Advice for Handling the Insurance Company’s First Settlement Offer in a Work Injury Case
Preparation, Patience, and Knowledge Give You Leverage During Negotiation and Increase the Likelihood that the Insurer Boosts Its Opening Settlement Offer
Most personal injury lawsuits, including car accident cases and workers compensation claims, settle without the need for an evidentiary hearing or a jury trial. And for a good reason. A settlement saves time and legal expenses, puts money in your pocket faster, reduces your stress, and eliminates the uncertainty of litigation.
It can be tempting to accept the insurance carrier’s first settlement offer to get the case over with and move on. But this is often a mistake. You can increase the amount you receive through settlement by thousands of dollars – or more – with the right strategy and patience.
Keep reading to learn more about the first workers comp settlement offer – who usually makes it, when you should make it, and how you should respond to get the fair compensation you deserve for your work injury or occupational disease.
If you have any questions or want a free consultation with a top-ranked workers comp attorney, then call me: (804) 251-1620 or (757) 810-5614. I have helped hundreds of injured workers get fair settlements for injuries to the back, brain, neck, shoulder, knee, spine, ankle, and hand, and I can help you.
What is Negotiation?
Negotiation is the name given to discussions between you and the employer and its insurer to agree on your workers’ comp claim.
What is a Settlement Offer?
In workers compensation, a settlement offer is an offer by the employer or insurer to pay money to avoid or end your legal claim.
Who Makes the First Settlement Offer?
In personal injury and workers comp litigation, the injured person (plaintiff/claimant) usually makes the first offer to settle.
This offer is known as a settlement demand. And your responses to the insurance carrier’s settlement offers are counterdemands.
Though it’s custom, no rule or regulation requires the injured worker to make the first settlement offer. Some workers comp claim adjusters make the opening offer frequently.
Should I Make the First Settlement Offer in My Workers Comp Case?
Hundreds of books and articles discuss whether you should make the first offer in any negotiation. And many recommend that you never say a number first.
But this isn’t always possible in workers comp cases. And if you have enough information to know your case’s fair value, you should never be afraid to make the first settlement demand.
Indeed, making the first settlement demand can increase the final settlement amount because of the anchoring effect. Anchoring is a cognitive bias where a person relies too heavily on the initial information offered to make later decisions.
Here is how the anchoring effect works:
Suppose your claim is worth $60,000 to $70,000.
If your initial demand is $150,000 and your counterdemand is $90,000, the adjuster may view the $90,000 demand as a fair deal – even though that amount still overvalues your case.
When Will Workers Comp Offer a Settlement?
You may receive a workers comp settlement offer at any time, even before you file a claim for benefits.
Some insurers offer a lump sum settlement within a few days or weeks of the injury. These quick offers happen when the claim adjuster realizes you suffered a catastrophic injury that could cost the insurance company tens of thousands of dollars – or more.
Other insurers take much longer to make a settlement offer. For example, you may not get an offer to settle until you win your case at trial if the insurance company feels good about its defenses or the employer has self-insured retention and refuses to be reasonable. Many cases settle after one of the parties files an appeal.
And some workers comp insurance carriers and third-party claim administrators (TPAs) such as Sedgwick, Gallagher Bassett, and Coventry might not offer a settlement until your condition stabilizes and you receive permanent restrictions.
Should I Accept the First Settlement Offer? What to Expect When the Insurance Company Makes the First Move – And Why You Should Not Accept It
Do not accept the insurer’s first settlement offer in your workers comp case. Though there may be exceptions to this advice, I have not seen them.
You have a lot at stake with your claim – financial security, medical treatment to return to the workforce at full duty or light-duty capacity, and vocational rehabilitation to transfer into a new career if necessary. It’s essential to consider the offer to settle and analyze all the factors that arise in workers comp cases – preferably with the help of an experienced and skilled lawyer and a family member or friend whose counsel you trust.
Every case is different and fact-specific, but opening offers from insurance companies and third-party administrators such as Sedgwick, Gallagher Bassett, Coventry, and ESIS usually have three things in common:
- The first settlement offer is too low. Insurers have one goal – to make money (profit) for shareholders. They make money by receiving premiums from insurers and limiting how much they pay in workers compensation benefits and settlements. And they grade and pay bonuses to claim adjusters and insurance defense attorneys based on how much money their representatives save on claims. The initial offer will reflect this.
- The insurer values your case higher than the first settlement offer. I have negotiated more than 1,000 settlements for injured workers, auto accident victims, and civil litigants. And I have never seen the insurer refuse to negotiate and increase its opening offer. The claim adjuster or defense attorney expects you to negotiate more money than is being offered.
