Understanding Workers Comp Settlements

Louisiana Workers Comp Settlements

One of the most important aspects of settlements in Louisiana workers compensation that an injured employee needs to understand is that settlements are completely voluntary for both sides. In other words, neither the employee can force the workers compensation insurance company to settle, nor can the workers compensation insurance company force the employee to settle. Nonetheless, settlements do typically occur in most workers compensation claims because it is generally in the best interest for both parties to settle the claim, or at the very least, to strongly consider a settlement. New Orleans Legal can help help you understand Louisiana workers comp settlements.

From the perspective of the workers compensation insurance company, a closed file is generally a good file, because a closed file stops the continued drain on insurance reserves (an amount of money earmarked for a claim) and the need for requiring additional reserving.

And even though the expenses and costs of the administration of a workers compensation claim can be relatively low, from the point of view of the workers compensation insurance company, a settlement within reasonable limits is generally seen as a win because the insurance company then knows that it will no longer need to spend any additional funds on the claim.

Injured Employee Case Result

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 or procedures 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 effect that vocational rehabilitation can have on the settlement 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 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.

Of course, there do exist some claims where there is little to no possibility of settlement, but such claims typically involve unrealistic expectations on one or both sides.

But again, in general, most Louisiana workers compensation claims will have a settlement value on which both sides might be able to agree, depending upon a variety of issues and facts.

And, there are also claims which may be partially settled, but (due to issues outside of the control of the parties, such as Medicare’s interest in a extremely high-value medical claim or non-approval of a settlement request subject to approval by the Board of the Second Injury Fund) where a full and final settlement may not be immediately possible.

Options for Louisiana Workers Comp Settlements

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 Louisiana Workers Comp 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.

When Does a Settlement Make Sense in Louisiana Workers Compensation?

In Louisiana workers compensation, settlements are possible – and occur in most claims – but they are not guaranteed.

Instead, settlements in Louisiana workers compensation are optional.

In other words, an injured employee can agree to a settlement or leave his or her claim open, and the workers compensation insurance company can offer a settlement or instead just continue to pay the claim.

So then the obvious question is: should the injured employee settle his or her workers compensation claim?  Does it make sense to settle? When does it make sense to settle?

The short answer is: it depends, and it depends on how much the workers compensation insurance company is willing to pay.

But much can be done in order to maximize the amount that the workers compensation insurance company is willing to pay, including:

1. Timing the settlement correctly;
2. Knowing the true value of a claim; and
3. Using skillful negotiation tactics.

So for these reasons, an injured employee should always hire an experienced Louisiana workers compensation attorney to handle his or her settlement; 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 settlement amount.

But in any case, it is important to recognize that most workers compensation claims do settle, and in most cases, a settlement is in the best interest of the employee.

So in most cases, yes, the injured employee should settle, but it needs to be at the right time and for the right amount.

Cost-Benefit Considerations in Settlements

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

In other words, is there is more to be gained from the 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 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.

Other Considerations in Workers Compensation Settlements

Besides a cost-benefit analysis, there are other considerations for an injured employee to keep in mind when considering settlement, even though the primary issue remains whether there is more to be gained from the settlement than from leaving the claim open.

For example, many settlements occur in the context of a claim in which at least one issue is disputed, including when the workers compensation insurance company might contend (and the employee of course disagree) that:

1. There never was a compensable accident;
2. The employee was injured but can return to work;
3. The employee committed fraud;
4. The claim is prescribed or expired under time limits; or
5. The claim is denied under any other possible defense.

Depending upon the strength of the defense, such defenses can greatly diminish (or even eliminate) the value of the claim to the employee, so they must be properly evaluated and considered when deciding whether or not to settle.

In another consideration, the injured employee may have reasons of his or her own to settle, even though the medical evidence may support an ongoing disability.

