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The Workers’ Compensation Settlement Process

  • By: Lisa J. Pezzano
  • Published: September 28, 2020

How Do Workers’ Comp Settlements Work In NJ? 2023 GuideYour attorney cannot begin the process of negotiating a settlement of your claim until the reports of all of the medical experts who performed permanency evaluations have been received. Thereafter, your attorney and the attorney for the insurance carrier will begin to discuss the nature and extent of your injuries.

What Occurs During a “Pre-Trial Conference,” And Do I Need to Appear in Court for It?

Once all of the expert reports have been received, your attorney will attend a “pre-trial conference” in the Workers’ Compensation Court with the insurance carrier’s attorney. You should not appear in Court unless instructed to do so by your attorney. The conferences are usually held in the chambers of the Judge of Compensation. Only attorneys participate in the pre-trial conference, although some insurance carriers also send claims adjusters to join in the discussions.

At the conference, the parties will discuss all of the issues in dispute, including any gaps in temporary disability payments which were not previously resolved by a motion, as well as any unpaid medical bills or liens. Your attorney will review the history of medical treatment you received with the carrier’s attorney, and point out the objective evidence that you sustained a permanent injury. If you suffered from a pre-existing medical condition, the attorneys will also argue about the credit the insurance carrier should receive for the prior injury. Multiple conferences may be required to review all of the outstanding issues or obtain additional information regarding questions which may arise during a conference. After all of the relevant information has been received and discussed by the parties, the Judge of Compensation will then adjourn your case to enable the insurance carrier’s attorney to obtain settlement authority from his client, the workers’ compensation carrier.

Following the pre-trial conference, the insurance carrier’s attorney will generally write a letter to the claim’s adjuster, setting forth his opinion regarding the settlement value of your claim, and requesting authorization to extend a settlement offer to resolve the claim. Your attorney will contact you once an offer has been received to discuss whether you should accept the offer or make a counter-offer.

What is a Fair Settlement Value for My Permanent Partial Disability Claim?

Most claims for partial permanent disability benefits settle somewhere between the estimates provided by the competing medical experts. The dollar value of the claim will depend on several factors, including:

  • Your average weekly wage at the time of the accident.
  • The amount of lost time from work.
  • The results of objective medical testing.
  • The nature and amount of treatment provided, and whether that treatment was authorized through workers’ compensation.
  • Any permanent work restrictions as a result of the accident, which prevent you from continuing in the same line of work, or require your employer to provide you with ongoing accommodations to do your job.
  • Your level of impairment at both work and home.
  • Any recreational activities you are unable to enjoy as a result of your injuries.
  • A comparison between your pre-accident disability level and current disability level if you had a pre-existing injury.
  • The nature and extent of medical treatment you underwent. Generally, if you had surgery the value of the permanency claim increases.

If the medical testing failed to reveal objective evidence of an injury and you only received minimal medical treatment, you will most likely receive a token settlement offer, since the insurance carrier knows that your case could be dismissed at a Trial. The settlement award should reflect the degree to which your injury has limited your ability to work and engage in your usual activities. Please see the “Permanent Disability” chapter for information on how the dollar amount of the award is calculated.

You must remember that when there is a dispute over a claim, and either side may prevail at Trial, a fair settlement represents a compromise between the highest amount you could be awarded and the possibility of an outright dismissal of the claim.

What Is a Reasonable Time to Wait for A Settlement Offer?

There are a multitude of reasons why a settlement of your claim could be delayed. If the experts were not provided with all of your medical records at the time of your permanency examination, the case may be adjourned in order to obtain supplemental reports from the experts. If you failed to provide the experts with a history of a prior accident, your case will be delayed to obtain those records. Even when all of the records have been provided and the expert reports have been completed, the insurance carrier’s attorney usually needs at least 6 weeks to obtain settlement authority from the carrier to resolve your claim, from the time a settlement demand has been made by your attorney.

If you were employed by a municipality or public-school district, it will take even longer to obtain settlement authority since the employer’s attorney must generally meet with an entire board in order to obtain authorization for a settlement. Additional time will also be required if the workers’ compensation insurance policy provides the insured (your employer) with the right to reject a settlement proposal. Human nature suggests that if your employer harbors animosity towards you it may take more time and effort for the carrier’s attorney to convince them that a settlement offer should be extended as opposed to forcing a Trial on your claim.

Do All Workers’ Compensation Cases End in a Settlement?

