Worker's Compensation Guidebook for Employees

SETTLEMENT OF YOUR CLAIM

If you have reached this point in the manual, you know that many aspects of a workers’ compensation case can be a huge headache. For this reason, injured employees often reach a point where they want to settle with the insurance company. There are both benefits and detriments to this resolution. The following is a general guide to the issues to consider; however, especially in this area every situation is different. If you have specific questions about your claim, you should discuss them with an attorney. Although you could end up paying for legal services as a percentage of your settlement, you can potentially achieve a much higher amount than you would have had you been negotiating with the employer yourself.

An employee’s claim can be settled whether or not there are any petitions pending before a judge. Most settlements do in fact occur during litigation, because there is a risk to both parties as to the outcome of the case. However, some claims can be settled when there is only a possibility of a petition being filed or if the employee would prefer to have a lump sum of money to use for other employment opportunities. Common examples of this include the use of the money to pay bills while retraining for another career of use of the money to start a business.

There are two main methods for settling a workers’ compensation case: the most popular one today is by a “compromise and release agreement”, the older, less common one is by a “commutation.” Both methods of settlement are discussed below.

A. Compromise and Release Agreements

1. Wage Loss Benefits – In a compromise and release agreement, the employee and employer/insurance carrier agree to pay a lump sum of money at one time instead of weekly wage loss benefits. The dollar amount which is reasonable in such case depends on your average weekly wage and the number of weeks you might have left on partial disability status. Other factors, such as the risk of pending litigation or the earning of other wages, also factor into the analysis of the proper amount.

Often an employee will discuss with a friend or coworker the amount he received as a settlement in his case. It is important to remember, however, that the “value” of your case may be very different, depending on the type of injury, weekly benefit rate and length of disability. Sometimes what appears to be two similar claims can be very different depending on one or two factors. Thus, it is important for you to discuss frankly with your attorney all of the factors which enter into her recommendations for settlement amounts. It cannot be emphasized enough that no question is too unimportant or “stupid”. The calculations can be complicated, and you should not be embarrassed if you do not understand the figures. Simply ask that they be reviewed again until you feel comfortable with how the conclusion was reached.

2. Medical Benefits – There are two ways of resolving the medical benefits portion of your claim in a compromise and release agreement. The least common method is to accept a lump sum payment of wage loss benefits only and leaving your medical claim open. In this case the employer/insurance company would continue to be responsible for payment of reasonable and necessary medical expenses. However, most employers are not willing to settle cases this way anymore. They prefer to offer a separate sum of money for payment of future medical bills so that they can close their file completely on your claim.

There are good and bad elements to this result. On the one hand, if an employee’s condition has resolved to the point where she is receiving very little medical treatment, the amount of money paid by the insurance company could exceed the actual expenses incurred for future medical bills. The employee is also free to submit the work-related medical expenses to any private insurance policy or to Medicare if she is eligible for Social Security benefits. However, as there is no guarantee that the future bills will be covered by any insurance, it is important to know that the bills are ultimately your responsibility regardless of the availability of any other insurance policy. In addition, if there is a likelihood of significant future medical treatment (such as surgery), for the work injury, the claim may not be a good candidate for a lump sum settlement on medical bills. In such a case it is hard to estimate what the total cost of future medical treatment would be and it is therefore hard to put a value on it. In these situations it may be better to wait until the significant medical treatment has passed.

3. Procedure for Compromise and Release – Once the parties have reached an agreement on a settlement amount, the written agreement must be approved by a workers’ compensation judge. This can be done fairly quickly (usually within a few weeks), if there is a petition already pending before a judge. The attorneys send a letter to the judge requesting a hearing on the agreement and a date is set. At the hearing, your attorney will ask you questions to demonstrate that you understand the settlement terms and the legal effect of the agreement. The hearing is usually brief and within a short time (hopefully, a few days), the judge will enter an order approving the settlement. You receive your check within a few weeks after the hearing. Any litigation which was pending at the time is usually resolved by way of the agreement.

If there are no petitions pending as the time of settlement, your attorney will need to file a petition with the Workers’ Compensation Bureau to approve the agreement. The petition will be assigned to a judge, who will then schedule it for a hearing. This process takes a few weeks longer because of the extra steps of filing and assigning the petition. The hearing and approval process are the same, however, as in a case where there is already litigation pending.

B. Commutations

Before the 1996 amendments to the Workers’ Compensation Act, this was the only method of resolving compensation claims. However, with the passage of the provisions relating to compromise and release agreements, the commutation method has all but disappeared. They are now the exception rather than the rule.

There are few significant differences between commutations and compromise and release agreements. The first is that in a commutation the medical claim must stay open. The parties cannot agree to a lump sum payment for future medical expenses by way of commutation. For this reason along, most employers avoid commutations. A second difference is that in a commutation, the approving body is usually the Workers’ Compensation Appeal Board (“WCAB”) and not the workers’ compensation judge. The employee must usually wait until the WCAB is scheduled to appear in her part of the state and have the hearing scheduled at that time. A final difference is that at the commutation hearing before the WCAB, the settlement will only be approved if it is found to be “in the best interests” of the employee. Therefore, the employee is asked questions about the intended purposes of the money and whether it will be put to good use. Many employees resent the intrusion of questions relating to other sources of income and future career plans, but such questions are essential to approval of a commutation. Because of the difficulties inherent in the commutation process and the relative ease of compromise and release agreements, commutations are now rarely used.

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