Understanding the Ins and Outs of Settlements in Arizona Workers’ Compensation cases
You can bet that the insurance company is pushing you to settle your case because it is in its’ financial best interest. How do you protect yourself from signing onto a bad deal?
There are generally two types of settlements; “Compromise and Settlement” and “Full and Final Settlement.” The first step is to determine what exactly you and the insurance company intend to settle. Compromise and Settlement only settle a portion of the case, usually the future monetary benefits. Full and Final Settlement or “FAF” is a full release of the insurance company from allfuture monetary payments and medical benefits. Step one: determine what type of settlement the carrier seeks. It will almost always be Full and Final.
Keep in mind that the insurance company has teams of savvy financial professionals on whom they depend to eliminate and minimize claims losses. In other words, they will know a lot more than you about how much your claim is worth, and they will capitalize on that knowledge gap when they settle a case against an unknowing injured worker. Knowledge is power in any negotiation. How do you protect yourself from being ripped off?
First, you have to make sure that you have your own figures for both the future monetary and medical benefits numbers that form the basis of a full and final. The carrier will present you with very official-looking numbers regarding future medical expenses. The numbers are almost always woefully deficient and self serving. They are not “ official.” The carrier is hoping that Medicare ( in certain cases) and the injured worker will blindly accept their figures and agree to their hand chosen vendor’s future medical figures. The insurer knows that their future medical figures will be substantially lower than their current reserves, and they seek to make money on the transaction. If the injured worker settles for less than it is worth, then they are stuck with future medical expenses.
If the insurer offers the injured worker settlement of future medical only through a medicare set aside program (MSA), beware. The medical settlement, essentially, becomes a deductible against future injury related medical care, so there is little or no benefit. The carrier should pay an incentive if the injured worker is giving up the rights to his case for the rest of his life.
Also, if the injured worker is receiving a “ loss of earning capacity” award, this should be valued and settled at a good number. Valuation is best done by an expert familiar with the essential math. Again, the insurance company should pay very good value, because they are escaping liability for the injured workers’ claim, permanently.
Annuities are a confusing topic, but understanding them is essential to any Full and Final Settlement in Arizona. Annuities are purchased by the insurer with settlement funds to create an annual stream of income to fund the future medical expense account and, sometimes, monetary payments.
The issues of settlement, valuations, offset numbers and annuities are complicated and deserve the attention of a professional. Take care and be careful when entering this minefield.
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