Neither party may be forced into a settlement, although some Judges are adept at pressuring one side or the other to “make a deal.” If the parties cannot come to an agreement on their own, they may ask the Judge of Compensation to review the medical reports and provide her opinion on the value of the claim. The Judge may advise the insurance carrier’s attorney that she believes the settlement offer is too low. If so, the insurance carrier’s attorney will generally request an adjournment to consult with the carrier about whether to increase the offer based upon the Judge’s recommendation. On the other hand, the Judge may advise your attorney that your expectations are too high, and that the offer is fair or even too generous. If the Judge finds the settlement proposal to be fair, the insurance carrier is unlikely to increase the offer short of a dramatic change in circumstances.

You may also reject the settlement proposal recommended by the Judge of Compensation if you believe it is unfair. However, keep in mind that the Judge is only likely to change his opinion if your testimony is compelling enough to persuade him that his original evaluation of your claim was incorrect. The vanity of some Judges prevents them from ever admitting that their original settlement analysis was flawed. Such a jurist will reflexively award the same amount at Trial, or could even “punish” the party which rejected their recommendation, by awarding more money if the insurance carrier refused to follow her recommendation or less money if the injured worker rejected her settlement proposal. Although the Judge could certainly be persuaded at Trial that the opinion, she provided at the Pre-Trial Conference was incorrect after listening to your testimony, many Judges reflexively stick to their original estimates of disability to encourage more settlements.

Why Do I Need Appear in Court if I Reached an Agreement With the Insurance Carrier to Settle My Claim?

Unlike a Superior Court claim, in which the plaintiff usually just signs a Release Agreement to memorialize a settlement, a Court Appearance is required to process a workers’ compensation settlement. If the parties attempt to enter into a private settlement, without the approval of the Court, it cannot be enforced by the Division of Workers’ Compensation. The insurance carrier may thus require you to appear in Court before it agrees to pay any settlement award.

If you moved out of state, or for other good cause shown, the Judge of Compensation may permit you to sign an Affidavit in lieu of a making a Court appearance. Unless you are truly unable to make the trip to Court though, most judges will require you to testify in person before approving of any settlement.

Once a settlement has been reached, you will be instructed to appear in Court on the next hearing date for your case. The purpose of the hearing is to: (1) to confirm “on the record” that you understand the settlement offer and wish to accept it; (2) for the Judge make a ruling that the settlement award is fair; and (3) set a baseline for the limitations you suffer due to the injury, in the event it is necessary to reopen your claim.

How Should I Prepare For the Settlement Hearing?

Depending upon the type of settlement which was negotiated, you may not need to speak much at the Hearing, aside from assenting to the terms of the agreement. If the settlement includes the right to “reopen” your claim, you will also need to testify about the nature of your pain and explain your limitations. You should thus make a list of your complaints in the days leading up the Hearing, to help you recall the manner in which your injuries have affected your everyday living.

You must dress appropriately for your day in Court. While there is no need for you to come to Court dressed in a business suit, you must have a neat and clean presentation in order to show respect for the institution. I would advise against wearing shorts, sweatpants, short skirts, revealing tops for woman, flip-flops, baseball hats, or any clothing which looks like you just rolled out of bed. There are Judges who will refuse to process a settlement if a claimant is dressed inappropriately. One Judge directed a claimant to the local Walmart to purchase a new outfit, when she arrived in Court in shorts and a low-cut top. Use your common sense in your choice of a wardrobe to avoid that uncomfortable scenario.

What Happens On The Day Of My Settlement Hearing Process?

You must check in with the security guard who will be stationed at the entrance of the Division of Workers’ Compensation. Have a seat in the waiting area and your attorney will meet you when she is finished checking in with the Judge. Do not be alarmed if your attorney does not come out to meet you immediately. She is most likely in the Judge’s chambers, awaiting her turn for the Judge to review your settlement paperwork, which is done the morning of the Hearing. Your attorney will thereafter present you with the Order Approving Settlement, which sets forth the amount of the settlement award, and the deductions which are set by the Judge for costs and fees. You should compute the net amount you will receive with your attorney, after the deduction of all costs and fees. Your attorney should then go over the questions you will be asked during the Hearing, to obtain the Court’s approval of the settlement.

Since many cases are scheduled every day before each Judge of Compensation, you may need to wait through several other Hearings before your case is called. Each Judge has a different style for handling settlement hearings. Your attorney should make you aware of the procedures followed by the particular Judge assigned to your case. Most Judges will take the settlements involving the largest awards last. Some Judges like to explain the implications of a settlement to you themselves, while others will cede that responsibility to your attorney. To help prepare you for the hearing process and familiarize yourself with the Judge’s style, you may wish to wait in the Courtroom to listen to other settlements being processed.

