How Much Do You Get in a Workers' Compensation Settlement?

The first thing to know about workers' compensation settlements is that they're purely voluntary. Your employer or its workers' comp insurance company does not have to agree to settle your claim, and you don't have to agree with a settlement offer proposed by your employer or its insurance company.

If you're discussing settlement regarding one or more aspects of your workers' compensation claim, or are considering pursuing a settlement with the insurance company, you may be wondering how much you'll receive in the settlement. There are a few preliminary considerations.

What Should You Expect From Your Workers' Comp Settlement?

When considering settling, it's important to know what workers' compensation benefits you are entitled to, and what rights you are relinquishing, as part of a proposed settlement agreement.

Consider the following types of benefits and how they are often handled in workers' compensation settlements.

Permanent Partial Disability

If your work-related injuries resulted in some type of permanent impairment, but did not render you totally disabled, you are likely to be entitled to a monetary award to compensate for your permanent impairment. You likely will be entitled to a permanent partial disability award if:

• you have new work restrictions as a result of your injury that limit the work you can do
• you had surgery under your workers' compensation claim, or
• your body will never return to its pre-injury state.

Many employers will propose a settlement of the permanent partial disability issues by offering a dollar amount equivalent to, or slightly less than, the amount of your likely permanent partial disability award under your workers' compensation claim.

An important thing to remember is that you will be required to give up something for this money. You may be giving up the right to argue that you are permanently and totally disabled, or the right to argue that a specific medical condition was related to your workers' comp claim, or the right to any future medical care.

If a lot of money is at stake, you'll want to talk to a workers' comp attorney about the implications of this type of settlement agreement.

Temporary Total Disability (Time Loss Compensation)

If your workplace injuries caused you to not be able to work for a period of time, you likely received partial or total temporary disability benefits, or "time loss compensation" benefits, during that time.

Sometimes, for a variety of reasons, your employer or its insurance company may not have paid you these benefits when you should have received them, or paid you too little. Your employer may offer you a lump-sum amount for what you are owed, and your agreement to not pursue this compensation.

Unpaid Medical Bills

Your workers' comp claim entitles you to continued medical care for your injury or illness. And if your injuries were relatively minor, you may be seeking only to have your medical bills paid for by your employer under your worker's compensation claim. Your employer may offer you a lump-sum settlement in exchange for your agreement to not pursue any further reimbursement for medical costs or other workers' compensation benefits.

How Much Is the Average Workers' Comp Settlement?

As you might expect, workers' comp settlement amounts vary widely depending on the severity of the injury. But in general, most settlements fall somewhere between $2,000 and $50,000, with an average workers' settlement of just over $20,000.

A study on workers' comp settlement amounts by Martindale-Nolo found that 12 percent of workers received less than $2,000, while only 8 percent received between $60,000 and $100,000. The majority of workers received settlements ranging from $2,000 to $20,000.

But these numbers are no guarantee. How much you'll receive for your case is determined by the types of injuries you suffered, how much you earn, the strength of the evidence in your case, and many other factors. Hiring a lawyer is a good way to ensure you get the best settlement possible.

Types of Settlement Arrangements

There are two primary types of settlement arrangements: lump-sum and structured settlements. In a lump-sum settlement, you will sign a settlement agreement giving up certain rights in exchange for a one-time, lump-sum payment from your employer or its insurance company. In a structured settlement, you will instead receive smaller payments over a period of time, such as one year, ten years, or more.

Deciding Whether to Accept a Workers' Comp Settlement

First, consider that a settlement is a guaranteed benefit. If you don't take the settlement and your claim proceeds to a hearing at the workers' comp appeals board or litigation at the state court level in your state, the judge may rule in your employer's favor, leaving you with little or no benefits.

On the other hand, you could prevail at a hearing and actually win more than the settlement offer. A settlement is a guarantee to provide you with certain benefits and takes out the risk associated with litigation.

A second consideration is that you will probably have to give up your right to future medical treatment for your injury (if your state allows you to give up this right). If you foresee yourself needing surgery, expensive medication, or lots of doctor visits, it's probably not in your best interests to settle.

A third consideration is that settlement is not permitted in every state at every point in a workers' compensation claim. This point is discussed further below, but you should speak to an attorney about your settlement options, particularly if your employer has proposed a specific settlement offer to you and a lot of money is at stake.

Will I Owe Taxes on My Workers' Comp Settlement?

In general, workers' compensation benefits aren't considered taxable income either at the state or federal level. But there is an exception. If you're receiving Social Security disability (SSDI) or Supplemental Security Income (SSI) in addition to workers' comp, the Social Security Administration might reduce your SSDI or SSI so that your combined benefits (from Social Security and workers' comp) don't exceed a particular threshold. This is known as the workers' compensation offset.

If you're subject to the offset, you'll owe tax on the amount of your workers' comp benefits that's equal to the amount your SSDI or SSI benefits were reduced. That means if your SSDI benefits were reduced by $200, you'll owe tax on $200 of your workers' comp.

If you receive SSDI or SSI and are considering accepting a workers' comp settlement, don't ignore that tax implications. A good attorney can structure your settlement in a way that minimizes or even eliminates the workers' comp offset and, thus, your tax liability. (Read about the tax implications of workers' comp settlements.)

State Rules on Settlements

Settlement is not permitted at all stages of a workers' compensation claim in all states. If you have not received a settlement offer, don't think that your employer is not interested in settling your claim.

It may be that your employer is not permitted to engage in settlement negotiations with you until your claim reaches a certain point. Some states, for example, do not permit settlement regarding whether or not a workers' compensation claim will be allowed or denied.

If you meet the criteria for a workers' compensation claim in those states, the claim is allowed, and if you do not meet the criteria, your only option is to appeal the order denying your claim.

Medical Benefits

Another area that many states do not permit settlement is in regard to medical benefits. Some states allow you and the company or insurance carrier to draft a settlement agreement that prevents you from coming back and having your medical bills paid for by your employer later on. Other states view this as unfair to the worker, and will require the employer to pay medical bills despite any settlement agreement between the parties.

What is, and what is not, permitted regarding settlements is often not described in state statutes. Oregon, for instance, doesn't have a statute that allows settlements regarding medical benefits. However, attorneys can and regularly do draft settlement agreements that effectively extinguish a worker's right to future medical benefits.

Judicial Review

Many states require a judicial review of proposed settlement agreements. This is especially true if your claim is in litigation, either at the administrative hearing level or the state court level. If your case has been to a hearing or to court, a judge will review the proposed settlement agreement and approve it unless some term violates the law.

Consult an Attorney

An attorney in your area familiar with workers' compensation can help you determine what settlement options you have and whether it's in your best interest to accept a settlement offer.