Negotiating a Workers’ Compensation Settlement

What You Need to Know About Negotiating a Workers’ Compensation Settlement

Negotiating is an important aspect of managing a workers’ compensation settlement, as an individual may not receive a large enough settlement from the first offer. Here’s everything you need to know about negotiating a workers’ compensation settlement.

Every state has laws that require employers of a certain size to provide employees with workers’ compensation benefits. Whether someone is subject to workers’ compensation laws or chooses to voluntarily maintain coverage, they should be aware of what benefits are payable, the proper steps to take when a workplace accident occurs, and how to best negotiate a workers’ compensation settlement.

Workers’ Compensation Laws

Governed by state law, workers’ compensation laws are in place in every state to protect employees against loss of income and for medical payments because of work-related injuries, accidents, illness, or disease. In the vast majority of states, workers’ compensation coverage is mandatory, but even if coverage is not mandatory for an employer, voluntarily participating in the state’s program is usually the wisest course of action.

Here are some common elements shared by the state workers’ compensation laws when it comes to benefits:

Benefits are provided for an accidental job-related injury. An employee is entitled to benefits when the individual suffers a “personal injury by accident arising out of and in the course of employment.”
Benefits include wage loss, medical, and death benefits.
Covered “employees” are defined by law and do not include independent contractors.
Neither the employee’s own negligence in causing the accident nor an employer’s lack of fault is a factor in deciding whether the worker gets benefits.
In exchange for the assured benefits, employees give up their right to sue the employer for any injury covered by workers’ compensation laws.
Employees retain the right to sue negligent third parties.
The system is administered by a state agency.

Keep in mind that workers’ compensation benefits are payable only for work-related injuries. Benefits are not available for self-inflicted injuries or for those caused by intoxication or substance abuse. Payable benefits include:

Income replacement for partial or total disability of a temporary or permanent nature
Medical and rehabilitation costs
Survivor benefits in the case of a fatal illness or injury

Steps in Workers’ Compensation Settlement Negotiations

While the exact steps involved in a workers’ compensation settlement negotiation may vary based on the situation, state, and parties involved, an employee can expect to generally:

Have their workers’ compensation lawyer send a demand letter to the insurance company with the amount that they seek for settlement, including access to relevant documentation if necessary
Receive a counteroffer. The insurance company may make a counteroffer or accept the settlement amount.
Continue reviewing the counteroffer until an acceptable amount for both parties is reached.
Spend a few days or weeks in the negotiating process until the process is complete.
Submit the agreed-upon settlement terms to the state’s governing authority for workers’ compensation settlements for final approval.

Each case is different. This list highlights just some of the steps one can expect to see during the negotiating process. If an employee has any questions about how their case will proceed and how long it will take to complete the negotiating process, it is a good idea to discuss this with a workers’ compensation lawyer.

When to Settle a Workers’ Compensation Case

Whether or not an employee should accept a settlement offer will depend on several factors, including the amount of money being offered, the severity of their injury and resulting in permanent limitations, the strength of their medical evidence, their financial situation, and their willingness to wait it out longer.

Before considering a settlement offer, an employee should at least wait until their medical condition has stabilized (a stage called “maximum medical improvement” or “permanent and stationary”). Until then, they won’t know how much their case is worth. Once a physician says that they will not improve any further, the doctor will decide whether and to what extent the injury has caused permanent limitations that would result in a permanent disability award.

Types of Settlements

There are two main ways to settle a workers’ compensation case: a “compromise and release” or “stipulated findings and award.”

Compromise and Release

With a compromise and release, an employee agrees to close out their workers’ compensation case in exchange for a lump-sum payment. This means workers’ compensation will not pay for any future medical care related to the injury.

A compromise and release is final. As long as an individual signed the agreement voluntarily, workers’ compensation judges usually will not let them take it back—even if they end up needing more money later. So before agreeing to this type of settlement, make sure that a condition is stable and that either:

No further treatment will be needed or
The lump sum payment will cover the cost of future medical bills

Stipulated Findings and Award

If an employee settles their case with a stipulated findings and award, the individual and the insurance company will agree on the extent of the permanent disability and the amount of benefits. The employee will receive biweekly payments rather than a lump sum.

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If you or a loved one would like to learn more about Negotiating Workers Compensation Settlement, get your free consultation with one of our Employment Attorneys today!