Full and Final Settlements
By Brian Weekley, Attorney/Partner
On November 1st, 2017, Senate Bill 1332 went into effect in Arizona. This state law allows for the full and final settlement of workers’ compensation claims. Under the current system, claimants always retain the right file a Petition to Reopen their claim in the event that additional active medical treatment is required for a new, additional, or previously undiscovered condition causally related to their industrial injury.
In cases which settled, carriers ( and third party administrators) retained a credit in the amount of the settlement that applied to future indemnity and/or medical benefits. With unscheduled permanent partial disabilities, claimants and carriers retain the right to Petition to Rearrange prior ICA Awards. This process allows for the increase or reduction of an Award.
With SB 1322, claimants and carriers now have the option of entering into a full and final settlement of the claim. This type of settlement, if approved, will bar forever the claimant’s right to reopen or rearrange his claim. It’s a one-time deal, so getting it right is critical.
Understanding Valuation of a Claim
There are two elements of value in any given workers’ compensation case; Medical benefits and indemnity ( the money that the carrier pays the claimant). If you want to understand the valuation of a claim, you need to understand how these elements are valued.
Future indemnity benefits are based on two constants; The claimant’s age and the monthly entitlement. The variables are how the value of future benefits, or reserves, are calculated. Different methods produce strikingly different values.
An annuitized value is based on the amount of money that a carrier would pay to fund an annuity to pay the monthly award based on prevailing daily rates of return. In Arizona, traditionally, the total present value is calculated by using a present value table and plugging in the age and monthly amount. The latter technique generates substantially lesser values than the former. There is no right answer at this point. Valuation is subject to radical differences of opinion depending on whose interests are being pursued.
Workers’ Compensation Medicare Set Aside
Future medical benefits should be assessed based on projected future value, including elements like medical inflation. Carriers can value these benefits, but the values may be grossly underestimated. A good rule of thumb is to make sure that the claimant either gets his own valuation and/ or insists that Medicare approve the valuation. Medicare will perform its’ own valuation when its’ interests are involved through a process called Workers’ Compensation Medicare Set Aside ( WCMSA).
If there is a proposed full and final settlement, then we strongly urge all claimants to treat Medicare’s interests with great care. There are thresholds that are very liberally construed by the Center for Medicare Studies ( CMS). CMS recommends that all proposed settlements be approved if they meet these thresholds.
The undersigned has seen unapproved agreements submitted by companies that call their products “ certified.” These certifications appear to be internal, and not from Medicare, so beware. Moreover, MSA funds should be professionally administered with full reporting and compliance. One benefit of resolving future medical under an approved and properly managed MSA is that any funds remaining at death pass to the claimant’s beneficiary. Beware of reversionary language in the agreement that would give all or part of the remaining funds back to the carrier.
We Want to Ensure You Have the Knowledge You Need
Full and final settlements are a new frontier for injured workers and their attorneys. They require preparation and knowledge because once approved, the claimants’ case is over. It cannot be renegotiated.
The claimant and his attorney must understand and protect the rights of Medicare in order for the system to work correctly and to protect the claimant’s future medical care, both injury and non- injury-related. Beware of undervaluation and negotiate from a position of knowledge.
At Snow, Carpio & Weekley, PLC, our top-rated Arizona workers’ compensation lawyers want to ensure that all injured workers have the knowledge they need to protect their legal rights and financial interests when it comes to worker’s compensation settlements. Insurance companies may try to use the option of a full and final settlement to their own benefit, but you should know the benefits and risks involved in agreeing to such a decision before you sign a full and final settlement with your work’s insurance company.
Understanding Downsides of a Full and Final Settlement
A full and final settlement, while it is generally a larger sum of money in comparison to other worker’s compensation settlements, is often more beneficial for the insurance company providing it. This protects them from further liability regarding your injuries, as you will lose the ability to reopen your claim in order to seek paid medical care in the future. As a general rule, injured workers should not reach this type of settlement until their condition has stabilized and they have reached maximum medical improvement.
While Arizona’s full and final settlement law requires that any agreement must outline and explain all likely future medical costs and treatment, there are serious concerns that insurance companies will be able to take advantage of injured workers who are not represented by a professional. Reaching a full and final settlement can make sense in some cases, but workers need to know that there has been a full and accurate valuation of possible future medical costs.
Insurance Company Full and Final Settlements Incentives
Arizona’s full and final settlement statute is still relatively new, but this is evidence that big insurance companies are trying to avoid making continual payments to injured workers overtime, regardless of the extent of the injury. Insurers are attempting to settle workers’ compensation claims for the exact same value as these cases would have reached under the old law while also slipping a full and final settlement provision into the agreement. This stipulation in the law could cripple a worker’s potential right to healthcare paid for by the responsible company’s insurance, and taking a full and final settlement without considering the risks to their future healthcare could harm their chances of care if the injuries exacerbate in any way in the future.
For more information on Workers’ Compensation or Social Security Disability, please contact Snow, Carpio & Weekley toll-free at 855-325-4781 or visit our website at www.workinjuryaz.com. We serve the entire State of Arizona and have offices located in Phoenix, Tucson, Yuma, and Lake Havasu City.