If you have a long-term health issue due to a work-related illness or injury, workers’ comp may provide a measure of protection by paying part of your lost earnings and covering your medical expenses that can be shown to be due to your injury. Most claims result in your insurance company paying out bi-weekly or monthly compensation while you are receiving treatment to improve your condition. Once your condition is medically stable, often referred to as MMI (maximum medical improvement) or medically stationary (the term used in Arizona workers’ comp matters), any compensation payable for a loss of earning capacity is paid monthly. However, it is sometimes possible to reach an agreement with the insurance carrier, employer, or Special Fund of the Industrial Commission for a lump sum settlement. Settlements can occur whether or not there is a dispute about the amount payable to you. There are some points that you should be aware of when considering this course of action.
Can you Demand a Settlement?
Just because you want a settlement, doesn’t mean you will get one. A settlement will only occur if you and the defendants can agree to one. You cannot force an insurance carrier or the employer to agree to a settlement. A defendant will only agree to a settlement if it believes the settlement makes economic sense to it. Understanding the true value of the claim and whether it is reasonable for you to agree to relinquish the money and other rights that the defendants will demand in exchange for a settlement is vital.
No one associated with Arizona’s workers’ compensation system will be looking out for your interests except you and, if you have one, your attorney. The Industrial Commission of Arizona (ICA) Administrative Law Judge (ALJ) doesn’t assure that the settlement is fair. The ALJ only determines if the settlement meets the requirements of the law—nothing more and nothing less. That is, does the agreement have all of the language the law requires. Having a lawyer represent you, who has not only the knowledge to understand the value of your claim, but also the benefits and risks of the settlement, is extremely important. The attorney can advise you of the best way to proceed and can negotiate the best possible agreement for you or tell you whether you are better off walking away from the settlement because it just doesn’t give you adequate protection. While the short-term benefit of a lump sum may sound attractive, you, the injured worker, must protect yourself for your lifetime, not just the next few months.
Monthly Payments vs. Lump Sum
A settlement results in the termination of any bi-weekly or monthly payments that are normally associated with a workers’ comp claim. Depending on the medical care that you will be receiving and the length of time you will require care, you may want to consider whether receiving one payment up front is beneficial. While you may intend to only spend the money when needed for your treatment, a large sum may tempt you to spend it right away. This may leave you without the required funds to pay for future treatment and violate Medicare’s rules, which can be even more detrimental when you have lost wages because of your impairment.
Estimation of Value
Determining the amount of a workers’ comp settlement is based on the total workers’ comp benefits that you may be entitled to in the future and the likelihood of receiving those benefits. This is dependent upon what type of disability you have and whether it is permanent or temporary. A lawyer can provide the expertise required to accurately assess this amount and ensure you are receiving fair compensation.
Types of Settlements in Arizona
Compromise and Settlement Agreement:
There are two main issues that are settled by compromise and settlement agreements. These are compensability and loss of earning capacity.
- Compensability: If there is a dispute as to whether the claim should be covered, as would be the case if there was doubt that the injury actually occurred during or because of work, the parties can enter a settlement by which the injured worker gives up all rights under the law in exchange for the payment of a lump sum. This means the worker will never receive any compensation and none of the treatment is paid by the defendants. It will be treated as if there was never any claim at all.
- Loss of Earning Capacity: In exchange for a lump sum payment, the worker gives up the right to monthly compensation, usually with the defendant demanding a credit if the claim is ever reopened.
Full and Final Settlements:
- Full and Final Settlement of Supportive Care: This settlement only gives up the right to future supportive medical care, but not active medical treatment. Supportive care is provided once the injured worker’s medical condition stabilizes, otherwise known as reaching MMI or becoming medically stationary. It is essential to consider how bills will be paid as discussed below.
- Full and Final Settlement of the Entire Claim: All future rights are given up, including the right to obtain any compensation or payment of medical expenses. You will never receive anything else on the claim except the settlement money – so it is essential that you be adequately protected.
When a settlement relates to future medical care, it is important that you are aware that if the money runs out, unless you have Medicare coverage or other governmental coverage, such as AHCCCS, there will be no coverage available for these expenses. It is crucial that you fully understand the limitations of Medicare and other such governmental programs and adequately protect yourself or you may be left without any protection for future medical.
When settling a claim, you must also consider the impact on Social Security Disability Insurance Benefits you may be entitled to at the time of the settlement or may become entitled to in the future. It is essential that the settlement properly prorate the settlement amount. The impact on other government and private disability programs must also be considered and addressed.
Whether you should enter a settlement is a very serious decision that can impact you for the rest of your life. You should not make that decision lightly. Your future financial wellbeing for years to come will be impacted.
If you or a loved one is considering a workers’ comp settlement, please contact Schiffman Law Office today at (602) 266-2667. Our State Bar of Arizona Certified Specialist in Workers’ Compensation with 45+ years of experience can help you navigate your settlement with confidence while fighting for your future every step of the way.
