How to Maximize a Settlement in Louisiana Workers Compensation

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Number 1: Hire an Experienced Workers Compensation Attorney Before a Settlement in Louisiana Workers Compensation

As stated above, an injured employee should always hire an experienced Louisiana workers compensation attorney to handle his or her settlement.

Again, not only will the attorney be able to obtain much more money for the employee even after a 20% attorney's fee, but the attorney will handle everything and provide the employee with peace of mind that everything was handled properly in order to maximize the employee's settlement amount.

An experienced Louisiana workers compensation attorney can maximize the amount that the injured worker will receive in settlement through a number of ways, including:

    1. Timing the settlement properly;
    2. Determining the true value of a claim;
    3. Using skillful negotiation tactics; and
    4. Properly handling a mediation.

An Experienced Attorney Knows How to Time a Settlement for Maximum Recovery 

Timing a workers compensation settlement is extremely important in order to maximize the employee's settlement amount, and really the only way that an injured employee can properly time a settlement is to retain an experienced Louisiana workers compensation attorney to handle his or her settlement.

From the perspective of an injured employee, it is important to understand that the value of a workers compensation claim continues to steadily decline, unless additional surgeries are required.

In fact, from the point of view of the employee, there is a real incentive to settle at the "optimum" value (or rather as soon as the employee has sufficiently recovered from surgery but not yet returned back to work) in order to maximize the employee's recovery, due to the serious negative effects that vocational rehabilitation can have on the value of a claim.

Nonetheless, it is usually in the best interest of an injured employee to have any recommended surgeries before consideration of settlement, since: 

    1. It can be difficult to accurately estimate the potential cost of a surgery, due to ever-shifting costs of medical facilities, providers, and/or surgical supplies;
    2. It can be difficult to accurately estimate any pharmacy charges necessary for pre-surgery and post-surgery discharge needs; and
    3. It can be difficult to accurately estimate any unforeseen developments and consequences related to the surgery.

Also, the employee's attorney should always present an initial settlement demand to the workers compensation insurance company before the workers compensation insurance company initiates settlement talks, in order to prevent the insurance company from setting the parameters for settlement negotiations.

Once the workers compensation insurance company determines how much an injured employee's claim is worth - and sets insurance "reserves" in that amount - it can be extremely difficult to get the insurance company to change that figure.

And, waiting too long to settle a claim can be a big problem for the employee, because if the employee fully (or mostly) recovers or finds another job, then the workers compensation insurance company can claim that little or no settlement is required.

But settling too early usually means that the injured employee is selling himself or herself short, because likely the full extent of the employee's injuries and disabilities have yet to be demonstrated to the workers compensation insurance company.

But an experienced attorney can present a well timed settlement offer - along with the proper medical evidence and legal claim analysis - in order to recover a maximum settlement for an injured employee.

An Experienced Attorney Can Properly Evaluate a Claim to Determine Its True Settlement Value

One of the most important things an experienced Louisiana workers compensation attorney can do for an injured employee is to provide a thorough and accurate evaluation of the employee's workers compensation claim.

In other words, before settlement negotiations even start (and in order to formulate the best settlement negotiation strategy) the employee's attorney should provide the employee with a specific dollar figure (or range) and inform the employee that this is the value of the employee's workers compensation claim.

The employee's attorney should base this evaluation of the employee's workers compensation claim on the following:

    1. The employee's current medical condition;
    2. The employee's future medical treatment options and expenses;
    3. The employee's future lost wages and ability to return to work;
    4. The employee's vocational rehabilitation status; and
    5. Louisiana workers compensation law.

This evaluation of the employee's workers compensation claim can serve as the basis of a settlement demand, but the amount demanded should always be much higher than the actual value of the claim, so as to leave room for negotiation.

An Experienced Attorney Knows How to Negotiate for a Maximum Settlement

Properly handling the negotiation process is another extremely important service that an experienced Louisiana workers compensation attorney can provide for an injured employee.

Negotiation can be a very tricky process, and really the best way to know how to handle negotiation is through experience and training.

An experienced Louisiana workers compensation attorney will know when and how to initiate the negotiation process, when and how to respond to the counter-offers of the workers compensation insurance company, when and how to "test" the workers compensation insurance company, and when and how to conclude the negotiation process.

And really, an injured employee who tries to handle the negotiation process is almost always leaving a significant amount of money on the table. 

An Experienced Attorney Can Maximize Settlement During a Mediation

A mediation conference in Louisiana workers compensation is an ideal opportunity to obtain a maximum settlement, but usually that maximum settlement can only be obtained at mediation when the mediation is handled properly by an experienced Louisiana workers compensation attorney.

In Louisiana workers compensation, a mediation is an informal meeting of the injured employee (ideally with the injured employee's attorney) and the attorney for the workers compensation insurance company, with a neutral individual - called a mediator - who attempts to resolve the issues that are in dispute.

The mediator is a neutral party and does not take sides; instead the mediator's purpose is to settle the disputed issues, or even the entire claim, without the need for further litigation.

Mediation is voluntary by the parties unless otherwise ordered by the workers compensation Judge.

Mediation is an opportunity for an injured employee to settle his or her disputed issues - or even settle the employee's entire claim - within the Office of Workers Compensation (OWC) system at no cost, or at a private mediation, before those disputed issues go to trial.

However, properly handling the mediation process can be tricky, and involves a great deal of preparation (including a confidential position paper) and negotiation, and therefore should be handled by an experienced Louisiana workers compensation attorney to obtain a maximum settlement for the injured employee.

Number 2Know and Understand All the Settlement Options in Louisiana Workers Compensation

An injured employee cannot fully maximize the employee's settlement unless the employee and the employee's attorney know and understand all the settlement options available to the employee.