For example, the employee may know that he or she is capable of returning to another job and may even have a job lined up; in that situation, the employee may be better off settling the workers compensation claim (which yields relatively low weekly benefits) and then taking a higher-paying job once the settlement is concluded.

In another consideration, the employee may be so seriously injured that the employee will never work again and will need extensive and expensive medical care in the future.

For example, it is almost always best to leave a claim open for a quadriplegic claimant, because it is likely extremely difficult to anticipate the value of future benefits; it is possible to settle the “high cost” claims, such as the paraplegic, but extreme care must be taken to ensure that the amount paid in settlement is enough to take care of the claimant for life, including medical expenses.

In another consideration, if the injured employee is on Social Security Disability (SSDI), a Medicare Set Aside (MSA) may be needed. And in any case, involving long-term disability and significant future medical expenses, it may be best to structure the settlement payments so that the claimant receives periodic payments over time and not a single lump sum, which can disappear very fast.

In another consideration, it is always possible that an injured employee’s medical condition could get worse, or could improve, and when considering settlement, the injured employee should take into account the likelihood of both.

Third-Party Sources of Income in Settlements

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.

The Pros and Cons of Settlements in Louisiana Workers Compensation

Before deciding whether or not to settle a workers compensation claim, an injured employee (with the advice and assistance of the employee’s attorney) must thoroughly consider the pros and cons of a settlement.

The pros of a workers compensation settlement include the following:

• The employee will receive a tax-free lump sum payment settlement up front and immediately.
• The employee will no longer have to receive only two-thirds (2/3) of the employee’s lost wages (subject to a cap).
• The employee will no longer have to fight with or deal with the workers compensation insurance company.
• The employee will no longer have to fight with or deal with the workers compensation system.
• The employee will no longer have to deal with the uncertainty of a workers compensation claim or a Judge’s potential ruling.
• The employee will not have to undergo the stress and trouble of a workers compensation trial if there is an open dispute.
• The employee can move on with the employee’s life, including getting whatever medical treatment the employee chooses without the approval of the workers compensation insurance company.
• The employee can move on with the employee’s life, including getting whatever job the employee chooses without a lost wage reduction by the workers compensation insurance company.
• The employee can choose to receive the tax-free lump sum payment settlement in a structured settlement or annuity, which is paid out over a set period of time in a series of periodic payments, thus allowing the employee to earn interest while having a guarantee that the money is available in the future.
• If the employee’s medical condition improves after the settlement, then the employee will still keep the settlement money that the workers compensation insurance company paid under the expectation of a less positive future medical prognosis.
• The employee will receive closure to a likely troubled period in the employee’s life.

The cons (or negatives) of a workers compensation settlement include the following:

• The employee will give up any and all rights to future lost wage (indemnity) benefits, which could last a lifetime.
• The employee will give up any and all rights to future medical benefits, which could last a lifetime.
• The employee will receive a much smaller settlement if the employee agrees to a partial settlement that leaves open medical benefits.
• If the employee’s medical condition deteriorates (or gets worse) after the settlement, the employee will NOT be able to go back to the workers compensation insurance company for additional money or medical care.

An injured employee should always hire an experienced Louisiana workers compensation attorney to handle his or her settlement, and this attorney can assist the employee in considering and weighing the pros and cons of a potential workers compensation 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 if, in fact, the pros outweigh the cons of a potential workers compensation settlement.

Timing a Settlement Properly 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 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 significant 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.

How to Properly Calculate the Correct Settlement Value of A Louisiana Workers Compensation Claim

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
3. STEP 1: Determine the Average Weekly Wage (AWW);
4. STEP 2: Determine the type of disability benefit;
5. STEP 3: Determine whether there are any credits/offsets applicable; and
6. STEP 4: Apply discount rates (actual discounts and time discounts).
7. MEDICAL BENEFITS
8. Past Medical Benefits
9. Future Medical Benefits
10. OTHER DETERMINATIONS FOR SETTLEMENT VALUE: T.R.E.E. (Time, Risk, Economics, Emotion) 
11. Causation
12. Intoxication Defense
13. Future Value of SEBs
14. Appealable Value
15. 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 Earnings 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) Benefits: Lost wage (indemnity) benefits continue indefinitely for the injured employee. But the employee’s injury must be so severe that he or she can never work again.

