Lump Sum Settlement in Workers’ Compensation Cases

Workers’ compensation claims, like any personal injury claim, can be settled if the parties agree to do so, and the Department of Industrial Accidents approves the lump sum settlement. Insurance companies, however, are not required to settle, and inured workers cannot be forced to accept an offer to settle. The settlement process is voluntary as there is no legal requirement that a case be settled. Furthermore, judges in Massachusetts, unlike other jurisdictions, do not have the authority to order the payment of a lump sum and thereby end the case. Judges are limited solely to a review of a proposed settlement and the extremely important task of determining if the settlement is in the employee’s best interest.

That being said how is a case settled? How much is a case worth? How long does it take? What are my rights if I settle, or if I do not? What happens after I settle? These are important questions that must be addressed before an injured worker begins the process of trying to bring his or her case to close by lump sum.

A lump sum settlement is a contract that results when an insurance company makes on offer to settle an employee’s claim, and the employee accepts that offer. Regardless, however, of the desires of the worker and the insurer to settle a case, all lump sums are subject to review by Judges or conciliators at the Department of Industrial Accidents who must determine if the settlement is in the employee’s best interest. If the settlement is found to be in the employee’s best interest, it is approved, and insurer must pay the employee his or her settlement within 14 days. If the settlement is not approved, then the parties, if they desire to do so, can continue to negotiate and present a different settlement proposal back to the Department for consideration.

The value of every case is different. There is no magic formula which results in an acceptable lump sum settlement. Insurers settle cases because they worry that the case can cost them more money if the case is not ended. Employees settle cases for a variety of reasons, not the least of which is that they may get less if they litigate. The well-negotiated settlement provides an injured worker with a result that reduces risk while maximizing the amount he or she receives.

The size of the settlement is affected by many factors. Generally, the two biggest influences are the amount of weekly compensation an employee may be entitled to receive and the extent of disability associated with the injury. One cannot focus on only one of these factors as the severity of the injury is not necessarily the factor which has the most influence on the size of the settlement. An illustration of this principle is helpful.

Jim is a lawyer who tires of work as a litigator and decides that he would like to leave the day to day fight in the courtroom for work outside free of the constant headaches which a courtroom can cause. He takes a job with a painting company and goes to work with his good friend, John, who left school early and has been making a very good living painting houses for the past 30 years. After a couple of days working on a scaffold they built, they both slip and fall from the scaffold within minutes of each other, and are rendered paraplegics, never able to walk again. Jim would collect compensation for a few months after which the insurer would likely seek to stop his payments by arguing that he was not totally disabled, and could return to work in a wheelchair, and make the same or more money than he did as a house painter. The insurer would be probably win that argument. Thus Jim’s case is worth relatively little in comparison to John’s case. John, on the other hand, a house painter in his fifties, with few, if any transferable skills, would likely receive permanent and total disability entitling him to weekly workers’ compensation for the remainder of his life. Same accident; same injury; 2 very different results.

Before a person settles, one must consider what he or she will do after settlement as settlement ends the right to collect any further benefits for an injury. There may be limited rights to retraining after settlement, but an injured work must understand that the settlement is meant to pay for future weekly benefits to carry one until she or he retrains or finds alterative work. Careful consideration must be given to how to support yourself after settlement.

Settlement may take two forms in Massachusetts. A case can be settled with liability in which case the insurance company is required to pay for medical care for an industrial injury for the rest of the employee’s life provided the treatment is reasonable, necessary and related to the industrial accident. These cases involve injuries that the insurer has agreed that the injury is work related, or in which the Department has made a determination that the injury is work related. The second scenario involves an injury under circumstances in which the insurer has contested that the injury is compensable under the Workers’ Compensation Act. A case which is settled without liability closes all aspects of the case, including medical care, past, present and future as well as closing all of their rights under the Act.

Once a settlement is approved, injured workers are free to go about their business. They can resume work as soon as they are able to do so. However, absent a written contract or an established company policy to the contrary, employers are not required to hire back an injured worker under a formula contained in the Workers’ Compensation Act. And while this statutory language may be susceptible to a constitutional challenge which has not yet been taken, until the statute is successfully challenged, employers can continue to rely upon it to deny reemployment.

The timing of settlement demands, and amounts which may be negotiated are complex. It is crucial to approach settlement with a carefully considered plan in mind. This plan must include not only the amount that an injured worker desires to receive, but also a plan for life after the weekly checks ends.

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Related Massachusetts Workers’ Compensation Articles

Massachusetts Workers’ Compensation – FAQs

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Other Massachusetts Workers’ Compensation Resources

Massachusetts Workers’ Compensation Act

Massachusetts Department of Industrial Accidents

Injured Worker’s Guide (Publication of Mass. Department of Labor)

The Workers’ Compensation Rating and Inspection Bureau