Lump Sum Settlements Explained

Workers’ Compensation benefits benefits are designed to provide financial relief for someone who has been injured on the job. This includes the cost of medical treatment, lost wages, job training, disability payments, and other costs that are directly related to the injury. In most cases, injured employees receive weekly payments based on the severity of the injury. However, it is possible for the employee to negotiate a lump-sum settlement with the employer’s Workers’ Compensation insurance company. Before making this decision, there are some important things to consider, which you can discuss with one of our experienced Workers’ Compensation lawyers.

What Is a Lump-Sum Settlement?

Lump-sum settlements are a method to close Workers’ Compensation claims with a one-time payment. However, if you choose to pursue a settlement, you can do so at any stage of the proceedings. Typically, lump-sum settlements include expected future payments, past due amounts, disputed amounts, medical reimbursements, and more.

An injured employee may pursue a one-time settlement rather than receive weekly benefits. Though a lump sum may seem tempting, especially if you are struggling financially, you should seek legal advice before making this decision. Once an agreement has been reached, your claim is finalized, and you cannot reopen the case at a later date.

What Are the Benefits of a Lump-Sum Settlement?

Lump-sum settlements may not be advisable in some cases, but the benefits of accepting one include the following:

  • Lump-sum settlements are tax-free.
  • Treatment can continue with the doctors they choose.
  • No dealings with insurance providers.
  • No required independent medical exams.
  • No requirements on the use of settlement funds.
  • You can accept a new job without risking your benefits.

What Are the Disadvantages of a Lump-Sum Settlement?

In contrast, there are some risks and disadvantages to accepting a lump sum, such as the following:

  • The final award may be too low in relation to the severity of your injuries and recovery period.
  • You cannot be awarded additional damages for pain and suffering.
  • Weekly benefits end once a settlement is finalized.
  • You are prohibited from reopening the claim.

It may also be in your best interests to consider a lump-sum payment when:

  • The parties are in dispute.
  • Your case has weaknesses or little evidence.
  • You have reached maximum medical improvement (MMI).

Depending on the circumstances of your case, the benefits of accepting a lump-sum settlement may outweigh any disadvantages, especially in moving forward in your recovery and life more quickly.

What Are the Different Impairment Ratings in Workers’ Compensation Cases?

Impairment ratings are the percentage of impairment your injury has caused. Your lawyer may refer you to a doctor to receive a complete examination of your injuries and level of impairment and assign a rating. You must also submit to an independent medical examination (IME) with a doctor appointed by your employer or the insurance company.

Your impairment rating may be higher from the physician chosen by your lawyer than the one chosen by your employer or insurance company. This is understandable, as the higher the impairment rating, the more costly the settlement, which your employer or their insurance carrier hopes to avoid. In Maryland, ratings must be in accordance with the Guides to the Evaluation of Permanent Impairment, 4th Edition, though each physician’s evaluations may differ.

Typically, the physician chosen by your attorney charges a fee for the evaluation, which will be included in the full and final settlement agreement and deducted from the settlement amount you are awarded.

How Are Lump-Sum Settlements Calculated?

Workers’ Compensation claims do not include pain and suffering, so employees should consider the following factors when calculating the value of a settlement. An experienced Workers’ Compensation lawyer can provide valuable insight during this process:

  • Estimate future benefits: Because your settlement will include future benefits you may receive, try to estimate – as accurately as possible – what those amounts might be. Look at medical documentation and consult with your physician and other medical experts to determine the estimated cost of future treatment. If you underestimate, you will not have the option to renegotiate your settlement once it is final.
  • Consider the possibility of not qualifying for benefits: If you do not qualify for benefits due to the likelihood of a short recovery, you may want to consider a lump-sum settlement because you may be able to collect more than you would from the benefits provided by state law.

How Are Lump-Sum Settlements Negotiated?

Workers’ Compensation claims do not include non-finite losses, such as pain and suffering; therefore, you and your lawyer must calculate a settlement to your best advantage. Calculations should take into consideration other contributing factors in addition to expected benefits, such as:

  • Current medical costs.
  • Future required medical treatments.
  • Prognosis for a full recovery.
  • Current lost wages.
  • Loss of future earning capacity.

Once you have determined an appropriate settlement amount, your lawyer will bring it to the company or insurance carrier’s counsel for approval or to counteroffer. In the majority of cases, the first request is usually met with a counteroffer, and negotiations between the parties will begin until an agreement is reached.

The attorney’s fee (which is regulated by the Commission), expenses, and doctor fees are deducted from the final settlement amount, and all of this is memorialized in a full and final settlement agreement, which the attorneys sign, the parties, and the Workers’ Compensation Commission.

What Are Workers’ Compensation Liens?

If the Workers’ Compensation insurer pays the remainder of your medical expenses or disability benefits, they may be entitled to recoup some of those costs by placing a lien against any settlement or judgment you receive. Often, the employer or insurance company is willing to waive all or a portion of the lien in exchange for accepting a full and final settlement and may even add to the amount if you accept a lump sum. A lien waiver also allows you to obtain higher damages in a personal injury case.

Baltimore Workers’ Compensation Lawyers at LeViness, Tolzman & Hamilton Assist Injured Employees With Lump Sum Settlements

If you have been injured at work and you are unsure about whether to file a Workers’ Compensation claim or a lump sum settlement, the Baltimore Workers’ Compensation lawyers at LeViness, Tolzman & Hamilton can help. We understand the complex nature of the claims process, as well as when it is in your best interest to pursue a lump sum settlement. We will help you determine which is the best course of action based on your injury, and ensure that you receive the maximum financial compensation you deserve. Call us today at 844-556-4LAW (4529) or contact us online.