Many of the injured workers we meet with always ask how, when, and if they can settle their workers’ compensation case. Settlement of a workers’ compensation claim is much different than that of a personal injury case. The term used for workers’ comp settlements is “Lump Sum Settlement” or “Lump Sum Agreement” as used in the statute that governs these settlements (M.G.L. c. 152 § 48).
What is a Lump Sum Settlement?
Essentially, a lump sum settlement is an agreement between the injured worker and the workers’ compensation insurance company to redeem any liability for compensation, in whole or in part, by the payment by the insurer of a lump sum amount. What this means is that the injured worker is agreeing to accept a one-time lump sum payment of future disability benefits instead of receiving weekly disability checks. A lump sum settlement will close a workers’ comp case forever for disability payments. All lump sum settlements must be determined to be in the employee’s best interest by a judge in order to be approved by the Department of Industrial Accidents.
How to determine how much a settlement should be?
Lump sum settlement amounts depend on the injured worker’s average weekly wage, disability rates, available disability benefits and other benefits. It is also important to determine the insurance company’s total exposure. The total exposure is the maximum disability benefits they would pay by law. For instance, an injured employee, who is totally disabled, can receive temporary total disability payments for three years. If an employee already received one year of temporary total disability payments, then the insurance company is only obligated to pay another two years of total disability, assuming the worker remains totally disabled for that amount of time. By using the employees total disability rate, we can calculate what the insurance company’s remaining available benefits are for temporary total disability, if the employee remains out of work for two more years. Of course, there is also temporary partial disability benefits, which you would calculate much the same way, as well as loss of function benefits to consider. An injured employee must also evaluate the extent of the injury and treatment status. By calculating the total exposure of the insurance company and knowing what the medical status is, an injured employee will be able to make a decision on how much to demand and expect for a settlement.
As you can see, there is a lot to consider in determining a reasonable settlement amount. We have handled and settled countless workers’ compensation claims and know from experience and knowledge of the law what should be deemed a fair and reasonable settlement. With each injured employee, we will sit down and calculate the total exposure and review all other factors (see below) in determining what should be demanded and ultimately accepted for a settlement.
What should be considered in deciding whether to settle by Lump Sum?
Keep in mind that not every work injury ends with a lump sum settlement. Sometimes, an injured employee receives the necessary medical treatment, makes a full recovery and returns to work. In that situation, the insurance company is not going to pay an employee a lump sum amount for future disability benefits if the employee has recovered and goes back to work. But, for the injured worker, who is still out of work because of their work injury, settlement may be a consideration. Many claims are resolved by lump sum settlement. Before deciding to settle, certain matters need to be reviewed, such as: Is the employee able to return to work? Are there unresolved medical issues from the injury? Can you prove your injury is work related?For Example:
If an employee wants to accept one year of total disability payments up front in a lump sum payment, but has an unresolved medical issue, it may not be advisable to settle (in most cases). This is because it is not yet known the full extent of the employee’s injuries and how long he or she will be out of work. If this employee accepts a lump sum payment for one year of disability payments, then he or she cannot later make a claim for disability benefits if the disability continues for more than one year. Accepting the lump sum settlement gives up all rights to any future disability payments for that injury.Another Example:
In cases where liability is disputed (i.e., the insurance company argues the injury is not work-related), or the extent of disability is disputed, special consideration must be given to any settlement demand or offer. The strength of the employee’s claim that the injury is work-related compared to the insurance company’s defenses must be thoroughly reviewed. In this case, the insurance company sometimes denies benefits and the employee is forced to file a claim. If the employee’s case is weak and the insurance company makes an offer of settlement prior to appearing before a judge, it may be advisable to settle. This is because an unfavorable Court Order may completely ruin any chance of settlement. Of course, each case is different and must be individually assessed.
There are many other things to consider, but these are some of the most important. It is always advisable to seek legal advice before agreeing to a lump sum settlement.
For over a combined 35 years, Mahaney & Pappas has helped injured workers get the disability and medical benefits they deserve. Our experience and knowledge of the law provides employees with an advantage in workers’ compensation cases and pursuing and obtaining satisfactory lump sum settlements. If you are hurt on the job, feel free to call us at (508) 879-3500 or contact us online to schedule a free case evaluation.