Compromise Settlements and Lump Sum Settlements

Under Louisiana workers compensation law, there are two general types of settlements of workers compensation claims:

    • Compromise settlements; and
    • Lump sum settlements.

A lump sum settlement occurs when there is no real dispute that the claim is owed, and the parties simply agree to payment of the discounted value of future benefits in exchange for a full and final release of the workers compensation insurance company from any further liability. 

A compromise settlement, unlike a lump sum settlement, resolves a dispute between the employee and the workers compensation insurance company as to how much, if anything, the employee is owed.

A compromise settlement is the most common type of settlement, due to the frequency in which workers compensation insurance companies dispute claims.

A compromise settlement differs from a lump sum settlements in that a compromise settlement relates to uncertain values, and therefore may be for any amount agreed on by the parties, such that the limitation to a discount rate of eight percent or less does not apply (unlike lump sum settlements). 

Upon submission of the compromise settlement to the workers compensation Judge for approval, the following requirements must be met:

    1. All parties must sign a joint verified petition to the workers compensation Judge for approval or must recite the terms of the agreement and acknowledgment by the parties in open court in a manner capable of being transcribed from the record of the proceeding.
    2. If the worker is represented by counsel, and if there are affidavits of the employee or his dependent attached certifying that counsel has explained the rights of the employee or dependent and the consequences of the settlement to him and that the employee or dependent understands those rights and consequences, then the workers compensation Judge shall approve the settlement by order.
    3. If the worker is not represented by counsel, then the workers compensation Judge is required to “determine” whether the employee understands the compromise.
    4. If the workers compensation Judge finds that the worker does understand the compromise, then the workers compensation Judge shall “approve it by order, unless he finds that it does not provide substantial justice to all parties.”

Lastly - but very importantly - all compensable medical expenses incurred prior to settlement must be paid unless the settlement provides otherwise.

Lump sum settlements are rare in Louisiana workers compensation.

One reason for this is because of the penalty for discounting a lump sum settlement by greater than 8%; another reason for this is because a compromise settlement can be disguised as a lump sum settlement, which can result in the penalty for discounting a lump sum settlement by greater than 8%, if so determined.

In other words, if a Louisiana workers compensation Judge found that a settlement labeled as a compromise settlement was, in fact, a lump sum settlement, and the discount on that settlement was greater than 8%, then the workers compensation insurance company would need to pay the penalty of one and one-half times the compensation which would have been due but for such lump sum settlement. 

Structured, Contingent, Combination and Partial Settlements

In addition to lump sum settlements and compromise settlements, there do exist additional types of settlements, such as:

    • A structured settlement is a settlement where the injured employee places all or some of the employee's compensation money into a structured settlement or annuity which is paid out over a set period of time in a series of periodic payments. A structured settlement allows the employee to earn interest and guarantees that the employee will have money available in the future.
    • A contingent settlement is a settlement where the payout is dependent on uncertain events, such as the settlement of a death claim in which future payments can be periodic and contingent upon the beneficiary's living to a certain age. Contingent settlements frequently occur in the context of an ongoing third party claim, wherein the settlement is incorporated into a “high-low” contingency, whereby the amount of the workers compensation payment by the employer is contingent upon the jury's award. However, contingent settlements are not recommended, if avoidable, because contingent settlements can lead to unforeseen trouble after the agreement is finalized.
    • A combination settlement is a settlement where there is an agreement between the employee and the workers compensation insurance company that part of the claim is compensable, while the rest is disputed. Thus, a combination settlement is a combination of a lump sum settlement and a compromise settlement. An example of a combination settlement is a settlement that compromises claims for past and/or future indemnity while allowing full but discounted payment of the employee's undisputed future medical expenses.
    • Finally, a partial settlement is a settlement where some of the employee's claims are settled, but some are not. An example of a partial settlement is where an employee's past and/or future lost wage (indemnity) claims are settled - either through a lump sum settlement or a compromise settlement - but this same employee's claims for medical expenses and treatments are left open and continue to be paid (or disputed) by the workers compensation insurance company.

Partial Settlements Versus Full Settlements

Generally, compromise settlement agreements in Louisiana workers compensation fall into three categories:

    1. Full and final settlement agreements;
    2. Partial full and final settlement agreements; and
    3. Settlement of only the specific disputes identified in the Form 1008 Dispute Claim for Compensation.

All three of these compromise settlement agreement are regularly used, as follows:

    • A full and final settlement ends and settles the entire workers compensation claim, including all benefits and all disputes between the employee and the workers compensation insurance company. A full and final settlement lays the entire claim to rest, and allows the employee to move on with his or her life, without ever having to deal with the workers compensation insurance company ever again. Many cases can be settled full and final even where the employee and the workers compensation insurance company cannot settle the Form 1008 dispute or agree on smaller issues. A full and final settlement should be the goal in all but a few select cases.
    • A partial full and final settlement occurs where either the medical benefits portion of the claim or the lost wage (indemnity) portion of the claim is settled, but not both. A partial full and final settlement allows the termination of one side of a workers compensation claim and normally occurs where very few disputes exist on the other side of the workers compensation claim. Partial full and final settlements frequently occur when the lost wage (indemnity) portion of the claim is settled but not the medical benefits portion of the claim, due to the fact that the value CMS places on a Medicare Set-Aside (MSA) makes settlement of the medical side of the claim impractical. 
    • Settlements of only the specific disputes identified in the Form 1008 Dispute Claim for Compensation allow the employee and the workers compensation insurance company to terminate the litigation (and its costs) while narrowing the scope of the issues remaining in the claim. The disadvantage of this type of settlement is that the remainder of the claim (outside of the specific disputes identified in the Form 1008 Dispute Claim for Compensation) still needs to be handled and resolved. This type of settlement can address a plethora of issues, but most often the battle is over a small number of issues (such as wage rate, back compensation or penalties and fees), but the settlement should end any issues that have been the subject of litigation.

