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Lump Sum Payments of Permanent Disability Benefits

Work injury attorney R. Mack Babcock, founder of Colorado's leading law firm for injured workers, explains the various benefit payment options in permanent total and partial disability cases

There are two main financial benefits paid in most workers' compensation cases: wage loss benefits (called temporary disability benefits) and permanent disability benefits paid at the conclusion of the claim.

Temporary Disability Benefits

Colorado's Workers' Compensation Act states that temporary disability benefits, when they are due, have to be paid at least every two weeks.  Weekly or bi-weekly is the only way temporary disability benefits are paid when they are due.  If an injured worker is in the middle of their case receiving bi-weekly temporary disability benefits and they need or want to get money in a lump sum, their only option would be to try and negotiate a full and final settlement in exchange for closing their entire claim.

Permanent Disability Benefits

Permanent disability benefits are paid at the end of some cases when an injured worker has ongoing problems as a result of a work injury or has suffered permanent impairment.  There are two types of permanent disability benefits in Colorado:

  • Total – Permanent total disability benefits are wage loss benefits either for the rest of the person's life or until a person is able to go back to work.  Permanent total disability benefits are very difficult to obtain in Colorado and therefore apply in very few cases.  In order to be entitled to permanent total disability benefits an injured worker has to be completely unable to work in any capacity.  It does not matter if the person cannot go back to their pre-injury profession.  If an injured worker can do anything in an employment capacity, that person will not be entitled to permanent total disability benefits.

  • Partial – Most cases involve permanent partial disability benefits.  Permanent partial disability benefits do not take into account an injured worker's ability to work or any resulting wage loss at all in calculating what benefits are due.  Permanent partial disability benefits are based entirely on impairment ratings assigned by an injured worker's treating physician pursuant to the American Medical Associations Guides to the Evaluation of Permanent Impairment (3rd Edition, Revised).  The impairment ratings assigned by a treating physician are used in one of two equations – scheduled or whole person – to calculate an injured worker's permanent partial disability benefits.  Which equation is used depends on the body part(s) injured in the accident.

Unlike permanent total disability benefits that can last for the rest of the person's life, permanent partial disability benefits are a set amount.  If a person's permanent partial disability award is $25,000, the carrier stops paying once they've paid that full amount.  At the same time, once a carrier agrees to permanent partial disability benefits and an injured worker accepts that amount, they are bound to pay the full amount.

Importantly, an injured worker can work and receive permanent partial disability benefits.  In the case of permanent total disability benefits, however, injured workers are only entitled to workers' comp payouts while they are unable work. (As soon as the insurer gets the notion that you are capable of working, they will set forth measures to check if you're still disabled. These methods include requiring frequent checkups with a physician, as well as hiring a private investigator. If you're cleared to work, they'll stop payments.).

Requesting a Lump Sum of Permanent Disability Benefits

Once an insurance carrier admits liability for permanent disability benefits of any kind (total or partial), an injured worker can make a "lump sum" request.  For injuries occurring before July 1, 2015, the lump sum total cannot be more than $60,000. Fortunately, thanks in part to the work of R. Mack Babcock, founder of The Babcock Law Firm and recent president of the Workers' Compensation Education Association (WCEA), Colorado law was changed a couple years ago to increase the lump sum limit and add a provision so that the limit adjusts for inflation every year. Therefore, what limit applies depends on the date of injury. The current limit for injuries after July 1, 2015 is $84,000.

The effect of requesting a lump sum in permanent partial disability cases versus permanent total disability cases is different.  In a permanent total disability case, the carrier gets to reduce the weekly or bi-weekly benefits.  In permanent partial disability cases, the carrier gets to apply an annual 4 percent reduction from the award total.  If an injured worker does not do a lump sum request, benefits are paid weekly or bi-weekly. How they are paid is completely up to the injured worker.

Injured workers can also submit lump sum requests in death cases.  It works like permanent total disability cases where the weekly benefit amount is reduced for the lump sum.  The lump sum limit is the same if there is only one dependent receiving death benefits.  If there are multiple dependents, they can each make a lump sum request, but they are all limited to an amount equal twice the individual limit.

Legal Advice on Lump Sum Requests

Deciding whether to receiving your workers' compensation benefits in the form of gradual payments or as a lump sum can be a difficult decision.  Typically, we encourage our clients to take a lump sum so long as all parties agree with the amount of the award.  This is recommended for several reasons – the most significant being that any financial professional will tell you that you can beat the 4% rate of return used when calculating the present value discount.  On top of that, most people want control of their funds and don't want to wait for them to be trickled out over a few years.

However, there is no one-size-fits-all solution. To determine the best course of action in your individual case and how to obtain your injury benefits, you should talk to a workers' compensation attorney.  For work injuries occurring in Colorado, contact The Babcock Law Firm to discuss your case today.

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Disclaimer

While the Babcock Law Firm tirelessly works to obtain successful outcomes for its clients, prior positive outcomes are no guarantee of future success. Indicating prior positive results is in no way intended to guarantee future results.

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