What Is a Workers' Comp Settlement and Should I Accept One?
After a workplace injury claim has been open for a while, the insurance company may offer to settle your case. In California, a workers' compensation settlement generally takes one of two forms, each with very different consequences for your future medical care and your ability to reopen the claim later. Understanding how these settlements work, and what a judge looks for before approving one, can help you think through whether the offer in front of you is the right one to accept.
The Two Types of Workers' Comp Settlements in California
Most California workers' compensation claims that reach the settlement stage are resolved one of two ways.
- Compromise and Release (C&R): a lump sum payment in exchange for closing out the claim, generally including the right to any further medical treatment for the injury.
- Stipulated Findings and Award (commonly called a Stip): an agreement on the facts of the claim, such as the permanent disability rating and average weekly wage, with permanent disability paid in biweekly installments and future medical care for the accepted body parts remaining open.
The biggest practical difference between the two comes down to future medical care. A C&R generally ends the insurance company's obligation to pay for treatment related to the injury, while a Stip leaves that door open.
Why a Judge Has to Approve Every Settlement
Neither type of settlement becomes effective just because you and the insurance company agree to it. Under California Labor Code Section 5001, no compromise agreement is valid unless it is approved by the Workers' Compensation Appeals Board. A workers' compensation judge reviews the proposed settlement to confirm it was not the product of fraud or undue influence and that the amount is not clearly inadequate given your medical condition.
If the judge needs help evaluating whether a proposed settlement reflects an accurate permanent disability rating, the case can be referred to the Disability Evaluation Unit for a consultative rating before the judge decides whether to approve it. A settlement can be approved at a scheduled hearing, through an in-person walk-through with no hearing on the calendar, or in some cases by mail.
What Makes a Compromise and Release Final
Once a judge approves a Compromise and Release, it is generally treated as final. Even if your condition later gets worse, you typically cannot reopen the claim to ask for more money or additional treatment, since the C&R is written to release the insurance company from that obligation as part of the settlement.
A Stipulated Award works differently. Under California Labor Code Section 5410, an injured worker may petition to reopen a stipulated award within five years of the date of injury if their condition changes for the worse. This is one of the main reasons some workers prefer a Stip over a C&R, particularly when the long-term outlook for the injury is still uncertain.
Questions Worth Asking Before Accepting a Settlement
Because the consequences of each settlement type are so different, it can help to think through a few questions before signing anything:
- Have you reached maximum medical improvement, meaning your condition has stabilized enough for an accurate permanent disability rating
- Is there a realistic chance you could need surgery or ongoing treatment for this injury in the future
- Does your permanent disability rating approach or exceed the seventy percent threshold associated with a life pension
- Are you currently enrolled in Medicare, or likely to become eligible soon, since this can affect how a settlement needs to address future medical costs
- Would a lump sum now serve you better than the security of having medical treatment remain available later
There is no single right answer to these questions. What makes sense for one injured worker's situation may not make sense for another.
Other Practical Considerations
A few additional details are worth keeping in mind when evaluating a settlement offer. Attorney fees in California workers' compensation cases are set by the Workers' Compensation Appeals Board, typically around fifteen percent of the settlement, and are only paid out of an actual recovery. Workers' compensation settlement proceeds are also generally not subject to federal income tax.
It is also worth remembering that a Compromise and Release closes out the claim for the specific injury and body parts described in the agreement. It does not generally prevent you from filing a new claim later if you suffer a separate, unrelated work injury.
Why It Helps to Have a Settlement Reviewed Before You Sign
Because a Compromise and Release is typically final once approved, and because permanent disability ratings and future medical needs can be difficult to evaluate without medical and legal expertise, many injured workers choose to have an attorney review a settlement offer before accepting it. The insurance company's goal in any settlement negotiation is to resolve the claim for as little as possible, which is part of why an independent review of the offer, the medical evidence behind it, and what it gives up can be valuable before you make a final decision.
Talk to a Santa Ana Workers' Compensation Attorney
If you have been offered a workers' compensation settlement in California, Ufkes & Bright can help you understand what it means for your case. Our workers' compensation attorneys have represented injured workers throughout Santa Ana and Southern California since 1964. Reach out through our contact page or call 714-909-2609 to schedule a free consultation.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. For legal guidance tailored to your specific situation, consult a licensed attorney.