Although the best type of settlement is whatever type of settlement benefits each individual injured employee the most, knowing what type of settlement benefits each specific injured employee the most requires understanding the advantages and disadvantages of each type of settlement, whether that be a partial settlement of currently disputed issues, or an indemnity only settlement, or a full and final settlement.

Nonetheless, generally speaking, the type of settlement that seems to most often benefit the injured employee the most is a full and final settlement that resolves all the issues in the workers compensation claim.

Number 3Know When Exactly to Time a Settlement in Louisiana Workers Compensation

The timing of a settlement in Louisiana workers compensation is extremely important, in order to maximize the value of the settlement.

As noted above, it is usually in the best interest of an injured employee to have any recommended surgeries before consideration of settlement, since:

    1. It can be difficult to accurately estimate the potential cost of a surgery, due to ever-shifting costs of medical facilities, providers, and/or surgical supplies;
    2. It can be difficult to accurately estimate any pharmacy charges necessary for pre-surgery and post-surgery discharge needs; and
    3. It can be difficult to accurately estimate any unforeseen developments and consequences related to the surgery.

So there is certainly the concern that the injured employee may settle his or her workers compensation claim too early, which is usually before the full extent of the employee's disability is known.

In fact, the workers company insurance company will frequently offer the employee a settlement before the employee's case is ready to settle, in order to low-ball the employee before the employee has retained an attorney.

But even more importantly, it is extremely important to understand that the value of a workers compensation claim continues to steadily decline, unless additional surgeries or procedures are required.

Thus, there is a real incentive to settle at the "optimum" value (or rather as soon as the employee has sufficiently recovered from surgery but not yet returned back to work) in order to maximize the employee's recovery, due to the serious negative effect that vocational rehabilitation can have on the settlement value of a claim.

In fact, the clock is running against the injured employee, even when the employee is engaged in settlement negotiations.

And, if the workers compensation insurance company has presented a settlement offer to the employee before the employee's attorney has presented a settlement offer to the insurance company, then the employee has already waited too long, because the insurance company has already set its settlement parameters and determined its settlement value before even hearing the side of the employee.

So the employee's attorney should always present a settlement offer to the insurance company first.

And, an injured employee has also waited too long if the employee has already recovered, or has already begun vocational rehabilitation, or has already found another job.

When is It Too Late to Settle a Workers Compensation Claim? 

Technically, unless the time limits (or prescription periods) run out on an injured employee, it is usually never too late to settle a Louisiana workers compensation claim.

However, in the course of a Louisiana workers compensation claim, it often can become too late to settle a claim for maximum value.

Generally speaking, over time the settlement value of a Louisiana workers compensation claim forms the shape of an arch; after the accident, the settlement value will generally increase over time, gradually hit a peak maximum value, and then gradually decrease until it hits little or nothing.

So again, it often can become too late to settle a claim for maximum value.

Generally speaking, if the workers compensation insurance company has presented a settlement offer to the employee before the employee's attorney has presented a settlement offer to the insurance company, then the employee has already waited too long.

Or, if an injured employee has mostly recovered from his or her disability, then the employee has already waited too long.

Or, if an injured employee has been released to return to work, then the employee has probably already waited too long.

Also, an injured employee has definitely waited too long if:

    1. The employee has begun vocational rehabilitation;
    2. The employee has undergone a Functional Capacity Evaluation (FCE);
    3. A Labor Market Survey has been performed for the employee; or
    4. The workers compensation insurance company has reduced or eliminated the employee's lost wage (indemnity) benefits.

But again, in all of these scenarios, an injured employee can still settle his or her workers compensation claim; however, the employee has waited too long to settle the claim for maximum value.

Maximum Medical Improvement and Settlement Timing 

An excellent time to attempt a workers compensation settlement is after the injured employee has completed medical treatment and the employee's treating physician determines that the employee has reached a condition known as at Maximum Medical Improvement (MMI).

In fact, in a Louisiana workers compensation claim, settlement most frequently occurs once a determination of Maximum Medical Improvement has been made by the injured employee's treating physician.

And because the employee's medical condition is generally not going to improve, both the employee and the workers compensation insurance company should be able to properly evaluate the settlement value of the employee's claim, since both sides should be able to estimate and predict the employee's future lost wage (indemnity) benefits and future medical expenses.

In Louisiana workers compensation, Maximum Medical Improvement - or “MMI” for short - is generally defined as the point at which the injured employee's medical condition has stabilized and is unlikely to improve any further.

In other words, Maximum Medical Improvement means that the injured worker has reached a state where his or her medical condition cannot be improved any further, or that a treatment plateau in the employee's healing has been reached.

Also, a determination of Maximum Medical Improvement can be positive for an injured employee, because it can signal that the employee's workers compensation claim is near an end and that settlement is likely to occur soon, since the employee's medical situation will no longer be changing or improving.

The workers compensation insurance company will likely be eager to pursue settlement negotiations at this point, and ideally the employee's attorney should already have presented a settlement demand in the matter.  

But if either the injured employee or the workers compensation insurance company fails to recognize that the employee has reached Maximum Medical Improvement, then unnecessary costs, expenses and time can be added to a workers compensation claim.

Nonetheless, a determination of Maximum Medical Improvement remains a very important event in the course of any Louisiana workers compensation claim, and the injured employee and the employee's attorney must recognize this determination as a prime opportunity to reach a full and final settlement with the workers compensation insurance company.

