Workers' Compensation Insurance

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How do workers' compensation settlements work?

Instead of accepting an insurance company’s offer on a workers’ comp claim, an injured employee can pursue a monetary settlement with the help of an attorney.

A settlement is an alternative to the insurance company’s offer

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 transportation
  • 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. In most cases, the employee has the option to accept the offer, pursue a lump-sum settlement, or negotiate for a larger structured worker’ comp settlement.

Employers should stay involved to avoid a lawsuit

If the employee decides to go after a larger workers’ compensation settlement, negotiations will take place between the employee, his attorney, and the business owner’s insurance company.

The employer’s role is very limited, but it’s still a good idea for business owners to facilitate communication between the other parties and stay up-to-date on the negotiations. Taking an active role during a workers’ compensation injury settlement can decrease the chance that the employer is named in a workers’ compensation lawsuit later on.

How workers' comp settlements are calculated

Before any workers’ compensation settlement is reached, the employee and his attorney calculate what they think the workers’ compensation payout should be. The settlement should 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

A settlement case can result in a lump sum, payment plan, or mistrial

Once the calculation is finalized, the employee and his attorney will negotiate with the insurance company. It’s unlikely that the insurance company will pay for everything the injured employee asked for, but the insurer and the employee’s attorney might settle on a number that satisfies both parties.

The workers’ comp settlement can be either a lump sum or a structured payment plan. If the worker requests a lump sum, the insurance company may include a stipulation that the company won’t pay any additional funds to the employee for the same injury in the future. However, that provision depends on state regulations – some states don't allow that option.

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

What to expect when a workers’ comp lawsuit goes to trial

During a workers’ comp lawsuit trial, a workers’ comp judge will evaluate the case and determine a fair settlement. Once the judge decides on an amount, the insurance company pays the claim and the settlement is complete.

One risk employees face by asking for a workers' comp hearing is that the judge might award less than what was asked for – sometimes even less than what the insurance company offered to pay. While this is unlikely, it is a risk of choosing to pursue a workers’ compensation lawsuit.

The employer’s role during the trial

The business owner’s role during any workers’ comp settlement is to make the process as smooth as possible. That includes providing the employee with 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