Workers’ comp claims can be bewildering—especially if you find yourself involved in one. The first thing you need to know is this: There’s no strict timeline for resolving workers’ comp claims. You may be able to settle a claim in several weeks, or it may take as long as a few years before the claim is closed.
But whether you’re a business owner or an employee dealing with an injury, it pays to understand the process and how it may benefit you.
So let’s take a closer look at how workers’ compensation benefits work and do a deep dive into the settlement process.
What Is Workers’ Compensation Insurance?
Let’s start at the beginning with a definition: Workers’ comp is simply insurance that a business owner is required to have in almost every state in the U.S. This insurance covers medical costs, disability benefits, and lost wages for injured workers who are hurt while on the job.
When an injury occurs, a few things happen:
- The injured worker receives the medical care they need, especially if the injury is serious.
- The business owner assesses the situation, ensuring that whatever caused the accident isn’t likely to happen again. Then they get to work on the documents that need to be handled to file a claim. This may involve taking photos of the site and having the employee fill out paperwork if they are able to.
- The business owner contacts the insurance company and files the claim, submitting an FROI document or First Report of Injury or Illness.
All that happens quickly. In many states, it must take place within 30 days. After that point, however, the process slows down considerably. The insurance company may make an offer of payment within a few weeks, or they may wait for a year or more.
How Long Do Workers' Comp Settlements Take?
Generally, workers’ comp insurance will pay out on a case anywhere from a few weeks after the accident to several years. Most take about 12-18 months, but this is impacted by a number of factors, including the following:
- The severity of your injury: How quickly you recover and whether you will need future medical care.
- Whether you are claiming temporary total disability, temporary partial disability, or permanent total disability: In some cases, insurance providers may want to see you return to work before proposing a settlement.
- Whether you hire a workers’ comp attorney: Since a lawyer may recommend holding out for a fair settlement if the first offer is low, it may increase the length of time before a payment is made.
- Your insurance carrier’s strategy for paying out on claims: Every insurer has its own processes for paying out on claims, and some may take longer than others. As we noted above, some may wish to wait until you are completely finished with medical care and therapies before writing you a check.
- The claims process in your state: Workers’ comp cases are impacted by state law, which varies depending on the state. In many states, there are appeals courts whose sole responsibility is hearing workers’ comp cases. For example, in Illinois, most workers’ comp settlements are approved about two years after the claim is filed. Under California law, claims administrators must investigate claims within 90 days of the accident; if the accident caused temporary disability, disability payments (which are only part of a claim) must be made within 14 days. Cases that are not settled, however, can take much longer. In New Jersey, workers’ comp usually pays a settlement within six to eight weeks.
How Do Insurers Respond to Workers’ Compensation Claims?
Your workers’ compensation case may have several outcomes, depending on the severity of the injury, as well as the payment strategy of the insurer.
So what are the insurer’s options? These are the most likely:
- They may offer a lump sum settlement: This is a one-time payout that may look impressive, especially to an employee with medical bills to pay, but it means that the insurer’s responsibility is finished and the claim is closed. If down the road, the employee suffers from further medical repercussions from the accident, they cannot file again and will have to pay the costs themselves.
- They may propose a structured settlement: This settlement agreement means that the injured employee will receive benefits over a period of time in an agreed-on number of payments. Once again, if the employee accepts this settlement, they in effect release the insurer and their employer from future liability related to the claim.
- They can deny the claim: Claims can be denied for a number of reasons. If the injury was self-inflicted, for example, or if the injury was caused during a bout of roughhousing or fighting while at work. If the employee was under the influence of alcohol or drugs or in the process of committing a crime against their employer at the time, the insurance company is likely to contest it. If it is denied for any reason, the employee can appeal, and then the case is likely to end in a hearing in front of a judge.
How Often Do Insurers Offer a Settlement?
Settlements are the most common way claims are paid. No one in the equation—employee, employer, or insurer—wants to spend the time and expense associated with going to court. Having said that, it is not mandatory for the employee to accept the settlement that the insurer offers. Sometimes, the first settlement offer will be on the low end, and it may be better for the employee to wait and get legal advice before settling, even if it means incurring attorney fees.
Another factor to consider is the employee’s health at the time the settlement is made. One common benchmark used by health professionals and insurers is whether the employee has reached maximum medical improvement or MMI. This is when the injured employee’s health is at a stage beyond which it will not improve. In other words, they are now as healthy following their accident as they are likely to get.