Number 4Know the Precise Correct Value of a Claim When Settling in Louisiana Workers Compensation

Before engaging in any settlement negotiations, it is incredibly important for an injured employee to retain a qualified Louisiana workers compensation attorney in order to perform a proper and thorough evaluation to determine the correct settlement value of the employee's claim.

A general outline for calculating the correct settlement value of a Louisiana workers compensation claim is as follows:

    1. ASSESSMENT OF THE INJURY/DISABILITY STATUS
    2. INDEMNITY BENEFITS
      1. STEP 1: Determine the Average Weekly Wage (AWW);
      2. STEP 2: Determine the type of disability benefit;
      3. STEP 3: Determine whether there are any credits / offsets applicable; and
      4. STEP 4: Apply discount rates (actual discounts and time discounts).
    3. MEDICAL BENEFITS
      1. Past Medical Benefits
      2. Future Medical Benefits
    4. OTHER DETERMINATIONS FOR SETTLEMENT VALUE: T.R.E.E. (Time, Risk, Economics, Emotion) 
      1. Causation
      2. Intoxication Defense
      3. Future Value of SEBs
      4. Appealable Value
      5. Penalties and Attorney's Fees

Calculating the Settlement Value of the Lost Wage Portion of a Claim

The general steps to evaluating the settlement value of the lost wage (or indemnity) portion of a Louisiana workers compensation claim are as follows:

    • STEP 1: Determine the Average Weekly Wage (AWW).
    • STEP 2: Determine the type of disability benefit.
    • STEP 3: Determine whether there are any credits / offsets applicable.
    • STEP 4: Apply discount rates (actual discounts and time discounts).

Step 1: Determining the Injured Worker's Average Weekly Wage (AWW).

In order to calculate any type of lost wage benefit, an injured employee must determine his or her Average Weekly Wage.

In most cases, the workers compensation insurance company will provide an injured worker with a weekly lost wage (indemnity) check for 2/3 (two-thirds) of the employee's average weekly wage, if the employee is physically unable to work due to an injury on the job.

However, these lost wage benefits are subject under Louisiana law to both a maximum compensation rate and a minimum compensation rate cap.

An employee's average weekly wage is typically based upon the employee's earnings for:

    1. The 4 full weeks before the employee's injury or accident for hourly workers;
    2. The 26 weeks before the employee's injury or accident for commission workers; and
    3. The 52 weeks before the employee's injury or accident for salaried employees.

But the basic calculation for lost wages is subject to many exceptions and variations.

A correct calculation of an employee's Average Weekly Wage is extremely important for a correct evaluation of a claim, because if there is a dispute over the AWW, there can be a significant difference in claim evaluations.

For example, an incorrect calculation of an employee's Average Weekly Wage can have a significant effect on the value of an employee's Supplemental Earnings Benefit (SEB) claim.

Step 2: Determining the Type of Disability Benefits.

In Louisiana workers compensation, there are four types of lost wage disability benefits:

    • Temporary Total Disability (TTD) Benefits: TTD benefits are lost wage (indemnity) benefits for the injured employee who is unable to work at all. These benefits provide weekly income equal to two-thirds of the employee's average weekly wage, and continue until the employee is able to work again.
    • Supplemental Earning Benefits (SEB): SEBs are lost wage (indemnity) benefits for the injured employee who is able to return to some type of work, but unable to earn at least 90 percent of the income that the employee was earning prior to the accident. These benefits provide supplementary weekly income so that the employee receives a total income of two-thirds of the employee's average weekly wage. These benefits continue for up to 520 weeks (or 10 years), but this includes a credit for the weeks of indemnity benefits paid. 
    • Permanent Partial Disability (PPD) Benefits: PPD benefits are lost wage (indemnity) benefits are defined and limited to a specific number of weeks, based on the body part injured and the anatomical loss found by the doctor.
    • Permanent Total Disability (PTD) BenefitsLost wage (indemnity) benefits continue indefinitely for the injured employee. But the employee's injury must be so severe that that he or she can never work again. 

Typically, an injured worker will receive a different type of benefit at different point during his or her workers compensation claim, though an injured employee can only receive one type of benefit at any given time.  

The type of indemnity benefits will determine:

    1. How much money the employee will receive in benefits;
    2. How the benefits are calculated; and
    3. How long the employee can receive the benefits;

So it is extremely important for the employee to know what type of benefits the employee is receiving or should be receiving, and to make sure the employee is receiving the correct type of lost wage benefit.

Step 3: Determining Whether Any Credits or Offsets Are Applicable.

The next step for determining the settlement value of an employee's workers compensation claim is to determine whether any credits or offset are applicable to the lost wage (indemnity) benefits calculated thus far.

Typical credits or offsets applicable here include:

    • A credit/offset for past workers compensation indemnity benefits paid. Concerning a credit/offset for past workers compensation indemnity benefits paid, this is important when determining if the employee is owed any Permanent Partial Disability (PPD) benefits, if TTD, SEB, or PTD benefits have already been paid. In fact, depending on the extent of the injury and the return to work status, most Permanent Partial Disability (PPD) claims are rather insignificant because the workers compensation insurance company will receive an offset or credit for the weeks of indemnity benefits that have already been paid.
    • A credit/offset for benefits under disability benefit plans funded by an employer. Concerning the credit/offset for benefits under disability benefit plans funded by an employer, the credit/offset will exist in the proportion funded by an employer.
    • The Social Security Disability offset of workers compensation benefits. Concerning the Social Security Disability offset of workers compensation benefits, an employee's Social Security Disability benefits will be reduced so  that the total of an injured employee's earnings through workers compensation combined with the employee's Social Security Disability benefits cannot be more than 80% of the employee's original earnings. 
    • The Social Security Reverse Offset for Permanent Total Disability (PTD) benefits only. Concerning the Social Security Reverse Offset for Permanent Total Disability (PTD) benefits only, the offset is determined by adding the total family benefits ("TFBs") received from Social Security (before any offset has been taken by Social Security) and the employee's monthly workers compensation benefits, and then subtracting from the result either the TFB or 80% of the average current earnings ("ACE") (a figure calculated by Social Security), whichever is greater. 

