ARIZONA WORKERS' COMPENSATION SUMMARY
The dictionary defines "settle" as "to put in order; arrange or adjust as desired." What will be covered here is a "settlement" of the major part of a worker's claim where the worker gives up some substantial part of a claim, past, present or future, in exchange for a sum of money rather than monthly payments or medical benefits or both.
It is important to remember in any "settlement" in a workers' compensation case the worker is limited by the maximum benefits that the carrier/employer would have to pay if the worker won everything the worker was entitled to under workers' compensation law. That amount cannot be more than payment of medical bills plus 66 2/3% of the worker's AMW up to the maximum wage set by law. The worker gets nothing for pain and suffering or any of the other damages the worker might receive in a personal injury claim.
"Lump Sum Conversions" Through the ICA
Under certain circumstances, an injured worker can request that the ICA approve a conversion of monthly permanent disability benefits into a lump sum payment. The worker's claim must have been accepted as compensable and benefits paid for total temporary and/or partial temporary compensation and the worker's condition must have been found to be "stationary." Following that determination, the worker must be found to have some permanent disability. The worker must also have been awarded some payments for a "scheduled disability" or some LEC for an "unscheduled" disability. The worker files a "petition" with the ICA directly and asks for a "lump sum" payment pursuant to a special table for the amount of money that would be paid over the period of the "scheduled" disability or in the case of an "unscheduled" disability, over the worker's lifetime. To qualify for such a "lump sum settlement," the worker must follow formal procedures to explain why the worker needs the money and what the worker intends to do with it. The ICA has the final word on whether these "settlements" will be approved.
This kind of settlement results in the worker getting the most money since the official "discount" rate for the payment of a "lump sum" is based on the ICA reserve tables with a very low rate of interest. Unfortunately for workers, the only time that an employer/carrier must pay in a lump sum is when the worker has been awarded a "scheduled" disability.
When a worker has suffered an "unscheduled" disability and an LEC has been determined which is either final or the parties agree that it can become final, the worker may request a "lump sum" settlement from the ICA. The worker must first obtain the permission of the carrier/employer to pay the money in a lump rather than month by month. If the carrier/employer refuses permission, the ICA cannot even consider the settlement. The current maximum that can be approved by the ICA in this procedure is $50,000.
With this type of settlement, the worker does not compromise the right to "reopen" or "rearrange" the claim and the settlement does not affect the right to medical care. If the worker does "reopen" the claim after settlement or in some way becomes entitled to compensation, the carrier/employer is entitled to a "credit" based on the same table that was used to compute the settlement so that the worker's monthly payments on "reopening" or "rearrangement" would be reduced but generally not eliminated entirely.
The carrier/employer prefers not to use these settlements because they have a much higher value for the worker and from the worker's standpoint they involve a much longer and more complex process. These "lump sum" settlements are now rarely used and most cases settle under the less formal procedure set out in the next section.
Settlement of Disputes Through an Administrative Law Judge (ALJ)
Another term for this settlement is a "Safeway Stores" Settlement. The name comes from the Arizona Supreme Court case that first approved this type of settlement. The basic concept is that the worker and the carrier/employer disagree about some payment for the worker at some stage of the worker's case. The worker can give up that payment (and sometimes other parts of the claim) in exchange for a sum of money. Usually, a hearing has already been requested because of the dispute and the case is pending before an ALJ. If the parties agree to a "Safeway Stores" Settlement, rather than going through a hearing, the parties must sign an agreement, which must be approved by the ALJ, before the settlement is complete. Unlike a "lump sum" settlement before the ICA, there is no need to wait until the final stages of the case and there is no table to specify the "present cash value" of the monthly payments nor is there any requirement for the worker to justify the need for the money.
There are literally hundreds of ways that a carrier/employer might agree to this type of settlement AND THERE IS NO WAY THIS PAMPHLET CAN COVER ALL ASPECTS OF SETTLEMENTS. An important rule in all settlements is that the carrier/employer is seldom going to agree to pay the full value of the case since if they do not want to settle, they cannot be forced to do so. Remember that the only legal rights a worker has provide for monthly payments and medical care and there is no right to a cash payment "up front."
The value of these settlements is just a mathematical calculation of what benefits the worker would receive in terms of the monthly payment of compensation and/or payment of medical expenses. The amount of cash paid is weighed by the chances of success by the worker in regard to any dispute that is pending as well as the worker's future longevity earning potential. Other complications include such things as the interest rate to be used to "discount" the monthly payments to "present cash value" and sometimes the life expectancy of the worker. Having some understanding of what all these terms mean is crucial to reaching any "fair" settlement.
The other consideration in addition to the cash payment is the right to "reopen" or "rearrange" a claim or, to put it differently, the worker's right to future benefits. The carrier/employer will often ask to have the worker's right to future payments compromised in some fashion as a part of a settlement and the worker must understand what is being given up before entering into such an agreement!
IN ANY SETTLEMENT, THE WORKER MUST KNOW AT LEAST (1) THE POTENTIAL VALUE OF THE CASE AND (2) WHAT POSSIBLE PAST, PRESENT OR FUTURE BENEFITS HE OR SHE WILL BE ASKED TO GIVE UP. At best, settlements are a gamble on the worker's future. If the worker gives up rights to compensation and medical care in exchange for some money NOW, the worker is gambling that money or care will not be needed later. WORKERS MUST BE CAREFUL AND MAKE SURE THEY KNOW WHAT THEY ARE DOING. WHEN IN DOUBT, THEY SHOULD TALK TO A LAWYER!