Two Types of Workers’ Compensation Settlements
Pennsylvania workers’ compensation settlements generally fall into two categories: lump-sum settlements and structured settlements. Both types of workers’ compensation settlements resolve some or all future benefits in exchange for compensation, but the right option depends on the nature of the work injury, future medical needs, and long-term financial goals.
What Is a Workers’ Compensation Settlement in Pennsylvania?
The Pennsylvania Workers’ Compensation Act provides benefits to workers injured in the course and scope of their employment. In some cases, the injured worker and the insurance company may agree to settle the claim rather than continue litigation.
In Pennsylvania, settlements are called Compromise and Release Agreements.
Under a settlement agreement, the insurance company provides compensation to the injured worker, and in return, the worker releases the insurance company from future liability related to the work injury.
Are Workers’ Compensation Settlements Taxable?
Generally, no.
Workers’ compensation benefits and settlements are typically not considered taxable income because they are intended to replace lost wages and compensate for a work-related injury.
What Does It Mean to Settle Your Workers’ Compensation Claim?
When you settle your workers’ compensation case, you may be giving up your right to future benefits related to your work injury.
These benefits can include:
- Future wage-loss benefits
- Future medical treatment
- Other workers’ compensation benefits related to the injury
Before a settlement becomes final, it must be approved by a Workers’ Compensation Judge. During the hearing, the judge will ask questions to make sure you understand the terms of the agreement and the rights you are giving up.
Once approved, the settlement is generally final and cannot be reopened later.
Types of Workers’ Compensation Settlements
Lump-Sum Settlement
A lump-sum settlement is a one-time payment from the insurance company.
Depending on the agreement, the settlement may resolve:
- Wage-loss benefits only
- Medical benefits only
- Both wage-loss and medical benefits
For example, some injured workers settle their wage-loss benefits while keeping future medical treatment open.
Structured Settlement
A structured settlement provides payments over time rather than a single payment.
The parties can agree to receive payments on a schedule, such as monthly, quarterly, or annually.
Talk to a Philadelphia Workers’ Compensation Lawyer About Settlements
Deciding whether to settle a workers’ compensation claim is an important decision. Before accepting a settlement offer, it is important to understand how the agreement may affect your future medical treatment and wage-loss benefits.
At Stern & Cohen, our Philadelphia workers’ compensation lawyers help injured workers throughout Pennsylvania evaluate settlement offers and determine whether a settlement is in their best interest.
If you’re considering a workers’ compensation settlement or have questions about a Compromise and Release Agreement, contact Stern & Cohen today for a free consultation.
FAQs
What is a Compromise and Release Agreement in Pennsylvania?
A Compromise and Release Agreement is the legal document used to settle a Pennsylvania workers’ compensation claim. It outlines the amount being paid and the benefits being closed as part of the settlement.
Do I have to attend a settlement hearing?
Yes. A Workers’ Compensation Judge must approve the settlement. During the hearing, the judge will ask questions to make sure you understand the agreement and are entering into it voluntarily.
What is the difference between a lump-sum settlement and a structured settlement?
A lump-sum settlement provides the settlement money in a single payment. A structured settlement provides payments over time according to an agreed-upon schedule, such as monthly or yearly installments.
What happens after my workers' compensation settlement is approved?
Once the Workers’ Compensation Judge approves the settlement, the agreement becomes final. The insurance company will issue the settlement payment according to the terms of the agreement, and the claim will be resolved as outlined in the settlement documents.