How Do Workers' Comp Settlements Work?
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Workers' Compensation Settlements

When employees are injured while performing job duties, they are entitled to workers’ compensation benefits. After experiencing an occupational injury, employees can make a workers’ comp claim on their employer’s policy to receive:

  • Coverage for hospital bills and ambulance ride.
  • A portion of missed wages.
  • Temporary total disability payments.

Once the insurance company accepts the claim, it may offer the employee a disability payment plan and funds for medical bills. Most times, the employee can accept the offer, press for a lump-sum settlement, or negotiate for a larger structured settlement.

If the employee pursues a larger settlement, negotiations will commence between the employee, their attorney, and the business owner’s insurance company. The employer’s role is very limited, but it’s smart to stay informed and facilitate communication between the parties, if only to decrease the chance of being named in a workers’ compensation lawsuit later on.

How to calculate the workers' comp settlement amount

Before any settlement is reached, the employee and their attorney calculate what they think the insurance company should pay out. The settlement will eventually take into account:

  • Balances on hospital bills, ambulance rides, etc.
  • The likelihood of future treatments (e.g., surgery).
  • Lost wages or future wage loss.
  • Disability payments.
  • Attorney fees.
  • State workers’ comp laws and relevant restrictions.

The settlement may either be a lump sum or a structured payment plan. In exchange for a lump sum, the insurance company may be absolved from paying anything to the employee in future for the injury. However, that provision depends on state regulations – some don't allow it.

Once the calculation is finalized, the employee and their attorney will negotiate with the insurance company.

How to negotiate a workers' comp settlement with an insurance company

It’s unlikely that the insurance company will pay for everything that injured employee asked for, but if it's willing to negotiate, the insurer and the employee’s attorney might settle on a number that both parties agree on.

If the parties don’t settle or aren’t willing to negotiate, the employee and their attorney may decide to go to trial, sometimes called a workers’ comp hearing.

When a workers’ compensation lawsuit goes to trial

During the trial, a workers’ comp judge will approve of a settlement they think is fair. It's a relatively informal process.

By going to a workers' comp hearing, the employee risks the judge awarding less than what was asked for – sometimes even less than what the insurance company offered to pay. This is unlikely but still possible under the right circumstances.

After the hearing, the settlement process is complete. The insurance company pays the workers’ comp settlement, and employee continues to recover.

Throughout this, the business owner’s role is to make the process as smooth as possible. That means offering the employee the necessary paperwork and contact information for the insurance company, and keeping the employee informed on the company's work injury policies.

Workers' Compensation Insurance: Further Reading

Workers' Compensation in the Insureon Blog