Step 4: Applying Discount Rates Over Time.

In order to properly determine the correct settlement value of an employee's workers compensation claim, the employee must apply certain discount rates to the lost wage (indemnity) figures determined thus far.

Generally speaking there are two types of discounts that should be applied to lost wage benefits: actual discounts and time discounts.

Actual discounts are discounts to lost wage (indemnity) benefits on the basis that an employee may not expect to actually receive those benefits.

    • For example, if an injured worker received $500 a week in workers compensation indemnity benefits, and has 5 years of Supplemental Earnings Benefits (SEBs) remaining, then the value of those full remaining SEBs is $130,000.00.
    • However, if this same employee and this employee's attorney determine after a thorough analysis that - due to the employee's medical status and work skills and abilities - the employee in all likelihood will only be able to receive 2 more years of Supplemental Earnings Benefits (SEBs), even those 5 years are technically possible, then this employee and his or her attorney should apply an "actual discount" from 5 years of SEBs to 2 years of SEBs, and calculate the employee's correct settlement value of the employee's lost wage (indemnity) benefits to be $52,000.

An injured employee will need to apply a discount over time because the workers compensation insurance company is very rarely, if ever, going to give the employee 100% of the value of the employee's claim for future benefits over time.

Basically, why would the workers compensation insurance company agree to pay 100% of the money it might owe over a long time, and simply give up the interest and investment it could earn on that money while the employee waits for it?

Thus, when valuing the future lost wage (indemnity) benefits of a workers compensation claim, the employee should use a discount value calculator.

    • For example, if an injured worker received $500 a week in workers compensation indemnity benefits, and has 5 years of Supplemental Earnings Benefits (SEBs) remaining, then those full remaining SEBs is $130,000.
    • But, using a discount value calculator at a discount rate of 4%, this same employee should receive $106,850.52 for the employee's remaining Supplemental Earnings Benefits (SEBs); and using a discount value calculator at a discount rate of 8%, this same employee should receive $88,475.82 for the employee's remaining SEBs.

The actual amount of the time discount should be negotiated, which typically involves the employee's attorney starting the negotiation with undiscounted numbers in an effort to allow the parties meet somewhere in the middle.

Calculating the Settlement Value of the Medical Portion of a Claim

After properly evaluating lost wage (indemnity) benefits, in order to properly determine the correct total settlement value of an employee's workers compensation claim, the employee must properly evaluate past and future medical expenses.

In order to calculate the medical settlement value of a workers compensation claim (which is based on future medical expenses), it is of the utmost importance to determine whether the injured employee is a Medicare recipient or has a reasonable expectation to receive Medicare in the future.

Importantly, the injured employee will likely be required to have a Medicare Set-Aside (MSA) prepared on the employee's behalf by a third-party company hired by the workers compensation insurance company.

Critically, this Medicare Set-Aside (MSA) will provide an estimate of the cost of the employee's future medical expenses, which is exactly what the medical portion of the settlement value of a workers compensation claim is based upon.

Past and Future Medical Treatments and Expenses

Without the potential clarity of a Medicare Set-Aside (MSA), an employee's past medical treatment history and past medical payment history can help dictate what the employee's future medical treatment and expenses will be.

However, more often than not, there is no exact way to determine an injured employee's future medical needs and expenses.

The employee's attorney must spend the time with the employee on this evaluation and keep the employee involved during this process to come up with reasonable estimates over time to determine future medical costs.

And again, an employee's past medical treatment history and past medical payment history can help determine what the actual medical expenses are that are related to the accident/injury, and thus what the employee's future medical treatment and expenses should be.

An employee's past medical treatment history and past medical payment history can help identify common issues with past medical benefits, and can help identify any potential issues for possible trial (even thought the issues could still negotiated).

And an employee's past medical treatment history and past medical payment history can help identify the cost and expenses of any of the employee's future medical treatments, especially if the future treatments will be similar to the past treatments or handled by the same providers.

Other Determinations for Settlement Value (T.R.E.E.)

After properly evaluating lost wage (indemnity) benefits and future medical expenses, in order to properly determine the correct settlement value of an employee's workers compensation claim, the employee must properly evaluate other considerations important to settlement value.

These other considerations important to settlement value - commonly referred to by the acronym TREE (Time, Risk, Economics, Emotion)- include the following:

    • Time.
      • In a disputed claim that is set for trial, the time and process of navigating the legal system is always a consideration in terms of settlement value.
        • For employees who are being paid benefits, the value of the claim over time, generally goes down, not up!
        • For employees who are not being paid benefits and are awaiting a trial date and possibly an appeal date, the value of the claim might depend on how long the employee can go without any money or treatment.
      • If the injured worker dies during the pendency of a claim and before settlement, there is no payout or settlement unless there is a valid death claim.
    • Risk. 
      • Causation: current defenses, future subsequent intervening accidents
      • Defenses: intoxication defense, fraud
      • Future value of the claim
    • Economics.
      • The employee's interests in settling and financial situation
      • Litigation expenses, social security benefits, disability insurance, and third party claims
    • Emotion
      • How well will the employee be able to testify at trial?
      • Will the employee's witnesses be good witnesses at trial?
      • Will the insurance company's witnesses be good witnesses at trial?

