We all know that mistakes and accidents are part of life – and part of having a business. However, while many mistakes and accidents are often only minor inconveniences for a company, some can cause a workplace injury.
According to the U.S. Bureau of Labor Statistics, private industry employers reported 2.7 million nonfatal workplace injuries and illnesses in 2020. And according to the National Safety Council, the total cost of work injuries in 2020 was $163.9 billion.
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So it’s easy to see why the vast majority of businesses are required to have workers compensation insurance to cover incidents like slips, trips, and falls. Each state has its own regulations and requirements for workers compensation insurance, but Texas is the only state where workers comp coverage is optional.
The simplest way to explain workers compensation insurance is that it protects your business from costs associated with workplace-related injuries or illnesses while helping injured employees recover. Workers compensation covers various claims from injured employees, including medical expenses, lost wages, and rehabilitation. In addition, workers compensation insurance will cover funeral costs and death benefits for close relatives in the event of a fatal workplace-related incident.
So what happens when a workplace injury occurs? While filing a claim is relatively straightforward, settling a workers compensation claim is an entirely different matter. Here’s a look at what you need to know about workers compensation settlements and the role that you, as an employer, will play in the process.
What is the Process for Workers Compensation Claims?
When a workplace injury occurs, the injured employee must report it to their employer as soon as possible to receive benefits. Most insurers require work-related injuries to be reported within 30 days.
Once the workers comp claim is filed, the insurer will approve or deny it. A claim will likely be denied by the insurance provider if they determine the injury was related to the following:
- Caused by fighting or horseplay
- Occurred during the employee’s commute
- Happened when the employee was under the influence of alcohol or other substances
- Occurred while the employee was committing a crime
When a claim is approved, the insurance provider will pay for all medical expenses related to the injury. The employee will receive a portion of their wage as a weekly benefit, which is usually two-thirds of their regular pay. Once the employee returns to work, these benefits end, but the claim can still be open even after the employee returns to work.
How Are Workers Compensation Settlements Reached?
Not all workers compensation claims end in a settlement. In some instances, the claim can simply be closed if the employee has fully recovered and is back at work with no outstanding medical bills.
But for claims involving severe injuries or permanent disability, the next step in the process is a compensation offer from the insurance provider. This offer may include payment for unpaid benefits or medical bills, and covering the costs of future treatments.
If the amount offered is accepted by the employee, they are paid and the claim is complete. When a workers compensation claim is closed, the employee is usually required to waive their right to seek further compensation, which is why settlements take into account future medical requirements. And if you do get sued for additional damages, employers liability insurance will cover those associated costs.
However, if the employee turns down the insurance provider’s offer, they would then consult with a lawyer in order to get a larger settlement. When determining an appropriate compensation amount, the employee and their lawyer will weigh various factors, including:
- Severity of injury
- Medical costs already incurred
- Future treatments
- Disability payments
- Legal fees
- Lost wages (including potential future lost wages)
- State rules and regulations regarding workers compensation (every state has its own schedule of loss of use to determine the rate for a specific loss such as a limb, hearing, or sight)
The employee and their lawyer will then negotiate with the insurance company to reach a final settlement. But if the two sides can’t come to an agreement, then the case is turned over to the courts.
Keep in mind that workers comp settlements can take months to wrap up, so don’t wait until the process is complete to let the employee know about their options for returning to work.
What Happens at a Workers Compensation Claim Hearing?
The majority of workers compensation claims don’t reach this step since most are settled out of court. That’s likely because having a workers comp claim go to court is a gamble for both insurance providers and employees since a judge could determine a settlement that’s substantially above or below what the other side offered.
In a court case for workers compensation, the judge will start by reviewing details of the case and will then issue a ruling for a settlement amount that they consider fair.
Following a court decision on a workers comp settlement, both sides can choose to comply with the judgment or file an appeal. Typically, an appeal must be made within 30 days.
Once the insurance provider accepts the court decision, or if they are unsuccessful with an appeal, the case is complete and the employee is paid the amount outlined in the judgment.
When it comes to paying a settlement, there are two options: a lump sum payment or a structured payment plan. With a lump sum settlement, the employee receives a one-time payment for the agreed amount. And with a structured payment plan, the employee gets regular payments over a particular period.
What is an Employer’s Role in the Workers Comp Settlement Process?
Even though having workers compensation insurance means you won’t have to pay for the costs associated with a workplace injury, you still have a role to play in the settlement process, albeit a limited one.
As an employer, your primary responsibility will be to provide both sides with essential information, including incident reports, job descriptions, and proof of income.
It’s best practice for employers to keep in touch with an employee following a workplace injury, and help facilitate clear communication between the employee and insurer. When it comes to workers comp settlements, being involved and helping add transparency to the process can go a long way in helping resolve the matter as soon as possible while also decreasing the chances of your business being sued. Not to mention that supporting an injured worker can help build trust and boost morale with your employees.
After all, the ultimate goal is to get an injured employee healthy and, hopefully, back at work. That’s why any workers compensation decision should never be about if you need it (you do), but rather which insurer will best suit your business and protect your employees.