When an employee has a pending workers compensation claim which has not been fully resolved, it is usually possible to settle the claim early with the insurer without having to go to trial or a final hearing. This is especially true when it comes to settlement of a Permanent Partial Disability claim because professional medical opinions can vary with regard to assigning a specific percentage of disability. There are a number of factors which allow for a successful settlement. Usually however, the employee needs to reach maximum medical improvement before serious negotiations can begin. After all, a worker doesn’t want to settle a disability claim only to find out later that their injury was more extensive and severe than they first realized. Consequently, the most important factor with regard to settlement is whether the employee has reached, or reasonably anticipates reaching, maximum medical improvement.

The Disability Rating

Once an employee has officially reached maximum medical improvement the authorized physician will usually, but not always, want to issue a disability rating. After a claimant has reached MMI and a settlement offer has been made based upon the employer’s doctor’s rating, the claimant has 12 months to acquire a rating of their own. Otherwise, any settlement shall be based upon the initial rating. However, it is possible to settle a worker’s compensation claim without having a formal disability rating. If the injury which occurred is common for the type of job duties which are performed, then it is possible to estimate the amount of disability. Once a percentage of disability is determined that will fully compensate the worker for their injuries, this amount is multiplied by the average weekly wage and the appropriate number of weeks. Refer back to Chapter 7 for calculating this.

The Demand Letter

The next step is to write what is called a “demand letter” to the workers compensation insurer or defense attorney. This letter sets out an account of the accident, details of the injury, and describes why and how the worker is now more limited in their ability to perform job related tasks. Finally, it includes a breakdown of the formula used to determine the specific amount that is being demanded.

Once the demand letter is complete, this letter can then be mailed to either the adjuster or defense attorney who is assigned the case. After the letter is given a full evaluation, hopefully the insurer or defense attorney will settle the case. If not, a counter-offer with a lower amount is usually issued instead. If no counteroffer is received, and there has been ample time to evaluate the demand letter, it is prudent to follow up request a response.

Settling Your Workers' Comp Claim

The employee/client should be fully apprised of the settlement negotiations and must agree to the settlement. It is the employee who is settling the claim after all. The lawyer gives advice and recommends settlement, but the worker decides.

The settlement terms can include whether money is set aside for future medical care, whether social security or Medicaid or medicare have to be dealt with, what average weekly wage is being used, what level of PPD or PTD is being used, what the prior paid medical is and other factors.

Once a settlement is reached, a Stipulation of Compromise Settlement must be prepared and signed by the employer/insurer, the employee, and the lawyers. It is submitted to the Workers’ Compensation Division to be approved by an ALJ. Then the settlement drafts are deposited into the attorney's trust account and distributed to the employee – with a written explanation of the disbursement.