Workers’ Compensation Settlements
Workers’ Compensation cases are a part of business whether we like it or not. Injured employees are entitled under the system to be compensated for the time they miss due to the injury. Employers benefit from the system because their injured employees are compensated by their workers’ comp insurance. Those of us who are intimately familiar with the Pennsylvania workers’ compensation system know that the process of working through that system may be difficult and filled with uncertainty. Oftentimes, there is a point at which either the employee or the employer and its workers’ compensation carrier is interested is finally resolving a case, usually by paying a lump sum settlement to the employee. Is there a time when a lump sum settlement is in best interest of both parties? The answer is not simple for either claimants or their employers. This article will discuss some issues to consider.
Many injured workers ask their attorneys whether, and when, they should settle their workers’ compensation cases. As in most litigation, the outcome of an individual case might be uncertain. There may be a time when either the injured worker, or the employer, or both, simply does not want to take the chance that the judge will rule unfavorably.
For example, an employee may be receiving ongoing workers’ compensation benefits when the employer attempts to have the employee’s benefits suspended or modified by petitioning a workers’ compensation judge. This petition is typically filed after the employee is sent to an independent medical examination (IME) and the IME doctor opines that the employee can return to work in some capacity. The employer must then find jobs that the injured worker may be able to perform. For many reasons, the employer’s workers’ compensation carrier may want the employer to offer the injured employee a job even if the employee has not been released to full duty work. Or, the carrier may identify other jobs, not with the original employer, within the injured worker’s physical capacities.
The injured worker (and her doctor) often disagrees with the IME doctor’s assessment that the worker can perform the jobs offered, and will vigorously defend such a modification or suspension petition. As one can imagine, the ensuing litigation can be complicated and risky. Will the judge find that the injured worker can indeed perform one of the jobs offered by the employer? Does the injured worker want to take that chance? Does the insurance carrier believe that its doctor’s opinions will be given more credence than the opinions of the claimant’s treating physician?
This scenario presents a prime, and frequently-seen, example of why workers’ compensation litigations settle cases. The parties simply do not want to take the chance that the judge will rule against them. An injured worker may decide to receive three years’ worth of benefits in a lump sum rather than take the chance that the judge will suspend or terminate his benefits altogether. Similarly, an employer and its insurance carrier might rather pay three years’ worth of benefits rather than litigate the case to its conclusion and lose, potentially entitling the claimant to benefits for a much longer period of time. The “sure thing” can be much more comfortable than the uncertainty of litigation.
Each party has its own special considerations. For the injured worker, settlements require consideration of very serious consequences. The employee has to realize that if he settles his case, most of the time, the insurance company will require a full compromise and release of his claim. This means that both parts of the injured employee’s workers’ compensation benefits – the wage loss portion and the medical benefits – will be lost forever. So, not only will the employee no longer receive wage loss checks each week, but also the insurance company will no longer pay for any of the medical treatment related to the work injury. Furthermore, any other health insurance available to the employee will probably not pay for treatment of the work injury. An injured worker must realize that his injury might still be problematic years later, and if the case has been settled, he has no recourse.
Often ongoing prescriptions are necessary to treat pain or other symptoms from a work injury. Many injured workers do not believe that paying these prescriptions into the future will be difficult, because they will receive a large sum of money as part of their settlement. However, those claimants may not realize how much their medications can cost over the long run. Two to three hundred dollars’ worth of prescriptions each month can add up over time! Before settling her case, any injured worker should sit down with an attorney and actually add up the total possible medical costs that may be incurred over the years following a settlement. Even with a full knowledge of the risks, the “sure thing” is a tempting option.
Similarly, there are many reasons why employers should settle cases. It is not uncommon for an employer settling a case to require that the employee resign from his employment as a condition of the settlement. For most employers, requiring a resignation presents little difficulty, as new (presumably healthy) employees can replace the injured worker. But many employers often take an injured worker’s absence from work very personally. Employers sometimes believe that their injured worker is merely abusing the system, and, indeed, this is sometimes the case. However, unfortunately, there are injuries that can prevent injured workers from ever returning to work. If this occurs, an injured worker could potentially receive benefits for the rest of her life. Thus, there are times when an employer may conclude that it will spend more time and money trying to terminate a case than can be justified in light of the potential savings from a settlement.
For example, take the “standard” modification petition discussed above. In the typical case, the injured worker will be paid total disability benefits for six months to a year before such a petition is filed, and, depending on the pre-injury wages of the employee, the insurance company may pay out over $38,000.00 in wage loss benefits per year. Once the petition is filed, the litigation may take well over a year, during which time the injured worker usually continues to receive benefits. Thus, in our example, the carrier may spend another $38,000.00 paying wage loss benefits, plus medical expenses, plus somewhere around twelve to fifteen thousand dollars in litigation expenses, and will take the chance that its attempt to reduce or cut off the employee’s benefits is not successful. What if it loses its case? Does the carrier seek another doctor’s opinion, and then file another petition? Should it start this expensive process over again? Sometimes the employer is better served by assessing the severity of the injury, together with its odds of successfully terminating or modifying an employee’s benefits, and determining whether a lump sum payout might be more economical. In the above case, the employer might have spent $76,000.00 plus the costs of medical treatment, attorneys, doctors, and litigation expenses, and may still be required to pay the injured worker’s full benefits if it loses the case. Savvy businesspeople will quickly realize that if the employer and its insurance carrier had settled the case for $80,000.00 early in the litigation, they would have come out ahead. The potential savings, and the certainty of putting a cap on the employer’s liability, are important considerations when deciding whether or not to settle with an injured worker.
Hopefully this article will have given the reader some insight into workers’ compensation settlements. It is by no means an exhaustive treatment of the intricacies involved in settling a Pennsylvania workers’ compensation case. Both claimants and employers should give careful consideration to their attorneys’ advice on such matters.