Structured Settlements and Workers’ Compensation

The legal system is often thought of by lay people as being complicated, and legal cases may take months or even years to resolve a case.  Unfortunately, workers’ compensation is not always an exception to this, as the nature of the cases often include injuries that take time to heal before it can be determined whether a worker is permanently or temporarily disabled, the type of accommodation the worker requires, or whether the worker can even return to work at all.  Both sides are often looking for ways to shorten the process and come to a settlement.  With a settlement, the parties can avoid the time and expense of a court case that drags out and costs both sides dearly.  One way to complete this in a workers’ compensation case is a structured settlement.

A structured settlement is a settlement agreement wherein the employer or its insurance provider agrees to make a series of periodic payments to the injured worker (or the surviving family) over a period of time.  Some structured settlements provide that each payment amount will be exactly the same, but other settlements can provide additional flexibility.  In some cases, the settlement may provide for a lump sum to be paid up front before the regular payments start.  This lump sum may be to assist with housing, transportation, or medical needs.  In addition, the settlement can take future cost of living expenses increase or inflation rates into account, and provide for future increases at specific times.  It should be noted that a separate account is often set up to handle the injured workers’ future medical expenses, and that the periodic payments are meant to represent the lost wages.

One advantage for the employee in accepting a structured settlement is that the periodic payments are not subject to federal income taxes.  An employer will often benefit from a structured settlement in cases where there has been a catastrophic injury that is likely to result in a finding of permanent partial or total disability, especially where the injury is so severe that the worker is unlikely to be able to return to meaningful employment.

We have extensive experience helping our clients understand what types of settlements may be best for their business.  Call us today to talk about what we can do to help you.

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