- If you are unrepresented, the offer will be premature (the quick offer). Some insurance adjusters offer to settle within days of the work injury or the diagnosis of an occupational disease. They do this for two reasons. First, to close the claim before you talk with an attorney to determine your case’s fair value. And second, to end your case before you learn what future medical treatment you will need, such as surgery (spinal fusion, rotator cuff repair, arthroscopy, joint replacement, etc.), and whether you will have permanent impairment or restrictions when you reach maximum medical improvement (MMI).
How Should I Respond to the First Workers Comp Settlement Offer?
Here are some tips for handling the insurer’s opening offer:
#1: Ask the Insurer How it Calculated the Offer
A reasonable workers comp settlement should include fair amounts for:
- Unpaid medical expenses.
- Future medical bills.
- Lost wages.
- The potential for lost earnings in the future.
- Permanent impairment to the injured body part (loss of the body part with amputation injuries; loss of use of the body part for other injuries)
Ask the insurer for a breakdown of how it calculated the amounts for each of these potential damages. This information will allow you to analyze the insurance company’s offer. You may discover that the insurance company does not have all the evidence that supports your claim and a higher value. Or you might realize that you need to get better medical evidence before responding to the offer.
If the insurer refuses to share this information with you, including how much Temporary Total, Temporary Partial, or Permanent Partial Disability benefits it thinks you will receive, that indicates the offer is too low.
#2: Use Silence and Patience to Your Advantage
I understand that suffering a work injury or contracting an occupational illness is a terrible experience that you want to put behind you as quickly as possible. But don’t let your frustration with the process and its frequent delays cause you to lose the money that you deserve.
Strategic delay and showing the claim adjuster that you will not rush into an unfair settlement can help you get a fair amount for your injury.
#3: Know Your Claim’s Fair Value
A negotiation strategy is useful only if you know how much your case is worth.
Many injured workers who are unrepresented or who have inexperienced attorneys set their settlement expectations using the damages available in negligence and tort claims. This is a mistake. The workers compensation system is much different when it comes to what you must prove and what benefits are available. And the insurer may think it can take advantage of you if you don’t know the differences.
You should also consider the likelihood that you will win or lose on any disputed issue. A loss on an initial claim for benefits, the addition of an injured body part (compensable consequence injury), or the authorization and payment of surgery after a medical treatment denial will decrease your claim’s value.
#4: Find Your Leverage
Insurers start with leverage in most workers comp settlement negotiations.
There are three reasons for this.
First, injured workers do not have the right to a jury trial. This means there is no risk of a “runaway verdict” that could bankrupt the employer.
Second, insurers do not have to compensate injured workers for pain and suffering. These damages increase the money awards in personal injury cases but are not available in workers comp.
Third, penalties for acting in bad faith are rare. Though sanctions and the payment of attorney fees are available when the insurer does not have a good faith basis to defend the claim, the Commission rarely awards these. And you do not have the right to pursue a bad faith action against the workers comp insurer because you are not the policyholder; your employer is.
Despite these obstacles, it’s still possible to find leverage to increase your settlement. For example, focus on:
- The challenge the employer will have finding light-duty work within your permanent restrictions.
- The employer and its insurer will have difficulty finding any work for you based on your age, education, past work experience, geographic location, and restrictions.
- The cost of vocational rehabilitation and the possibility it will be unsuccessful.
- Your potential need for surgery in the future, and its cost. Read this article for a detailed discussion of whether you should settle the workers comp case before or after surgery.
- The money the insurer will have to spend to defend the case at trial or on appeal.
If applicable, you can use these items to strengthen your position during negotiation.
#5: Turn Up the Pressure and Litigate the Claim
Attorneys and judges often use the expression “settling on the courthouse steps.” It reflects that many cases settle after the discovery process and right before the trial.
Use this to your advantage during settlement negotiations. Push your case toward trial so that the insurer cannot sit back and take its time in responding to your counterdemand. This means filing a workers comp claim if you haven’t, serving interrogatories and requests for the production of documents, taking the depositions of witnesses, and getting supportive reports from your treating physician (orthopedic surgeon, neurologist, pain management doctor, etc.).
#6: Ignore Ultimatums, Scare Tactics, and False Deadlines
Many claim adjusters and defense attorneys play fair. But some will use pressure and threats to try to force you to settle immediately.
Do not fall for it.
First, these tactics are usually threats and nothing more. I have never seen an insurer refuse to negotiate because an injured worker or accident victim rejected the first offer.
Second, the insurer would not pressure you if the offer was that good.
#7: Remember That Anything You Say Will Be Used Against You
The adjuster and defense attorney are not your friends.