Before you begin to testify (answer questions under oath in the presence of the Judge), you will be sworn in by the court reporter. You may use the religious book of your preference or merely affirm to tell the truth.

What Is a Section 20 Settlement Award?

The term “section 20” refers to the portion of the Workers’ Compensation Act (NJSA 34:15-20) which outlines the basis for entering into a “lump sum” settlement agreement between the injured worker and the employer. A settlement reached under section 20 forever ends the right of the worker to return to the Court for additional benefits. This type of settlement is only permitted if the accident was denied by the employer, if there is a dispute regarding causal relationship between the accident and injuries, or if it is questionable that the injury was permanent in nature. Since an award under NJSA 34:15-20 is not considered a payment of “compensation,” it may be paid in a lump sum, rather than on a weekly basis.

What Are the Drawbacks of Settling A Claim Under Section 20?

While you may prefer to receive your entire net award up-front, you are giving up significant rights in the future in exchange for such a settlement. Some Judges are reluctant to approve section 20 awards, since they completely terminate the injured workers’ right to receive future medical treatment or benefits related to the accident, through workers’ compensation. If you have private health insurance though, you may consider it a blessing that you do not need to deal with obtaining the approval of a workers’ compensation carrier to receive future medical treatment. Moreover, if there is a new accident or injury, a section 20 settlement does not foreclose the possibility of filing of a new claim.

What Are the Terms of a Non-Section 20 Settlement Agreement?

If the insurance carrier agrees to a settlement of your claim under NJSA 34:15-22 of the Workers’ Compensation Act, you may reopen your case if you need additional medical treatment or if your symptoms significantly worsen within two years of the date of your last workers’ compensation benefit, including authorized medical treatment. Accordingly, the only right you give up by settling your claim at a specific disability level is your right to a Trial, at which time the Judge would hear your testimony, as well as the testimony of the medical experts, to make a determination regarding your level of permanent disability. Orders Approving Settlement generally include language indicating that the Respondent has paid or will pay all reasonable and customary charges for outstanding bills related to authorized medical treatment. The Order will also set forth the degree of permanent disability which the parties agree you suffered as a result of the accident. As outlined in Chapter 9, the percentage of permanent disability awarded corresponds to a specific dollar amount of weekly benefits, based upon the year of the accident, your wages, and the extent of the injury sustained to each body part.

Why Will I Only Be Receiving Part of the Weekly Permanent Disability Benefits Up Front?

Unlike a “lump sum” award under Section 20, which is not considered to be a payment of compensation, all compensation awards in New Jersey are payable on a weekly basis, since their purpose is to replace the injured worker’s income. As outlined in Chapter 9, the percentage of permanent disability awarded corresponds to the number of weeks of benefits to be paid, at a rate of no more than 70% of your average wage. The second page of the Order Approving Settlement (“OAS”) sets forth the number of weeks and weekly rate you will be receiving in the settlement. See, Appendix G for sample OAS. After the settlement is processed, the insurance carrier will pay the accrued benefits to you upfront, less your share of costs and fees.

The term “accrued benefits” refers to the number of weeks which have passed since the date you last received either temporary or permanent disability benefits from the workers’ compensation carrier. For example, if you received temporary disability benefits until March 1, 2016, and the insurance carrier cuts your first check for partial permanent disability benefits on March 1, 2017, you will be receiving approximately 52 weeks of benefits up front at your permanent weekly rate, less your share of costs and fees. If the benefits have not all accrued, the remaining weeks will be paid at your permanent disability rate until the settlement award has been completely paid out.

What Statements Must I Make at the Hearing to Ensure that the Court Approves of the Settlement?

If you are receiving a “section 20” or “lump sum” settlement award, your testimony will be very brief. Your attorney will review the settlement figures with you when you are on the witness stand, and ask you to confirm that you understand that by accepting this settlement your case will be closed forever, with no opportunity to seek additional payments from the insurance carrier or employer for medical bills or any other benefits. If any medical bills remain in dispute, you must pay them out of the proceeds of your settlement, or make a separate agreement with that provider. You must simply affirm that you understand and agree to these terms. If you waiver, the Judge may not approve of the settlement, and instead set your case down for a Trial.

