Two Types of Workers’ Compensation Settlements

June 11, 2024
Stern & Cohen
Gavel with Workers Comp Settlement money

The Pennsylvania Workers’ Compensation Act is a state-wide, no-fault system. The payments come from the insurance companies because you cannot sue your employer in Pennsylvania. The Pennsylvania Workers’ Compensation Act provides compensation for workers who are injured within the course and scope of their employment.

Additionally, workers’ compensation benefits are not considered taxable income. This is because the settlement awards are compensating for income that was lost due to the injury rather than providing an actual income. Workers’ compensation benefits restore a person to their pre-injury status and do not provide any additional income.

What is a Workers’ Compensation Settlement in Pennsylvania?

In Pennsylvania, settlements are known as Compromise and Release (C&R) Agreements. In exchange for the insurance company paying you money, they are also being released from paying any future workers’ compensation benefits. They will not have to pay any future lost wages or medical expenses related to the work injury.  

Essentially, a workers’ compensation settlement is a trade off between an employer and an employee where the employee gets their payment, and the employer is no longer held responsible for workers’ compensation benefits regarding the work injury.

What Does It Mean to Settle?

By agreeing to settle, you waive your rights to future wage loss or medical benefits for the work injury. A workers’ compensation judge must approve the settlement agreement before you can get your benefits. Once the judge approves the settlement agreement, it is full and final, meaning that you cannot reopen the claim or request more benefits for the injury regardless of whether the injury has worsened in the future.

In order for the judge to approve the settlement agreement, you will need to attend a hearing where you will testify and answer the judge’s questions regarding the terms of the settlement agreement.

Types of Workers’ Compensation Settlements

There are two types of workers’ compensation settlements: Lump-Sum Settlements and Structured Settlements. Both types of settlements have their own drawbacks and benefits. It is important to consider the circumstances of the claim and the nature/extent of the injury when deciding between the two types of workers’ compensation settlements available in Pennsylvania.

It is also important to consult with an experienced workers’ compensation lawyer, like the team at Stern & Cohen, when thinking about settling.

1. Lump Sum Settlement

A lump sum settlement is a one-time payment from your employer’s insurance company that involves a payout for your injury in a single transaction. The one-time payment you receive cannot be more than your weekly workers’ compensation benefits multiplied by 500 weeks. Taking a lump sum settlement releases your employer from paying any future workers’ compensation benefits for wage losses or medical expenses; however, you may be able to settle for wage losses only or medical expenses only.

  • Settlements for wage loss only: If you agree to a lump sum settlement for wage loss benefits, you will stop receiving wage loss benefits. However, your medical benefits will remain unaffected, allowing you to continue having your medical bills paid by the insurance company for any expenses related to your work injury. This type of settlement is usually applicable in cases requiring long-term medical treatment.
  • Settlements for medical expenses only: If you settle for medical expenses only, you will not be eligible for any additional benefits should you require more treatment in the future.

2. Structured Settlement

A structured settlement is similar to a lump sum settlement, but it is a payment from your employer’s insurance company that is spread out over time. They are negotiated payments on a regular schedule that are given over an agreed upon period. You can agree to receive payments every week, month, year, etc.

Next Steps

An experienced workers’ compensation lawyer, like the team at Stern & Cohen, can help you decide whether a lump sum, a structured settlement, or not settling at all is the best option for you at this time.

If settling your workers’ compensation case is something that you want to review, give us a call.  The consultation is always free.