement. For example, you might give up your right to further disability benefits, but keep your right to future medical care. However, these limited settlements are relatively rare because insurance companies prefer to close out cases and cut costs.
Most workers receive a lump sum payment when settling their claims. However, in some cases, the insurance company will agree to a structured settlement. In a structured settlement, you receive payments in installments over time. For example, you might receive payments on a monthly or yearly basis. Structured settlements are more common when a worker has a catastrophic injury that leaves them unable to work and needing long-term medical care.
It's possible to receive a lump sum without agreeing to a full and final settlement. In Colorado, if it has been established that the insurance company owes you permanent disability benefits, you can request a lump sum payment. However, you won’t receive the full value of your benefits. Instead, the insurance company pays the “present value” value of your benefits, which means they will be discounted by 4% per year. Colorado also caps the amount you can receive in a lump sum request. As of June 2017, lumps sums are typically capped at $87,470.18.
You also must wait at least six months from your date of injury before filing a Request for Lump Sum (Form WC62) with the Colorado Division of Workers’ Compensation. If you receive a lump sum in this way, you are not closing your claim—you can request additional benefits if your condition substantially worsens, for example.
Settlement values are based on several factors. It's important to understand the total amount of workers’ comp benefits you might receive during your claim—including the value of permanent disability benefits, unpaid medical bills, the cost of future medical treatment, and more. (Read our article on Colorado’s workers’ comp benefits to get an idea of these amounts.) However, you'll also need to consider any weaknesses in your claim—such as conflicting medical reports or a preexisting condition that might have contributed to your disability.
Valuing a workers' comp claim is a complicated matter, and several other factors may impact whether a particular settlement offer is fair. In general, you'll likely need the assistance of an experienced workers’ comp lawyer.
Certain items will be deducted from your settlement check. Depending on the nature of your claim, these costs may include:
To learn more about these deductions, read our article discussing how much of your settlement you will get to keep. It is also important to understand that some of these deductions are mandatory under state and federal laws.
The Colorado Workers’ Compensation Division must review and approve all settlements. If you have a workers’ compensation lawyer, your lawyer will explain the terms and conditions of your settlement and have you sign a Claim Settlement Agreement (Form WC104). Your lawyer will send your signed agreement to the Division for approval. You typically will not attend a settlement hearing.
If you are unrepresented, you must either attend a settlement advisement hearing or certify that you viewed the Division’s online settlement presentation. At a settlement hearing, the judge will explain the implications of a full and final settlement. You will also have an opportunity to ask the judge questions about your settlement. However, the judge cannot give you legal advice.
Once your settlement is approved, you typically cannot cancel or modify a settlement. For this reason, you should never settle a claim unless you are completely comfortable with its terms. It’s always a good idea to run a settlement agreement by a Colorado workers’ comp lawyer before signing.
Workers’ comp settlements are complicated—most workers won’t be able to correctly value their claims, effectively negotiate with the insurance company, and ensure that the settlement meets all the necessary legal requirements. When you hire a lawyer, he or she will guide you through the entire settlement process and make sure that the settlement is in your best interests.
In Colorado, you can settle your workers’ comp claim at any time. However, most workers wait until they reach maximum medical improvement (MMI). You reach MMI once your doctor finds that your condition is stable and you’re not likely to improve further with medical treatment.
Settling before MMI is risky because you won’t know the full extent of your injuries—and therefore the true value of your claim. When you settle, you are typically financially responsible for all of your future medical treatment. These medical costs could be very significant, and your regular health insurance is unlikely to cover them.