No matter how nice they seem, what you tell the insurance company’s representatives could be used to develop evidence unfavorable to your claim or minimize the settlement value.
For example, the insurer will likely make a lowball settlement offer if you tell the adjuster that you are struggling financially. Or if you post comments about money or your case on social media.
Choose your words carefully when speaking with the insurance company, and never agree to give a recorded statement without your attorney there.
#8: Know How a Settlement Will Impact Other Claims and Benefits
You may have claims for or receive Social Security Disability, Long Term Disability, Virginia Retirement System (VRS), or Line of Duty Act (LODA) benefits while seeking workers comp.
Properly worded settlement papers can protect and increase these other benefits so that you get more money from all sources.
You may also need the insurer to fund separate accounts for medical care such as a Workers Compensation Medicare Set Aside Arrangement (WCMSA) for any settlement to make sense for you.
How Much Money Should I Ask for When I Counter the Insurance Adjuster’s Offer?
Once you determine a fair settlement range for your case based on its strengths and weaknesses and identify your leverage, you must decide how aggressive you want to be.
If you are receiving benefits under an Award Order and have restrictions that prevent you from returning to your pre-injury job, then I recommend an aggressive counterdemand. Start with the highest possible number you can justify, even if you doubt the insurer will come close to that figure.
If the insurer has defenses to your claim, your authorized treating physician has released you to full duty, or you are in a hurry to close your case, then I recommend a less aggressive counterdemand. Start a number at the high end of your fair settlement range.
How Many Times Should I Counter Back and Forth with the Insurer?
There is no set number of times you can go back and forth with the claim adjuster or defense attorney. The negotiators’ personalities and beliefs about disputed points might determine how competitive or collaborative the negotiation is.
Some cases settle after a couple of rounds of negotiations.
Other negotiations take ten, fifteen, or even fifty rounds of back and forth.
Do not be afraid to make only small concessions during the negotiation, particularly if the insurer is nowhere near the range you find acceptable.
How Should I Negotiate with the Insurer? Understanding the Different Communication Methods
The method you use to communicate during settlement negotiations is often as important as what you say.
You can negotiate:
- Face-to-face: I find this to be the most effective way to negotiate a compromise and settlement. It allows you to develop a relationship with the other side, build empathy, and observe non-verbal cues. Unfortunately, meeting in person is time-consuming and can be expensive depending on where the parties live. Scheduling a workers comp mediation in person or by video conference can solve these problems.
- By phone: Telephone conversations are another option for negotiating settlements. The ability to interpret a person’s tone of voice is one advantage of this communication method.
- By email: Though impersonal, negotiation by email is common because it is efficient. The parties can respond when they have the time.
Can the Insurance Company Revoke a Settlement Offer?
You might feel pressured to accept the insurer’s first offer because you are afraid that the insurer will decrease the offer or take it off the table if you do not. But don’t allow this fear to cost you tens of thousands of dollars.
Though the insurer can withdraw its consent to a settlement agreement up to 30 days after the Workers Compensation Commission approves the settlement, it’s rare. No insurance company has revoked its offer to settle one of my clients’ cases in more than a decade of practice.
You also have the right to withdraw from a settlement agreement. For more information on this topic, read my article: Can I Change My Mind and Back Out of Settlement?
What Happens if I Reject the Settlement Offer?
What happens after rejecting the insurer’s offer depends on where you are in the workers comp claims process.
Regarding the offer, the insurance company may ask you to make a demand, or it might bid against itself and increase the amount offered.
If settlement talks stall (or never start), you will continue to receive benefits if you have a Workers Compensation Award Letter covering medical treatment and wage loss payments, or both. If you don’t have an award, you will have to prove the entitlement to benefits at a trial-type evidentiary hearing.
Is a Settlement Offer or Demand Admissible at Trial?
No.
The court will not accept the insurer’s settlement offers or your settlement demands as admissible evidence at the hearing. Neither you nor the insurer can use the settlement negotiations to show the other side believes it will lose on the disputed issues.
This freedom allows you to explore settlement without the risk that negotiating will make you look weak in front of the judge. Indeed, many judges want the parties to settle to clear the trial docket.
Get a Top-Ranked Lawyer to Handle Settlement Offers and Negotiations
Dealing with the insurance company is stressful. Its goal is to prevent you from getting all the money you need to recover and survive after a workplace injury.
When you get a lawyer involved in your case, an experienced negotiator will help you value your injury claim and handle direct negotiations while you focus on your recovery.
To learn more about how my firm can help you and your family, email or call me: (804) 251-1620 or (757) 810-5614. I represent injured workers throughout Virginia and can help you find a local attorney if you live out of the state.
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