Workers’ compensation insurance companies can offer a settlement at any point during the claims process. However, they often wait for maximum medical improvement (MMI) because that is when there is some certainty about your future needs. Depending on the injury, this can be around a year after the injured worker first filed their claim.
How workers’ comp cases proceed
Workers’ comp cases move forward slowly if you were seriously hurt. They generally take the following early steps:
- you suffer a workplace injury,
- you file an injury report with your supervisor or human resources (HR) department,
- you get medical treatment to treat the injury, and
- an adjuster for your employer’s workers’ compensation insurance company reviews your case.
If your injury keeps you out of work, you will receive temporary disability benefits. These are a substitute for your lost wages from the injury. You will also receive the medical benefits of having your medical costs covered.
As you recover, it will become clearer whether you have a long-term disability that will require permanent disability benefits. If you do not and you are able to return to work, your case will be closed without a settlement. If you are disabled, negotiations concerning a workers’ comp settlement for these permanent benefits will heat up.
At some point, doctors will decide that you have either made a full recovery or have reached maximum medical improvement and will continue to be disabled. This is when most workers’ compensation cases are settled.
Maximum medical improvement
Maximum medical improvement (MMI) is when doctors agree that further medical care will not make you better. Instead, your condition has stabilized.
If at this point, you are still unable to work in your former capacity, then you have either a:
- permanent total disability, if you are completely unable to work, or
- permanent partial disability, if you can work but only in a limited capacity.
Because doctors do not think that you will get better, MMI is when workers’ comp insurance companies have a good idea what benefits you will need in the future. With no more speculation to do, they will often make a settlement offer to end the case.
Types of workers’ compensation settlements
Workers’ compensation claims can settle in 2 different ways:
- by a compromise and release, or
- by stipulation and award.
The differences between these types of settlements can be substantial. You should strongly consider talking to a workers’ compensation attorney before accepting one.
Many state workers’ compensation laws require a settlement agreement to get a judge’s approval before it can go into effect.
Compromise and release
Under a compromise and release, the insurer will offer you a lump sum of money to end the case. That lump sum settlement can be accepted all at once or spread out over time in a structured settlement.
The amount reflects your future losses from the work-related injury. This includes money to cover your:
- future medical expenses, like ongoing physical therapy,
- disability benefits for your future wage loss, and
- any out-of-pocket expenses that the insurance company still owes you.
This amount can, and generally should, be negotiated carefully to ensure you get what you need and deserve.
Once the lump sum payment is made, your workers’ comp claim is closed. Once closed, it is extremely difficult to reopen it. If the lump sum ends up being insufficient, you will probably not have any further recourse.[1]
Stipulation and award
Less commonly, workers’ compensation claims are settled in a stipulation and award. This settlement creates an ongoing relationship with the insurer. The insurer agrees to continue to pay the medical bills associated with the work-related accident. It would also continue to pay disability benefits for your impairment.
What is included in a workers’ comp settlement amount
Settlements are meant to cover your:
- lost wages, through your disability benefits, and
- future medical costs.
These workers’ comp benefits can be difficult to determine, especially early on in a claim and particularly if the extent of your injuries is significant. This is why workers’ comp settlements are typically only made after reaching MMI. That is when it becomes clearer what medical care you need and what work you can do in the future.
Injured employees who have the legal representation of a personal injury or workers’ comp lawyer from a reputable law firm tend to get more workers’ compensation benefits in a settlement.
Why settlements take so long
Depending on the severity of your injury, there will be a lot of uncertainty about your future needs. Additionally, your employer’s insurer will be covering your medical care and paying temporary disability benefits during the settlement process while you recover.
In many cases, it is not in your best interests to settle too quickly. You may agree to a settlement amount that proves to be too low for your future needs.
Factors that can delay a settlement offer
The 2 most important factors that can delay a settlement are:
- factual disputes about the accident or your injuries, and
- the willingness of the parties to compromise.
Both of these factors are very common.
Factual disputes
The 2 most common factual disputes are:
- whether your injury is covered by workers’ comp, and
- how much compensation you deserve.
Workers’ compensation insurance companies will not offer a settlement if there is a chance that your injuries are not covered. Instead, they will deny your claim. This can happen if, for example:
- you were not on the job when you got hurt,
- the injuries were self-inflicted,
- you were under the influence of drugs or alcohol, or
- you were fighting or roughhousing with someone else on the job.
The insurer may also delay in making a settlement offer if it is still unclear how much compensation you deserve. Insurers are for-profit companies that want to pay as little as possible to settle your claim. Offering a settlement amount before it is known what you will need presents a risk of overpaying you. Only after getting a good idea of what your disability payments and future medical care will be will workers’ comp offer a settlement.
Willingness to compromise
Some workers’ compensation insurers are known for being stingy, while others are known for making fair settlement offers. Some insurers are even willing to delay the settlement in order to make you feel more pressure and become willing to accept a lower payout.
Your willingness to compromise also matters. If you are willing to budge from the amount of money that you feel you are entitled to receive, a settlement can often be made more quickly.
Legal Citations:
[1] See Yoder v. McCarthy Constr., Inc., 291 A.3d 1 (Penn. 2023) and Seybert v. Cominco Alaska Exploration, 182 P.3d 1079 (Alaska 2008).
