Work Injury Settlements
There are many ways that a lawyer can add value to workers' compensation settlements, both in terms of the total settlement amount, but also in avoiding pitfalls. This page will not cover everything, but will go over some of the issues, including: Value of Benefits, Administrative Costs, and Benefit Avoidance.
Bring in your written settlement offer, and no fee will be charged on that portion of your final settlement.
What is my case worth?
This is a reasonable question, but not one that Kelly Blue Book or the NADA Guides can answer. Like selling a truck, there's some truth in the saying that it's worth whatever a buyer will pay. With that in mind, the better question may be: What does the Employer/Carrier ("E/C") have to pay?
Basic Value of Benefits
The core value of a settlement often involves adding up the cost of any outstanding benefits along with an estimate of future medical and indemnity exposure.
This generally depends on what the particular benefits cost for the E/C to provide, but may be reduced for any disputed benefits. For example, the parties may disagree about whether a certain surgery will be needed in the future.
Another issue is the present-value of money. If the E/C knows that 5 years from now they will have to pay $100, then they would invest some smaller amount today and it will grow over the years until it reaches $100.
Cutting Administrative Costs
Insurance companies and self-insured employers want to save money. Beyond the value of checks and the cost of prescriptions, the E/Cs also face administrative costs. They may pay in-house adjusters, rent offices, or contract with a third-party administrator.
The more that litigation is required on a file, the more that file may cost the E/C in terms of defense attorney fees. This is another cost which the E/C may try to reduce by settling the claim. Settling a case may stop their attorney's clock.
About The $24,900 Offer.
This may be a red flag, and possibly a big one. The threshold of $25,000 is a number used by the Centers for Medicare & Medicaid Services ("CMS") to determine whether they will evaluate a proposed Workers' Compensation Set-Aside Arrangement ("WCMSA"). CMS has a process for approving or disapproving set-aside arrangements which is intended to make sure that enough money is set aside to cover medical treatment.
While not every case requires an MSA, the $24,900 offer may indicate that settlement is a bad deal and would denied by CMS for being too small.
There are legitimate reasons why the E/C may want to settle and why the employee may agree to compromise their claims. Settlement can avoids the risks of litigation and the provide with money to pursue medical treatment as they see fit. A lump sump may help a worker buy a house, and a small discount could make it E/C agree. However, another major motivation for E/C's is often to simply avoid paying benefits.
One simple reason that an E/C may wish to settle is that the Employee has overlooked one or more benefits. Indeed, after a period of voluntarily providing medical treatment the E/C may have purchased enough "goodwill" with the claimant that they trust the insurance company. A claimant may sign away benefits they didn't know they had.
One benefit under the WC Law is that in many instances the E/C will have to pay the employee's attorney's fee. It is the linchpin of the system. While lawyers can be relatively expensive, it is worth considering: who's money is being saved and what are you getting for it?
- For example, lets imagine an E/C wrongly withholds a $500 benefit: Over months of litigation, the Employee's attorney may be forced to spend many hours representing the claimant. The E/C may pay their lawyers an unknown amount, then be required to pay the $500 benefit, and also be liable for paying the Employee's attorney. If we suppose 18 hours at $300 (18 x 300 = 5,400), then the represented employee's $500 benefit may end up costing the E/C well over $5,900. If the E/C does this every year, then the Employee's case has become a much more costly file.
- Alternatively, imagine that same employee failed to hire a lawyer. They effort would have saved $5,400 for the E/C, and for this good deed they would have taken on the work of having to represent themselves. If he declines to pursue the benefit at all, he runs the risk of setting a precedent. Will the E/C provide the next benefit or withhold that one too?
When the law provides for legal representation, that is a benefit worth valuing.
Unforeseen Medical Care
Simply put, a disabled employee's medical condition can get worse. If it deteriorates while their workers' compensation case is open, they may be covered. If it happens after they've settled, they may be in dire straights. Settlement often shifts this risk away from the E/C. It risk worth discussing with a lawyer if you are considering settlement.
Updated: June 6, 2018