If an insurer is offering a lump sum settlement for your workers' compensation claim, you need to think carefully about whether or not it is the right decision for your case. Below are the steps you should take before deciding to accept a lump sum.
Consider the reasons for settling. Does settling make sense?
Insurers would like to settle your claim via a lump sum. Do you wonder why? Because it takes an unknown - how long and how much they will have to pay you - and turns it into a known. They will also pay less in the settlement than they would over the long term. Because when you settle, it will be for an amount less than the maximum amount they could have to pay you. Settling brings closure for both you and the insurer.
In order for the settlement to make sense, you need to have a realistic idea of your condition and your situation - will you get better? Will you be able to get back to work? Just as important, do you feel you are getting a fair shake from the system? Is workers' comp somehow holding you back? What is the current status of your case? If your case is currently in dispute, settling may be a very good idea, as this way you have some control over the result.
Calculate the value of your current claim.
$1In order to arrive at a reasonable settlement amount, you need to fairly asses the value of your claim. "Value" in this case refers to the actual amount the insurer is likely to pay you over the life of the claim. This is their exposure. Section 34 and 35 claims are of limited duration, so it is relatively easy to determine the value.
Take the number of weeks left on your claim, and multiply it by your weekly benefit. For example, if you are on s. 34 (total) benefits, and your weekly check is for $500, and you've already been on benefits for a year, you've got 2 years - 104 weeks - of s. 34 benefits left. 104 x 500 = $52,000. This is the total amount the insurer will have to pay you under s.34.
Calculate the extended value of your claim.
Once your current benefits run out, you may still be eligible for further benefits. Continuing with the above example, if you've been on s. 34 (total), you may still receive 5 years of s. 35 (partial) benefits once the s. 34 benefits run out. Partial benefits will never be more than 75% of your s. 34 benefit.
Since s. 35 benefits last for 5 years, lets add this to the claim as follows: 75% of $500 = $375 * 260 weeks (5 years) = $97,500. Now add this to the earlier amount, and your extended value is $149,500.
Consider the likelihood that benefits will continue.
You are only entitled to benefits so long as you are unable to work. Insurers can be quite diligent in their efforts to ensure that you are truly disabled, and not malingering. They will hire private investigators to watch you. They will require that you see their physicians every six months. If they believe that you are ready to get back to work, they will move to discontinue benefits.
You need to make a realistic assessment of your physical condition. Do you feel ready to go back to work? If you feel that you're getting close, settlement may make sense. Once you go back to work, the benefits will stop, even if there is still time left on the clock.
Consider the possibility that your condition will get worse.
If your condition gets worse or you become permanently disabled, then settling your claim while on temporary benefits may be a bad idea. Workers who become totally and permanently disabled due to the workplace injury are entitled to s. 34A benefits, which equal 2/3ds of your average weekly wage, do not expire, and will eventually be eligible for cost of living adjustments.
If you are a candidate for s. 34A, the insurance company would LOVE to settle your claim before 34A benefits are ordered. S. 34A benefits will significantly increase the insurer's exposure. If you are a strong candidate for s. 34A, you should wait to settle your claim.
Understand what settling means.
Settling the claim means that the weekly checks will stop and be replaced by a single, lump sum amount. You will be forever foreclosed (that is, not allowed) to receive a weekly check for this particular injury and this particular workplace event. If the insurance company has been paying for your medical treatment, this will be unaffected by settling. So please understand that settling will in no way affect your medical treatment.
Establish a reasonable settlement amount.
A reasonable settlement amount is an amount that both you and the insurer can agree to, that is not unfair to either side. In the example above, we arrived at a value (or risk) of $149,500. You need to know this amount in order to establish a reasonable settlement amount. The insurer certainly knows this. If the insurer offers you $50,000 to settle your claim, is that reasonable?
This sounds like a lot of money, but it really isn't. You need to live on this. What is "reasonable" will also be determined by your current condition, and whether or not you are getting better. A reasonable settlement, then, requires that you know the insurer's exposure, your condition, and your prognosis. Depending on these factors, the settlement amount could be as much as 80% of the value of the claim.
Consider the costs of settling.
When you settle, the workers' comp. statute allows your attorney to take 20% off the top. This is one of the very few times that the cost of your representation comes out of your pocket. Outstanding costs accrued for pending litigation (or lost litigation) will also be deducted at this time.
Let's assume that we've worked together on the above scenario, and have reached a settlement amount, after considering all of the factors discussed above, of $75,000. Your attorney will be entitled to take 20% of this, or $15,000, as a fee. This will leave you with $60,000. Deducted from this will also be any unpaid costs for your representation, such as filing fees or the costs for independent medical analyses. I have seen these costs amount to several thousand dollars.
We've settled the case, what happens next?
Once we've agreed with a settlement amount, we will go before the DIA to for approval. Depending on the circumstances, we may go before the same judge you've seen before, a conciliator, or another judge. Your attorney will tell your story and explain why the lump sum is in your best interest. The insurer's attorney will be asked if he wants to add anything. The judge will then look over the paperwork, and will ask you a few questions. The judge wears a different hat here than you have seen in the past.
Here, the judge acts as your advocate, to make sure that this settlement really is in your best interest. He will address you directly, ask you if you understand and agree with the settlement. He will explain what rights your are giving up, and what rights you are not giving up. Once he is satisfied, he will approve the settlement. When the settlement is approved, your weekly checks will stop. The insurer will have 14 days to get your settlement check to you.