Before you settle your New Jersey workers' comp claim, you should carefully weigh your options. While many workers prefer a lump sum payment to the hassle of a workers' comp claim or appeal, a settlement is not always in your best interests. It depends on what you're getting and what you're being asked to give up.
When you settle your workers' comp claim, you give up certain benefits in exchange for an agreed-upon sum of money. Settlements can be paid in a lump sum or in installments on a monthly, annual, or other basis. There are two types of New Jersey workers' comp settlements: Section 20 settlements and Section 22 settlements.
If the insurance company denied your workers' comp claim, or disputes some part of your claim, you can agree to a Section 20 settlement. This is a full and final settlement in exchange for a lump sum. You will be giving up your right to all workers' comp benefits relating to your claim, including future medical care. You cannot reopen your claim and demand additional benefits, even if your condition worsens. Section 20 settlements are not available if the insurance company has accepted your claim.
Unlike a Section 20 settlement, any workers' comp claim can be resolved with a Section 22 settlement, including accepted claims. In a Section 22 settlement, you and the insurance company agree on a specific permanent disability rating. The insurance company then agrees to pay your permanent disability benefits in installments based on New Jersey's schedule of benefits. (For more information, see our article about the types and amounts of New Jersey workers' comp benefits.)
When you agree to a Section 22 settlement, you do not give up your right to future medical care. And, if your condition worsens, you can reopen your workers' comp claim and ask for additional disability benefits. However, you only have two years from the last payment due under the settlement to reopen the claim.
Unlike some states, you can settle a New Jersey workers' comp claim at any time. However, many workers wait until they reach maximum medical improvement (MMI). You are at MMI when your doctor believes your condition is stable and will no longer improve with treatment. Settling before you reach MMI is very risky. If you settle before your condition is stable, you might lose out on valuable benefits—such as the cost of an expensive surgery or permanent disability benefits.
Calculating the value of a New Jersey workers' comp claim is a complicated and detailed process. Whether a settlement amount is fair depends on a series of factors, including the severity of your injury, your need for ongoing medical care, your pre-injury wages, your ability to return to work, and any conflicting evidence in your claim (for example, that your injury isn't work-related). If you don't already have one, you should seriously consider consulting with a New Jersey workers' comp lawyer before accepting a settlement offer. Without the help of a lawyer, many workers undervalue their claims and accept inadequate settlements.
You won't have to pay income taxes on your workers' comp settlement. However, other items might be deducted from your settlement check, including:
To learn more about these deductions, read our article discussing how much of your settlement you will get to keep.
Your settlement isn't final until the New Jersey Division of Workers' Compensation reviews it and determines it is in your best interests. For both Section 20 and Section 22 settlements, you will complete a series of forms that explain the terms and conditions of the settlement. If you are entering a Section 20 settlement, you also must attend a settlement hearing. At this hearing, a workers' comp judge will review your settlement, ask you questions, and make sure you understand that you are entering a full and final settlement.
Practically speaking, the division approves most workers' comp settlements—especially if you have a lawyer. If you are unrepresented the judge will scrutinize your settlement more carefully to ensure it is in your best interests.