Compromise & Release Agreements: Their Effect on Workers’ Compensation Settlements

If you’ve been injured at work or someone you love has suffered an injury while working, you probably have a workers’ compensation case.

During this process, you may hear about compromise and release agreements. You need to understand what these agreements are and how they work, as well as the effect they can have on any settlement you make with the workers’ compensation insurance.

This is a complex part of worker’s compensation that the average person will find difficult to read and understand. However, we can help you decipher the legalese with the information presented here.

What are Compromise & Release Agreements?

A compromise and release agreement is also commonly referred to as C&R. It is a way the workers’ comp insurance can settle your claim without a lengthy process.

A C&R is most often seen in serious injury cases, especially those which require long-term medical attention. By settling, you avoid lengthy litigation which can take your focus away from recovery. On the other hand, you will most likely not be able to add to the claim even if your costs increase.

What a C&R Pays

A compromise and release agreement provides for different types of payment. Some of the features of this settlement include the following:

  • Allows for payment of lost wages
  • Pays for medical expenses
  • Payments may be made directly to the medical care facility
  • Payments may be made to the injured worker in a lump sum or installments
  • Past lost wages along with future wage losses if the injury is permanent and limits the person’s ability to return to work

In essence, a compromise and release provides a payment agreement for your injuries and the cost of treatment and loss of wages to you while releasing the workers’ comp insurance company from further responsibility. It’s important to know what provisions the agreement includes so you can make an informed decision about whether it is best for your situation.

How Workers’ Compensation Compromise & Release Agreements Work

Not all states have C&R and those that do have their own laws for how they work.

In Pennsylvania, chapter 131 of the state code details compromise and release agreements and their legal requirements. Specifically, 131.57 addresses this issue.

C&R Workers’ Comp Must be Approved by Judge

This act states that a C&R may include all liability in the case. This includes not only medical costs but lost wages and any other aspects which may be considered in a settlement. The C&R must be presented to a judge at a hearing where they can decide to approve or reject the agreement despite the fact that the injured worker agrees to the conditions.

The judge must make a written decision on the compromise and release agreement within 30 days of the hearing. At the hearing, the attorney for the injured worker will ask questions along with the attorney for the insurance company. Even the judge may ask questions of the worker. The goal of all these questions is to make sure the person understands the terms of the agreement.

The judge cannot base their decision on whether the terms are in the worker’s best interest, only that they understand what they are agreeing to. In fact, it is generally understood that the insurance company is offering a settlement that is lower than what they believe they would pay if the claim remains open. However, many injured workers don’t understand this concept or the fact that they may incur more costs in the future.

When a Worker’s Compensation C&R Can Be Filed

The workers’ comp insurance will write up the C&R settlement offer, and they may do so at any time after the worker files the claim. The injured worker will read the offer and decide whether to accept it.

If they choose to accept it, then they present the settlement before the court. These agreements are written in legal language, which makes it difficult for the worker to understand. It’s advisable for them to hire an experienced attorney to help them understand what they are agreeing to.

The state allows the worker’s compensation agency to offer a settlement after four months from the date of injury. However, the worker may not know the full extent of their injury if it is serious at this time.

In fact, many medical experts say it can take at least a year to determine the future impact and limitations of a major injury. The risk with accepting a C&R is doing it too soon before the worker understands the lifetime costs of the injury.

Types of Provisions Included in a C&R Workers’ Comp Settlement

The basic idea of a compromise and release agreement is for the workers’ compensation insurance to offer an amount of money to the injured worker in return for no future requests for money in this claim. However, there are various provisions which may be included in one of these settlements.

Lump Sum or Structured Payments

One of the primary inclusions is whether the person receives a lump sum payment or a structured settlement. In a lump sum payment, the injured worker receives one large amount of money, usually within 30 days of court approval. Most settlements pay out in a lump sum.

A structured settlement is designed for major injuries which require long-term care. The payments are made over time and may be made monthly, annually or even every few years.

Partial Settlement

Pennsylvania allows for a commutation of compensation. This process allows you to receive a lump sum of your lost wage benefits in a settlement without giving up other benefits, such as medical care. The total benefits often discount to current value. You may be able to include stipulations which allow you to receive future payments or for medical payments to continue as expenses incur.

Other Documents

In addition to signing the actual agreement, the claimant may be asked to sign another document which prevents them from discussing the case with the media or other parties. They may also need to sign a document stating they do not have child support payments or any in arrears. They may be asked to sign a document of resignation from the employer.

How C&R Affects Workers’ Comp Settlements in Pennsylvania

Signing a C&R can impact how much you receive in your workers’ comp compromise and release settlements in Pennsylvania. Take the following ideas into consideration before deciding whether this agreement is right for you.

  • A person may settle for less than what they will need to treat their injury or to adjust to life with a permanent disability.
  • The reduction in pay may be permanent and affect the lifestyle the person is able to maintain.
  • If both parties agree upon the settlement before the final diagnosis, the injured worker may not have figured a lifetime of lost wages into the agreement.

Once the judge approved the settlement, the decision is final. The person cannot reopen the claim or file for new benefits. The decision may also impact future benefits with Social Security and Medicare. For this reason and many others, it is advisable to talk to a workers’ compensation attorney before agreeing to any settlement.

Is a Compromise and Release Agreement Good for the Worker?

While there are a lot of legal and financial ramifications for the worker to accept a C&R, it can be the right decision for some people. If there are concerns about the employer or insurance fighting the claim in the future, it might be beneficial to negotiate a settlement. On the other hand, it can limit financial assistance if you incur more expenses than expected after the settlement is complete.

Benefits of Settlement

One major benefit is avoiding the cost of litigation which can be quite expensive and time-consuming. It also allows you to see the doctor of your choosing and make more of your own decisions about your medical care than you would if workers’ comp remained involved in the claim. Many times, the decision to settle is not just about the money but about the ability to move forward with your life in your own way.

Risks with a Compromise and Release Settlement

The biggest risk in accepting a C&R is if you agree to a low offer and aren’t financially able to pay for your medical expenses and care in the future. A workers’ compensation attorney, such as those at Krasno Krasno & Onwudinjo, can review your case, including medical records and even request an evaluation to determine long-term impact to your future wage-earning ability.

Once they have the information they need, the attorney can offer legal advice on whether you should accept a settlement offer and how much you may be eligible to receive. It’s important to note that workers’ comp compromise and release does not include pain and suffering; only medical expenses and lost wages.

The attorney will help you understand what you are agreeing to and what the C&R states. They will represent you to the workers’ compensation insurance and negotiate a settlement that is right for you. In some situations, they may even advise against accepting a settlement.

If you’ve been injured at work , contact a workers’ comp lawyer immediately. Let them help you through the process to protect your rights even before a settlement offer or compromise and release is presented to you.