Should You Settle Your Workers' Compensation Case?
A workers' compensation settlement may provide a large sum of money up front, but be sure you understand what you may be missing.
If you have a workers’ compensation claim, you may be wondering about settling your case and how much money you might get. Here are the basics on settling a workers’ compensation case.
No More Weekly Benefits
The first thing to know is that, if you settle your workers’ compensation case, you can never again receive any weekly benefits for that injury. Settling a workers’ compensation case closes that part of the case. (To understand what you might be missing, learn more about workers' compensation benefits.)
Medical Payments May Continue
Some states require the insurer to continue medical payment benefits after settlement, but other states allow insurers to terminate medical benefits upon settlement of a workers’ compensation case. You should check with your state’s workers’ compensation agency or a workers’ compensation lawyer in your state to find out whether your state requires medical payment benefits to continue after a settlement.
However, even in a state where medical benefits are supposed to continue after settlement, you should be aware that, if you settle your workers’ compensation case, the insurer will likely be reluctant to continue paying for your medical benefits after it pays out a settlement. You may find that your medical bills don’t get paid quickly or even at all. If this happens, you will need to file a claim with your state’s workers’ compensation agency to force the insurer to pay your medical bills.
The Settlement Must Be Approved by the State Workers’ Compensation Agency
Just because you, your lawyer, and your insurer agree to settle the case does not mean that it will be settled. Most, if not all, states require that you and the insurer submit the proposed settlement to the state workers’ compensation agency for approval.
The agency will hold a hearing, and the workers’ compensation judge or hearings officer will review the proposed settlement with you. Only if the judge or hearing officer is satisfied that you voluntarily agreed to the settlement, that you understand the settlement terms, and that the settlement is in your best interests, will the settlement be approved. It is not unusual for the judge or hearings officer to reject the settlement if he/she believes that the injured employee did not get enough money from the settlement.
How To Determine The Amount of a Workers’ Compensation Settlement
Because workers’ compensation benefits have nothing to do with pain and suffering, calculating the value of a workers’ compensation settlement is based primarily on two things:
- the amount of workers’ compensation benefits that you might be entitled to in the future, and
- the likelihood of actually receiving those benefits
Estimating the Amount of Future Workers’ Compensation Benefits
Your future workers’ compensation benefits are based on the medical evidence in your case and how long your state’s workers’ compensation law allows you to receive those benefits.
As an example, let’s say that you’re on temporary total disability, that all of your doctors, as well as the insurer’s doctor, agree that you will be totally disabled for another two years, and that you will be then fully recovered from your injury, with no permanent impairment.
In that case, you would entitled to another two years of temporary total disability benefits, so it wouldn’t make sense to lump sum settle your case for less than two years of temporary total disability benefits unless you really need the money in a lump sum now. Even then, if you have a lawyer, it might not make much sense to settle the case at all because your attorneys fees will come out of the settlement.
Considering the Likelihood of Receiving Your Benefits
Let’s change the above example a little. Let’s say that the insurer’s doctor thinks that you can return to work now, and you have a hearing coming up next week in which your benefits might be terminated.
Now, your future entitlement to benefits could be anywhere from one week to two more years of weekly compensation. Let’s also say that you and your lawyer agree that the insurer’s doctor’s opinion is stronger than your own doctor’s opinion. In that case, it is more likely than not that you will only get another week of benefits, and so you would want to settle your case before the hearing for an amount that reflects your likelihood of having your benefits terminated at the hearing next week.
What If You Are on Permanent Total Disability?
Estimating the value of a settlement is more complicated if you are on permanent total disability. This is because, if you are on permanent total disability, your weekly benefits might continue for decades. Thus, estimating the settlement value has to take into account the present value of your future entitlement to benefits.
Present value is a financial concept that involves determining the value of a future stream of income (i.e., future weekly workers’ compensation benefits) as if it were all in a bank account today. In other words, how much money does the insurance company need in a bank account today in order to pay you weekly benefits for, say, the next twenty years? This is a complex financial calculation. If you are on permanent total disability and do not have a lawyer, you should not consider settling your case without speaking with a workers’ compensation lawyer.