Typically, an injured worker will receive a different type of benefit at different points 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 of receiving 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 though the issues could still be 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?

The Employee Should Always 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 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.

Settlement Agreements in Louisiana Workers Compensation

Under Louisiana workers compensation law, settlement agreements should be in writing and include specific legal provisions and settlement language, before the settlement agreements and settlement papers are presented to the workers compensation Judge for approval.

Also, any written settlement agreement must declare which injuries (or, more commonly, all injuries flowing from a particular accident date) are being settled and the amount of the settlement payment(s), despite the fact that most orders approving settlement specifically incorporate the terms of the joint petition for approval of settlement.

All full and final settlement agreements must be approved by the workers compensation Judge, or else the settlement is not valid, and the workers compensation insurance company can be penalized.

However, it is possible to confect a full and final settlement orally, in the presence of a workers compensation Judge and transcribed on the record, but in such cases, the 30-day clock for funding of the settlement begins running at the moment the Judge approves the settlement in open court, on the record.

Any and all agreements as to any Medicare Set-Aside (MSA) should be included in all settlement agreements, and the workers compensation insurance company should confirm the employee’s Medicare and Social Security Disability status so as to make sure to comply with any requirements for a Medicare Set-Aside (MSA).

Approval of Louisiana Workers Comp Settlements by The OWC Judge

The lump sum or compromise settlement paperwork shall be presented to the presiding workers compensation Judge in a pending disputed claim or to any judge in an undisputed claim for approval on Form LWC-WC-1011 and upon joint petition of the parties.

When the employee is represented by an attorney, the workers compensation judge has no discretion in whether or not to approve the settlement; under Louisiana law, if the settlement documents are complete and proper, the workers compensation Judge “shall” approve the settlement.

But when the employee is not represented by an attorney, the workers compensation Judge may refuse to approve a settlement if the Judge determines that the employee does not understand the terms and conditions of the settlement or that the settlement does not provide substantial justice to all parties.

Nonetheless, a workers compensation settlement is not valid and enforceable unless the settlement has been presented properly and approved by the workers compensation Judge. 

But once the settlement is approved by the workers compensation Judge, this settlement becomes a court Judgment and can only be set aside or modified for fraud or misrepresentation made by any party.

Additionally, all compensable medical expenses incurred prior to the date of the settlement shall be paid by the workers compensation insurance company unless the terms of the settlement specifically provide otherwise.

Payment of Settlement Funds

Once the workers compensation Judge signs off on the settlement documents, the settlement agreement is now a Judgment of the court, and at that point, the employee is entitled to any and all settlement proceeds within 30 days of the date of approval of the settlement agreement by the workers compensation Judge.

Additionally, under Louisiana workers compensation law, if a Judgment obtained via settlement agreement is not paid within the 30 days of the date of approval of the settlement agreement, the workers compensation insurance company can be assessed with a penalty of 24% of the judgment or $100 per day together with reasonable attorney’s fees for each day after it remains unpaid, whichever is greater.

So the workers compensation insurance company and its attorneys must be aware of the date of approval of the settlement and make sure that any settlement funds that need to be produced have been properly obtained in a timely manner in order to avoid any potential penalty.

Also, for these reasons, when the initial settlement agreement is reached, it should include an agreement as to the time for performance (including payment) and whether or not settlement documents, stipulations and/or a consent judgment is required.

Failure to include such an agreement could subject the workers compensation insurance company to the above-detailed penalties.

The Louisiana Statutes for Settlements in Louisiana Workers Compensation

The primary Louisiana statutes regarding workers compensation settlements 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.