All workers’ compensation settlement agreements need to have certain elements in order for the agreement to become finalized. It is important that members of the claim management team are aware of these requirements in order to avoid having to pay additional monies in order to properly effectuate an agreement.
Get the Agreement in Writing and Approved by the Court
All workers’ compensation settlements are not final until a court of component jurisdiction reviews and approves a settlement agreement. This is based on contract law principles in American jurisprudence. The settlement agreement should include basic components that often include:
- The need for there to be a dispute – stating the differing positions of the parties;
- Outlining the payments that have been made in the past, if applicable;
- Noting all interested parties or intervenors (eg – medical providers, health insurers, or government agencies who have paid money related to the work injury);
- The terms of settlement – who is paying whom, and in what amounts; and
- The workers’ compensation benefits being closed out under the settlement agreement, and what if anything is left open.
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Each jurisdiction may have other specific requirements. If you do not know what is required, check with an attorney. Each settlement should be signed and dated by all impacted parties, and then submitted to a compensation judge, or industrial commission for review and approval. Formal consent by the appropriate person or entity triggers payment requirements.
Types of Settlement Agreements
There are various types of settlements in workers’ compensation. This includes the following:
- To-Date Settlements: This type of settlement will only close out specified the contemplated workers’ compensation benefits through the date of settlement. Any and all benefits not closed out “to-date” would remain open. Benefits closed out would be subject to future contemplation and receipt by the employee in the future.
- Partial Settlements: In some instances, employees will agree to the settlement of indemnity or medical benefits, but leave open other future workers’ compensation benefits. Under this settlement, the employee would not be eligible for future specified benefits.
- Complete Settlements: Under this type of settlement, any and all past, present, and future workers’ compensation benefits are closed out. This would include all medical and indemnity benefits. In sum, the employee would not be entitled to any additional workers’ compensation benefits after the settlement is finalized and approved. Parties may need to consider a Medicare Set-aside in the settlement depending on various factors. Guidance regarding these issues can be received from an attorney or service provider.
It is important to remember that parties to a workers’ compensation settlement are only allowed to resolve known work injuries. Settlements that attempt to close-out unknown injuries are generally not permitted. Be sure to list ALL known dates if injury when settling workers’ compensation claims.
There are several other important considerations when finalizing a workers’ compensation settlement. Things to consider should include:
- Unrepresented employees: Many jurisdictions give special consideration to employees who are not represented by an attorney. This is an important check to ensure the employee understands the settlement, what they are receiving, and what benefits they will no longer be eligible to receive. A special term conference or formal hearing may be required.
- Minor employee: As a general rule, persons under the age of 18 are not allowed to contract. This rule applies to court settlements. Special consideration may include having a parent or legal guardian consent to the agreement.
- Non-English-speaking employees: Workers’ compensation courts will often be given deference to those who do not speak English as a primary, or second language. One consideration to avoid issues could include paying for a duplicate settlement document to be translated into that person’s primary language. If this occurs, that person should have a demonstrated competence such as a court-certified translator, along with a signed affidavit.
Claim handlers are not required to have legal counsel draft a settlement agreement. If they decide to not engage counsel, they should coordinate their efforts with their legal department to ensure the basic requirements are met.
Memorializing a workers’ compensation settlement is an important step in closing down a claim. This requires various components are including in the written agreement, as well as making sure certain the injured employee is component to understand it, so there is no confusion later on. Failure to do so will result in the settlement not occurring, and the file will remain open.
Author Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is the founder & lead trainer of Amaxx Workers’ Comp Training Center , which offers the Certified Master of Workers’ Compensation national designation.
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.