No matter your age, the Court will also require you to testify about your eligibility for Medicare at the settlement hearing. Federal law provides that Medicare’s interests must be taken into consideration whenever a personal injury or workers’ compensation case is resolved, to ensure that the parties are not inappropriately diverting the cost of medical treatment to Medicare in order to make deal. If you are not a Medicare recipient, the inquiry will end there. By contrast, if you are enrolled in Medicare, your attorney will ask you whether any of the medical treatment you received related to the work injury was paid by Medicare, and must present documentation from Medicare confirming that it did not pay any medical bills related to your injury. If Medicare did pay for some medical treatment which may have been related to the work injury, the carrier must obtain a printout of the “conditional payments” made by Medicare, which must be either paid by the carrier or paid out of the proceeds of your settlement award.

Why Must I Testify About My Injuries If My Case Has Been Settled?

Additional testimony is necessary if your case is being settled pursuant to NJSA 34:15-22, with a right to reopen your claim. Beyond affirming that you agree to the terms of the settlement, you will need to explain in Court how the work injuries have affected your life. To finalize the settlement, the Judge of Compensation must find that you fully understand the terms and that the settlement fairly compensates you for your injuries. Keep in mind that although your case has already been tentatively settled, pending the approval of the Court, if you fail to place complaints on the record to justify the payment of an award, the attorney for the insurance carrier could revoke the offer, although this scenario is highly unusual. Accordingly, if you are unable to enunciate any complaints regarding your injuries, the negotiated settlement agreement could fall apart during the Hearing.

How Many Details Must I Share With the Court Concerning the Nature and Extent of My Disability at the Settlement Hearing?

Since you may return to Court if your condition significantly deteriorates or if you need additional medical treatment related to your work injuries, it is important to place some bright lines on the record regarding your limitations due to the accident. For instance, it is not sufficient to merely indicate that you suffer from pain in your lower back. You should describe the pain – is a burning or stabbing pain, or merely an ache? Where precisely do you experience the pain? Is the pain in your mid-back, or predominantly on one side? Does the pain radiate into either one of your legs? How far down each leg? Please see Chapter 12 for an explanation of how your testimony during a settlement Hearing or a Trial will affect your right to receive additional benefits in the event your claim is reopened.

When Will I Start Receiving My Partial Permanent Disability Checks?

At the conclusion of the settlement hearing your attorney will provide you with a copy of the Order Approving Settlement (“OAS”). You should keep the OAS in a safe place for future reference. The Workers’ Compensation Act provides that the insurance carrier must issue the first check for all net accrued benefits within 60 days of the day the Order was entered by the Court. However, most carriers will process the settlement award within 4-6 weeks. Thereafter, depending upon the specific carrier involved, the remaining weekly benefits will be paid out every 2-4 weeks, until the net award is paid in full.

More Information
What Effect Will A Workers’ Compensation Partial Total Disability Settlement Have on My Social Security Benefits?

Federal law provides that before your full retirement age, an individual cannot be paid more than 80% of his average cumulative earnings, known as the “80% ACE” rule. If you receive an award of partial total disability benefits, your social security benefits may thus be reduced if your combined benefits exceed your 80% ACE. The offset which the Social Security Administration (“SSA”) takes for partial permanent workers’ compensation benefits is only applied for the specific dates through which you receive those benefits. Thus, if your workers’ compensation award is all accrued and represents payment for the period prior to the date you began to receive social security benefits, then the SSA will not take any offset. The offset will end after you reach full retirement age, which varies depending on your year of birth, under the guidelines of the SSA.

What Effect Will a “Lump Sum” Settlement Have on My Social Security Benefits?

The same 80% ACE rule applies even if you receive a lump sum settlement as opposed to weekly partial permanent disability benefits. In order to more accurately reflect the reality of a lump sum payment and avoid having your social security benefits being wiped out by a large offset from a lump sum settlement, you should ask your attorney to provide you with a written breakdown of the gross “section 20” settlement, on a monthly basis, stretched over your remaining lifetime. For example, if you are a social security recipient and received a section 20 award of $25,000, your attorney may prepare an addendum to the OAS with Dismissal, outlining the monthly equivalent of the award, for you to provide to the Social Security Administration, i.e.:

Gross Settlement: $25,000.00
Less costs/fees: ($5,000.00)
Net Settlement: $20,000.00
Lifetime Expectancy: 15 years: 180 months
Monthly Net Settlement: $111.11

While the SSA is not bound by the findings of the New Jersey Compensation Court, or the analysis of your attorney, if the calculation makes sense, the federal government will generally accept that amount as the offset.

For more information on Workers’ Compensation Settlement Process, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (908) 923-0020 today.

Lisa J. Pezzano

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