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What is a workers compensation settlement?

Last modified: Dec 12 2020

In a worker’s compensation settlement, you give up your right to future workers compensation benefits in exchange for a lump sum payment. Unlike in a personal injury case, you cannot force the insurance company to pay you a lump sum in exchange for the injury you suffered. The only way that a settlement happens in a workers compensation case is if both parties agree.

Tips about settlements

Most insurance companies want you to resign from your job when you settle your workers compensation case, but this is negotiable. Usually, they would want to pay you less money if you do not resign. The reason for this is that you can bring a new workers compensation case if you got reinjured at work. You should speak to your attorney about whether the insurance company is insisting on a resignation.

Workers compensation settlements are not considered taxable income by the IRS. Therefore, you will not have to pay any income taxes on the money you get from your workers compensation settlement.

How does an attorney calculate the value of your workers compensation case?

Calcultaing workers compensation cases is complicated.

The workers compensation insurance company will pay more money if they expect to pay you a significant amount of future benefits. The insurance company does not care about your pain and suffering from the accident. This sounds harsh, but it is true. The only thing they care about is how much they will have to pay and their “exposure” on your claim. This is the potential amount of money the insurance company could pay in your case based on all of the potential benefits provided by workers compensation.

In order to calculate the insurance company's exposure, we have to add up all of the benefits you are entitled to by law. This includes the cost of lost income benefits, the cost of future medical treatment, and the cost of permanent partial disability benefits.

Medical Benefits

Medical Care is expensive. Although the cost of medical care is paid to your doctors, the insurance company considers this cost when calculating how much to pay in a settlement. We gather all of the medical records from your treating doctors to estimate the total value of the future medical care in your case.

Lost Income Benefits

An individual could potentially draw six and a half years of lost income benefits. If you can prove your case is “catastrophic” then you can draw lost income benefits for life (this means that there is no work in the national economy that you can perform). Whether you will draw the maximum number of benefits depends on whether the insurance company can successfully cut off your benefits. Getting the maximum value for lost income is difficult. Often times the insurance company will try to get your doctor to send you back to work before you are ready, they send you sham light duty job offers, and will try to use other technicalities in the law to lower the amount of your weekly check.

Permanent Partial Disability Benefits

These benefits are meant to compensate you for permanent damage done to your body because of the workers comp accident.

Late Fees and Penalties

The insurance company might owe you late fees and penalties if they did not pay your benefits when they were due. Enforcing these late penalties most often requires hiring a lawyer. Late Temporary total disability payments incur a penalty of 15 percent of the back due benefits.

Future medical costs + Lost Income Benefits + Permanent Disability Benefits + Late Fees= "Exposure"

Present Cash Value

You must consider the "present cash value" of all the benefits the insurance company might have to pay you. Basically, a dollar today is worth more than a dollar 6 years from now. However, the insurance company will try to rip you off by miscalculating the present cash value of your settlement.

How do we make sure you get the most value for your workers compensation case?

Our job is to increase the insurance company's exposure in the case to maximize the amount of the settlement you get. A big part of a lawyer's job is making sure that you draw benefits for as long as possible. Workers’ compensation can be like a game of chess. The insurance company is trying to end your benefits as soon as possible. Your attorney is protecting your rights to draw the benefits. Your right to draw benefits is governed by the official code of Georgia annotated section 34-9 and the administrative rules published by the State Board of Workers Compensation. Some of these rules can be arcane and contain many arbitrary deadlines that favor the insurance companies. Our job is to make sure that your case stays on track and that you are benefits never end prematurely. We want to make your case expensive for the insurance company. That is how we make sure you get a great settlement.

When you are ready to settle, we prepare a “demand letter” to the insurance company. We add up all the future benefits costs in you case, and this forms the basis of the demand. A good demand letter will explain to the insurance company why they should pay you. Every case is unique, and the demand letter should be tailored to the facts in your case. A good demand letter will help the insurance company realize that it is better for them to pay you a fair settlement.

What are some good reasons to settle your workers compensation case?

In workers comp, the cost of the medical bills are paid directly to the doctor but not to you. When you settle your workers compensation case, the insurance company should be giving you money for your future medical care as part of the consideration for the settlement. If you do not settle your case, this is money that would never be paid to you directly. If you have an alternative way to receive medical care, for example through group health insurance, then it can be a wise financial decision to settle the workers' compensation case. And you can choose your own doctor after you settle the workers’ comp case.

If you are no longer able to perform the physical tasks of your original job, you may be better off in the long run settling your case and finding another job you are physically able to perform. You can get the money from the settlement and start drawing another income from the new job within your work capacity.

What are some good reasons not to settle your workers compensation case?

You do not want to settle your case too early in the medical treatment. When you settle, you are giving up your rights to have workers comp pay for your treatment. You want to make sure you have a clear understanding of the treatment plan. You cannot come back after the settlement and ask for more money if your doctor decides you need surgery.

You should not settle if the insurance company does not offer you enough money. In workers' comp, the insurance companies almost always want to settle. But sometimes, they will "low-ball" you. In these cases, it pays off to be patient and hold off for a fair settlement.

The insurance company sent me an unsolicited settlement offer, should I take it?

It is not uncommon for the insurance company to send you an unsolicited offer to settle your case. In our experience, these always tend to be “low ball” offers that severely devalue your case.

You should never take an unsolicited settlement offer without speaking to an attorney. Some clients are concerned how much an attorney might cost. You never have to worry about that with our firm. We will not charge a single penny if we do not recover more money for you (after attorney’s fees) than the original settlement offer. That is our guarantee. We have had many clients in the past who ultimately recover many times more than the original offer.

The insurance adjuster may say “this is a good settlement because we only owe you PPD.”

Sometimes the insurance company will want to settle with you after you get an “impairment rating”. This is not out of the kindness of their hearts. This is money they must pay no matter what. By paying you in a settlement instead of a weekly check, they can get you to sign away all your rights to future benefits. This is ok if the settlement amount is fair, but we almost always find that not to be the case when a client is unrepresented. Be very cautious and speak to an attorney before you sign anything.

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