During settlement negotiations, the participants will consider the employee’s MMI, since it is not in the best interest of the employee to accept a settlement that doesn’t take into account future medical expenses. If the case goes before a judge, they, too, will look at whether the employee has achieved MMI, as well as other factors such as wage loss, future wages, and any potential disability payments or impairments.
What Is the Highest Workers’ Comp Settlement?
A few workers’ comp benefits payments have been quite high. A case in California, for example, where a woman sustained a catastrophic brain injury during a work-related accident, paid out $11.3 million. But if you have been injured, it is unlikely that you will receive a payment of this size.
What is the Average Payout for a Settlement?
The average payout in a settlement is $21,800, and a typical range might be between $17,000 and $27,000. Those who hire a workers’ compensation lawyer have a slightly higher average payout—$23,500—as opposed to $18,000 for those without representation.
Keep in mind that your payment may include money intended for several different costs, including:
- The medical costs of your work-related injury: This may include costs that you’ve paid yourself for past care, but it might also include projected payments for future medical benefits related to your injury.
- A portion of your lost wages: The amount may vary by state. In New York, for example, the compensation rate for a personal injury sustained on the job is two-thirds of the average weekly pay. This will usually be determined based on the payroll records of your employer for the past year.
- Disability benefits: The extent to which you are temporarily or permanently disabled after an accident will play a role in your workers’ compensation settlement. Your doctor or an independent examiner hired by the insurance company may assess your level of disability, rating it, for example, as moderate (50% disabled) or mild (25% disabled). A person who is ruled to be 100% disabled will most likely receive a higher settlement than someone who is 50% disabled. If you are considered temporarily disabled, these benefits would cease when you return to work, even if you are still receiving benefits for medical costs, such as physical therapy. A permanent disability, meanwhile, would mean that benefits continue indefinitely, as detailed in your settlement agreement.
- Fees for hiring a law firm: If you hire a workers’ compensation attorney, and you win your case and receive the agreed-upon settlement, your lawyer will take a portion of your workers’ compensation insurance payout. Usually, this is roughly 10-20% of the amount you received. Since most lawyers handle these cases on a contingency fee basis, you will owe your lawyer nothing if you lose the case.
What Happens If There’s No Settlement?
If the employee and the insurance company can’t agree on a settlement, or if the claim is denied, the case may go to a workers’ comp hearing. This is essentially a trial in front of an experienced judge to determine a fair resolution. Both sides in the case will present their arguments while agreeing that they will abide by the judge’s decision.
If one of the parties is unhappy with the judgment, it is possible to file an appeal against the entire settlement or even just part of it. Usually, there is a period of time, such as 30 days, when an appeal must be submitted.
Once both parties have accepted the judge’s decision, it should take between 30 and 60 days for you to receive a payment.
How Do I Know I’m Receiving a Fair Settlement?
The most important thing to know when you receive a settlement offer from an insurer is whether the offer includes all costs related to your injury. That includes lost wages as well as future medical treatments—which can sometimes be hard to determine. You’ll want to work closely with your doctor so you understand if and how your injury will need to be treated in the future. A settlement that covers only your past medical expenses may leave you short of what is needed to fully cover your health costs.
If you receive a settlement offer very quickly, and if it seems incomplete or too low for your medical needs, you may want to make a counteroffer. It’s not uncommon for the claims process to include a period of negotiation between the insurer and the injured worker.
If you’re not sure whether the settlement you’ve been offered is fair, it might be time to consult a workers’ comp attorney who is experienced in dealing with claims. Usually, they will offer a free consultation so you can determine if you wish to work with them. They can help to write a reply to the settlement offer that includes a counteroffer of what you feel is a fair payout in your case. If necessary, they can also handle your case if it ends up going before a judge.
Workers’ Comp Protects Employees and Employers
Coping with workers’ comp claims is complex. There are a lot of moving parts and it may take some effort—and a good dose of patience—to see a claim through to the best conclusion, whether you are an employee or a business owner. Claims can take anywhere from a few weeks to a few years to be settled, but the most important thing is to make sure they cover the injured worker’s needs.
It’s good to keep in mind that workers’ comp exists as a way to protect both employees from skyrocketing medical costs and business owners from the challenges of a lawsuit. That makes it one more “tool” in the workbox that can have a positive impact on businesses both large and small.
Not sure you fully understand workers’ comp? You’re not alone. Find out more in our Complete Guide to Workers Comp Payments.