How to Value Your Work Comp Case - Part 2

Saturday, March 15, 2003 | 0

The first part of this article series dealt with some basic work comp case valuation issues, such as some of the concepts behind workers' compensation, temporary disability and other benefits.

One of the more perplexing benefits, and perhaps the most difficult to comprehend, is the determination of permanent disability, in part because this is typically one of the last benefits to be determined, in part because it too is paid as a weekly benefit, and because there are elements of permanent disability that are just plain difficult to comprehend, even by professionals.

Most states follow guidelines established by the American Medical Association, and leave the actual disability rating up to the physician. In those states, no one can have a combined disability greater than 100%. Also, in these systems, many specific types of injuries are given a specific percentage of disability meaning that the doctor is restricted in delineating what the permanent disability will be.

Other states, such as California, let the doctor almost "free form" the description of permanent disability, and leave the interpretation of disability language into numbers up to rating specialists. This method leaves quite a bit up to the subjective determinations of various persons, making a final result more difficult to predict at the beginning of a case. To make matters more confusing, in California a person can in fact have a combination of injuries resulting in more than 100% permanent disability.

In both situations, the permanent disability must be based on sound medical evidence. For example, a doctor cannot ascribe 90% permanent disability to a back sprain. Such a rating would not make sense when compared to a more serious injury such as a disc herniation or the amputation of a limb.

The base description of permanent disability in a number is called a "standard". Once the standard has been arrived at, the number is then plugged into a schedule that takes into account the injured workers' wages, age and occupation to determine the final rating of an injury. The final rating is then plugged into another schedule that determines what the weekly benefit rate will be and for how long.

If there are multiple body parts that were injured in a single incident, the ratings are combined for a "multiple disability" rating. This rating cannot exceed 100%, and is the product of an algorithm that combines the ratings in a regressive formula.

While most systems attribute a gross valuation number to a rating, that number is for comparison purposes only to assist the parties in evaluating the case. Unless the case is being settled for a lump sum, permanent disability indemnity is paid out as a weekly benefit for a certain period of time into the future.

The purpose of permanent disability indemnity needs to be kept in mind when evaluating whether a proposed resolution of that issue is appropriate. Permanent disability is not intended to make a person "whole", nor does it compensate for pain and suffering, or loss of consortium, or any other sort of damage element that may be found in civil actions. Permanent disability indemnity is solely for the purpose of compensating the injured worker for the loss of use of a body part as it relates to that person's ability to compete in the open labor market in the same or similar job being performed at the time of injury.

In other words, there is a presumption that the impairment or loss of use of a body part makes a worker less valuable to an employer, and hence more difficult for a worker to get a job in the same line of work as at the time of injury. This is why a back injury is going to be more valuable to a 50 year old warehouseman than a 24 year old secretary.

To make things a bit more difficult, some states allow for subjective factors, such as different levels of pain, to be accounted for in a rating. Typically subjective factors of disability and objective factors of disability are mutually exclusive, but not always, so the same injury on two different people may bring a different result depending on subjective factors, such as pain.

A comparison of a workers' compensation settlement that takes into account permanent disability indemnity to a civil case, say for instance an automobile injury case, is not appropriate. In the civil case, the injured party must wait for a complete resolution of the case before receiving compensation. Then, deducted from that compensation are medical bills, disability liens if any, and attorney fees. While the civil case is pending, the injured party does not receive any benefits, or forms of remuneration, whatsoever.

In contrast, the injured worker will have already received remuneration in the forms of temporary disability indemnity, the medical bills will have already been paid, or are to be paid "outside of" the settlement or award, attorney fees are strictly limited (in most states), and there may be additional entitlements applicable, such as vocational rehabilitation.

Permanent disability is one of the most difficult benefits to understand, but is typically the one that gets the most attention. Perhaps the best advise when evaluating permanent disability is to determine an acceptable range of disability for the injury in question, then shoot for a resolution within that range.