Number 5: Know All the Third Party Sources of Income When Settling a Claim in Louisiana Workers Compensation

Another consideration for an injured employee to keep in mind when considering settlement is whether there are any other sources of income from a third party.

The third-party claim may be one of good or bad quality, and if the third party claim is strong on liability, damages and applicable insurance, then the injured employee may prefer to leave at least the medical portion of the claim open, so as to provide a source of payment for medical expenses which will be incurred while the third party claim is pending.

If, on the other hand, the third party claim is relatively weak, then it may have more value as a bargaining chip in settlement negotiations with the workers compensation insurance company, since the workers compensation insurance company has the right to recover from any liable third party.

If the value of the third party claim is extremely high, it usually makes sense for the employee to settle his or her workers compensation claim at a discount if he or she can retain all of the proceeds of the third party claim.

In some cases, the employee may have self-funded disability insurance, and (depending on the terms of the disability policy) the value of the insurance may be significant enough to provide additional incentive for the employee to settle his workers compensation case and continue to collect disability insurance.

Social Security Disability (SSDI) is another source of income commonly seen with significant injuries, but SSDI will take an offset for money received by the injured employee from the employee's workers compensation payments, unless the employee is permanently and totally disabled, in which case the workers compensation insurance company is entitled to a “reverse offset.”

Finally, in the case of a death claim, though periodic payments are owed to eligible dependents of a deceased employee, there may also be available life insurance.

Depending on the amount of life insurance, there may or may not be enough proceeds to replace the employee's expected future income, in which case, the dependents may well prefer to liquidate and settle the death claim, while retaining the life insurance proceeds. 

Number 6: Do a Full Cost Benefit Analysis Before Settling a Louisiana Workers Compensation Claim

An excellent way to determine whether a workers compensation settlement make sense is to consider a simple cost-benefit analysis.

In other words, is there is more to be gained from settlement than from leaving the claim open?

For simple cost-benefit analysis, simply determine:

    • What are the costs (or negatives) of a settlement?
    • What are the benefits of a settlement?
    • At what amount of settlement money do the benefits outweigh the costs?

The main costs of a settlement include the end of medical benefits and and the end of lost wage (indemnity) benefits.

The main benefits of a settlement include the tax-free lump sum cash payment, the end of dealing with workers compensation, and the ability to move on with life, including getting a new job without worrying about a deduction in lost wage benefits.

Of course, a cost-benefit analysis will determine the point at which the employee should settle, but that does not mean that the employee's attorney cannot get more than that amount, because the insurance company's own cost-benefit analysis likely will come up with a higher number for the employee.

For example, following a thorough evaluation of the claim by the employee's attorney, the employee may determine that the employee should settle if he or she can get a $100,000 settlement.

But the workers compensation insurance company may determine that it should settle if the employee would accept a $200,000 settlement.

So from that perspective, even though the employee's attorney will advise the employee to settle if the employee can get $100,000 or more, the employee's attorney can and should aim for, fight for, and negotiate for, much more, and hopefully get the $200,000 settlement in order to maximize the employee's settlement.

But the workers compensation insurance company will likely know that the employee should settle if the employee can get $100,000, so that is why it is important to have an experienced attorney properly handle the settlement evaluation and negotiations.

Number 7: Know the Pitfalls to Avoid Before Settling in Louisiana Workers Compensation

The injured employee (with the advice and assistance of the employee's attorney) must beware of certain pitfalls before agreeing to a settlement, or really even before engaging in settlement negotiations.

A brief list of key settlement pitfalls to avoid includes:

