How to Value Your Work Comp Case - Part 1

Monday, March 3, 2003 | 0

What's my case worth? When all is said and done, the bottom line for most people is the answer to this question - the system is, after all, "workers' compensation. Unfortunately, this question is much easier to ask than it is to answer, as there are many issues that have a bearing on a case value. In this article we will deal with the obvious - an accepted case where benefits have been paid, though there may be some benefits still due and owing. In a future article we will deal with the case where the claim was not accepted.

The first order of business is to set expectations in line with reality. First, all work comp systems cap out the weekly benefit payment. Since all awards and settlements are predicated on this weekly benefit payment, there is a limit to the value of your comp case.

Second, remember that the work comp system is a compromise - it was intended to begin immediate payments to an injured worker at some reduced rate in exchange for employer exemption from civil lawsuits. Part of the compromise is that the employer would face a limited financial exposure. So, an auto accident case civilly that might generate a $200,000 jury verdict, may generate only $20,000 in a work comp award.

Third, don't forget about all the benefits you may have already received! Many injured workers like to compare their work comp cases to some one else's slip and fall case where the claimant received a $200,000 jury verdict, but forget that they have received benefits in the form of indemnity and medical treatment for the same 3 year period that the slip and fall claimant was litigating and getting nothing.

Okay, now that we are done with all the caveats, let's do a brief review of what the benefits are in workers' compensation, so that we have an understanding of how this all fits together in the valuation of a case. Those benefits are: temporary disability indemnity (TD), permanent disability indemnity (PD), medical treatment, medical-legal, and vocational rehabilitation. In addition, each of these benefits can be the subject of one or more forms of penalties, which are also benefits so far as most state supreme courts that have interpreted respective laws are concerned.

Temporary disability is paid when you cannot work so long as you have a physician's opinion that concurs with that claim of status. On occasion there may be weeks of TD aggregated that the insurance company failed to pay, either because they had a different opinion, because they were negligent, or because of some other information that they may be in possession of. Depending on the prevailing medical opinion, there may be retroactive periods of temporary disability due. This may constitute a part of your ultimate settlement or award.

Permanent disability is the compensation awarded for the loss of value of your skills in the open labor market - meaning that if you are a piano player and injured your index finger which then prevents you from performing concerts, then presumably your value to concert going fans of piano players would be less. Typically the PD portion of the award is what your attorney is paid out of. This too is limited by a schedule, and does not compensate for pain and suffering, loss of consortium, or any of those other "fuzzy" valuations that are a part of a personal injury jury verdict. PD is based on medical report language, which is converted to a number based on a schedule, which is then plugged into a table to determine ultimate valuation. Adjustments are typically made to accountyou're your age and occupation at the time of injury.

Most workers' compensation awards entitle the injured worker to medical treatment related to the injury for that person's life. This is something that most insurance companies are quite willing to settle because of the life time valuation of such an award, and the uncertainty of what may lie in the future, because typically any aggravation of an earlier work comp covered injury may mean that the carrier is on the hook for all of the treatment.

Medical-legal is the payment of experts to provide expert opinion or testimony on your case, typically medical reports. The future value of this benefit isn't much, but failure to pay in the past may generate penalties to which you may be entitled.

Finally, vocational rehabilitation, which used to be very valuable as an independent benefit, is seeing less value since most states have put a cap on the amount of money to be spent on vocational rehabilitation. Some states, like California recently, allow claimants to settle out vocational rehabilitation rights with a lump sum.

Now that we have reviewed what the benefits are in a typical workers' compensation case, how do we put dollar figures on it? For the most part, a valuation of most benefits is simply figuring out what was due when, and whether it was paid. For example, ultimately it may be determined that you were temporarily disabled for a year, and are entitled to a year of TD, but the insurance company only paid TD for six months. If your TD rate was $460 per week, then $460 times 26 weeks is $11,960. This same determination may be made relative to vocational rehabilitation as well - you may have been entitled to vocational rehabilitation for a period of time where the insurance company did not provide it. Usually the right to vocational rehabilitation includes some monetary benefit intended to assist financially while you try and get going in a new job.

Past medical benefits are usually the purview of the physicians and other medical vendors, and you have little to receive from their settlements. But, if you are entitled to future medical care, then there is a value that can be determined. This valuation will be reduced to present value.

Present valuation is simply figuring out what a reasonable rate of return would be on an investment (i.e. the current amount felt necessary for your medical care), then projecting that rate of return out over your lifetime. It is simply application of the old adage that a dollar today is worth more than a dollar tomorrow.

Permanent disability, for all of the schedules and other attempts at objectification, is more difficult, primarily because the physician's medical report language has to be converted into a number, this in itself requires subjective interpretation. Suffice to say, a discussion of how permanent disability indemnity is determined is beyond the scope of this article. But that's okay because we will deal with the topic of permanent disability valuation in the next article in this series!