    1. Whether or not a Medicare Set Aside (MSA) report will be required, the amount of the MSA allocation and whether it will be funded by annuity or by lump sum payment should all be a part of the settlement negotiations. If the injured employee finds out - after agreeing to a settlement - that the employee's net settlement is being greatly reduced by an MSA, and tries to back out prior to signing the settlement paperwork, the workers compensation insurance company can force the employee into the settlement.
    2. Delays while waiting on approval of a Medicare Set Aside (MSA) by the Center for Medicare and Medicaid Services (CMS) and/or seeking approval of the Second Injury Fund for funding of part or all of a settlement, can also serve as obstacles to a settlement. These expected delays and the manner in which the delays will be handled should be explicitly agreed to between the parties.
    3. Not placing a time for performance on tasks that may take more than 30 days is important. The injured employee is entitled to an end date or time certain for performance of the settlement terms, so the opposing attorneys should include in the documents the result they desire and the mechanism for achieving it.
    4. In cases where there are no disputes, the workers compensation insurance company cannot settle for a discount rate greater than 8%. Louisiana workers compensation law allows the injured employee two years to request the additional compensation and an additional sum that will amount to 1.5 times the amount that should have been paid in settlement, if a lump sum settlement is settled for a discount rate greater than 8%. For instance, if an 8% discount would have amounted to a settlement of $100,000 and the employee was paid only $80,000, the employee would be owed $70,000 — $20,000 to reach the $100,000 mark and $50,000 to get him to 1.5 times the $100,000 (the amount owed at 8%).
    5. The employer may wish to have a resignation included in the settlement, and if that is not initially conveyed such a detail may cause problems with the settlement. If appropriate, this should be explicitly agreed to between the parties.
    6. The employee and the workers compensation insurance company should verify that all authorized non-emergency treatment and all appropriate and related emergency treatment has been paid for and/or will be paid. If any such treatment has been paid, or not been paid, or will not be paid, or will be paid, then the nature and extent of these payments should be explicitly incorporated into the settlement.
    7. Medicare conditional payment amounts should be determined. Most workers compensation insurance companies have contracts with organizations that can perform a conditional payment search, and this amount should generally be uncovered prior to negotiating settlement. Although any conditional payments would not be owed until settlement, the workers compensation insurance company may want to know in advance what those conditional payments might be. An injured employee's failure to advise as to Medicaid or Medicare entitlement and/or conditional payments can kill a settlement or adversely affect the employee's recovery and expectations.
    8. Liens and subrogation interests need to be handled as part of the settlement process. Concerning liens and subrogation interests for non-ERISA health care plans, if it is determined that the worker's compensation payor was responsible for payment of medical benefits that have been paid by the health insurer, the obligation of the workers compensation payor for such benefits shall be to reimburse the health insurer one hundred percent of the benefits it paid. If it is determined that the workers compensation payor was responsible for payment of benefits and its denial of responsibility is determined to be arbitrary and capricious, then the health insurer shall also be entitled to recover legal interest on any benefits it paid, calculated from the date such benefits were due.
    9. The workers compensation insurance company has its own subrogation rights against any third party claim filed by the employee. In many cases, this subrogation right can be an excellent vehicle for a favorable full and final settlement. Through a combination of waiver by the workers compensation insurance company plus the credit received for the amount the employee nets, the parties can often come to a full and final settlement.
    10. If the injured employee's private health insurance company paid for treatment arguably related to the accident, then this health insurance company has a lien that should be handled prior to executing the settlement documents. If the plan is an ERISA plan, then this health insurance company may have an absolute right to recover the lien upon settlement with no allowance for state law defenses such as 1208 fraud, failure to request authorization or other statutory defenses. If the plan is an exchange created by the Affordable Care Act, the subrogation rights of this health insurance company are not clearly defined and care should be taken when settling to insure that any lien is settled with the workers compensation claim.
    11. Child support liens need to be investigated and settled. Child support should state in writing the amount that they will require from the settlement and that amount should be included in the settlement documents, and the failure to withhold amounts from child support could amount to enforcement actions against the employer and/or the workers compensation insurance company, especially if a garnishment has been served.
    12. The employee and the workers compensation insurance company should verify that there are no other outstanding liens. However, if there are other outstanding liens, the nature and extent of these other outstanding liens should be explicitly incorporated into the settlement.

In order to avoid these pitfalls, all the details related to these pitfalls should be addressed and provided to the attorneys for the parties.

While some of these issues can be worked around by including conditional provisions in the language of the settlement (with the default to be continuation of benefits as if no settlement occurred), the more complex the settlement the more likely something important may get missed.

And if the parties expect a delay in the settlement process, there is no obstacle under Louisiana law to extending the time for the settlement to be completed and the payment made, just as there is no obstacle to setting a shorter time than allowed by Louisiana law.

However, if there is an unforeseen delay and the reason for delay were within the control of the workers compensation insurance company, then the injured employee may be entitled to penalties and reasonable attorney fees because of that delay.

Number 8Know How to Handle a Mediation Conference in Louisiana Workers Compensation

An excellent opportunity to attempt a workers compensation settlement is during a mediation conference.

In Louisiana workers compensation, a mediation is an informal meeting of the injured employee (ideally with the injured employee's attorney) and the attorney for the workers compensation insurance company with a neutral individual - called a mediator - who attempts to resolve the issues that are in dispute.

The mediator is a neutral party and does not take sides; instead the mediator's purpose is to settle the disputed issues, or even the entire claim, without the need for further litigation.

Though the parties can choose a private mediator at their own cost (although it is almost always the insurance company who pays the mediator), most mediations in Louisiana workers compensation occur within the Louisiana Office of Workers Compensation (OWC) since there is no fee or cost in those mediations.

Mediation under either method is voluntary by the parties unless otherwise ordered by the workers compensation Judge.

The Office of Workers Compensation (OWC) mediators are licensed attorneys who are specifically trained in handling mediations, knowledgable about dispute resolution techniques and experienced in resolving Louisiana workers compensation disputes.

These OWC mediators attempt to resolve the workers compensation disputes between the parties, so that the parties will not have to go to a hearing in front of the workers compensation Judge.  

In other words, mediation is an opportunity for an injured employee to settle his or her disputed issues - or even settle the employee's entire claim - within the Office of Workers Compensation (OWC) system at no cost, before those disputed issues go to trial.

What Happens During an Actual Mediation

Basically, most mediations - including those in Louisiana workers compensation - begin with the parties and the neutral mediator all seated in the same room together, usually around a large conference table.

The mediator will start by explaining to the parties why they are there and how the mediation will work.

Then, the sides will take turns introducing themselves, and explaining what they are seeking or offering, and why they are seeking or offering that.

Next, the two sides will separate by moving to separates rooms, and the mediator will go back and forth and exchange counter-offers or positions between the two parties, in order to eventually come to a settlement or agreement between the parties.

Eventually, the matter will either settle or the mediator will declare that no settlement can be reached.

However, whether the claim settles or not, all statements made at any mediation conference shall be privileged and shall not be admissible in any subsequent status conference, pretrial conference, hearing, or trial.  

This simply means that nothing said at a mediation - including a settlement position - can be used against that party at any other time.

Also, unlike Court proceedings, there is no court reporter or stenographer to record or write down what is said at mediations, and no witnesses are called to testify at mediations. 

Upon completion of a mediation in Louisiana workers compensation, the mediator will draft a mediation report, and the mediator and all the parties will sign the report.

How to Approach a Mediation Conference

Mediation can be a really helpful tool in settling a workers compensation claim, because it emphasizes the common goal of resolution that both sides are seeking, while de-emphasizing the confrontational element that is naturally a part of any dispute.

So it is important to understand that mediation is not the court room where the two sides argue that they are right and the other side is wrong; instead, mediation is a process to find agreement between the injured employee and the workers compensation insurance company.

In other words, when an injured employee walks into mediation, the employee is there to work toward the settlement of the claim for an amount that the employee is willing to take, not to argue facts before the workers compensation Judge.

Mediation is voluntary and works only if both sides are willing to compromise, so the injured employee needs to have a realistic assessment of the value of the employee's claim.

The Louisiana Statutes for Settlements in Louisiana Workers Compensation

The primary Louisiana statutes regarding settlement options are La. R.S. 23:1271, La. R.S. 23:1272, and La. R.S. 23:1274, which read as follows:

§1271.  Right of parties to settle or compromise

A.  It is stated policy for the administration of the workers' compensation system of this state that it is in the best interest of the injured worker to receive benefit payments on a periodic basis.  A lump sum payment or compromise settlement in exchange for full and final discharge and release of the employer, his insurer, or both from liability under this Chapter shall be allowed only:

(1)  Upon agreement between the parties, including the insurer's duty to obtain the employer's consent;

(2)  When it can be demonstrated that a lump sum payment is clearly in the best interests of the parties; and

(3)  Upon the expiration of six months after termination of temporary total disability.  However, such expiration may be waived by consent of the parties.

B.  As used in this Part, "parties" means the employee or his dependent and the employer or his insurer.  Nothing in this Section shall require the office of risk management to obtain approval of settlements from the employing state agency, department, council, board, or political subdivision.

Amended by Acts 1954, No. 724, §1; Acts 1966, No. 181, §1.  Acts 1983, 1st Ex. Sess., No. 1, §1, eff. July 1, 1983; Acts 1991, No. 892, §1; Acts 1997, No. 60, §1, eff. June 11, 1997.

§1272.  Approval of lump sum or compromise settlements by the workers' compensation judge

A.  A lump sum or compromise settlement entered into by the parties under R.S. 23:1271 shall be presented to the workers' compensation judge for approval through a petition signed by all parties and verified by the employee or his dependent, or by recitation of the terms of the settlement and acknowledgment by the parties in open court which is capable of being transcribed from the record of the proceeding.

B.  When the employee or his dependent is represented by counsel, and if attached to the petition presented to the workers' compensation judge are affidavits of the employee or his dependent and of his counsel certifying each one of the following items: (1)  the attorney has explained the rights of the employee or dependent and the consequences of the settlement to him; and (2)  that such employee or dependent understands his rights and the consequences of entering into the settlement, then the workers' compensation judge shall approve the settlement by order, and the order shall not thereafter be set aside or modified except for fraud or misrepresentation made by any party.

C.  When the employee or his dependent is not represented by counsel, the workers' compensation judge shall determine whether the employee or his dependent understands the terms and conditions of the proposed settlement, and shall approve it by order, unless he finds that it does not provide substantial justice to all parties, and the order shall not thereafter be set aside or modified except for fraud or misrepresentation made by any party.

D.  If a suit has been filed against a third party pursuant to the provisions of R.S. 23:1101, the district court hearing the third-party suit shall, in addition to a workers' compensation judge, have the authority to approve a lump sum or compromise settlement of the workers' compensation claim under the same conditions and terms set forth in this Section for approval of such settlements by a workers' compensation judge, and such authority shall include approval and establishment of the credit due the employer.  The fees of the attorney representing the employee in the workers' compensation matter shall be approved by the district court judge.

E.  All compensable medical expenses incurred prior to the date of the settlement shall be paid by the payor unless the terms of the settlement specifically provide otherwise.

Acts 1992, No. 769, §1; Acts 1995, No. 1137, §1, eff. June 29, 1995; Acts 1997, No. 88, §1, eff. June 11, 1997; Acts 1999, No. 776, §1; Acts 2001, No. 1014, §1, eff. June 27, 2001; Acts 2005, No. 257, §1.

§1274. Lump sum settlements; necessity for approval

A. The amounts payable as compensation may be commuted to a lump sum settlement by agreement if approved by the workers' compensation judge as provided in this Part. In a lump sum settlement, the payments due the employee or his dependents shall not be discounted at a greater rate than eight percent per annum.

B. If the lump sum settlement is made without the approval of the workers' compensation judge, or at a discount greater than eight percent per annum, even if approved by the assistant secretary or the workers' compensation judge, the employer shall be liable for compensation at one and one-half times the rate fixed by this Chapter. At any time within two years after date of the payment of the lump sum settlement and notwithstanding any other provision of this Chapter, the claimant shall be entitled to demand and receive in a lump sum from the employer such additional payment as together with the amount already paid, will aggregate one and one-half times the compensation which would have been due but for such lump sum settlement.

C. Upon payment of a lump sum settlement commuted on a term agreed upon by the parties, approved by the workers' compensation judge, and discounted at not more than eight percent per annum, the liability of the employer or his insurer making the payment shall be fully satisfied.

D. For the settlement of compensation claims as provided in R.S. 23:1231 through 1236 the following procedure shall be followed. The claimant must present to the employer an affidavit of death of the employee, proper proof of the claimant's relationship to the deceased and his legal right to the compensation benefits. Such documentation shall be affixed to the joint petition and submitted to the workers' compensation judge for approval as hereinabove provided.

Acts 1977, No. 40, §1; Acts 1982, No. 611, §1; Acts 1983, 1st Ex. Sess., No. 1, §1, eff. July 1, 1983; Acts 1988, No. 938, §1, eff. July 1, 1989; Acts 1989, No. 23, §1, eff. June 15, 1989; Acts 1989, No. 260, §1, eff. Jan. 1, 1990; Acts 1997, No. 88, §1, eff. June 11, 1997.

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