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

What Are Temporary Disability Benefits?

Colorado's Workers' Compensation Act states that wage loss 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.

What Are Permanent Disability Benefits?

Permanent disability benefits are paid at the end of some workers' comp 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 (PTD) 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 doesn't 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 likely not be entitled to permanent total disability benefits.

  • Partial. Most cases involve permanent partial disability (PPD) benefits. Permanent partial disability benefits don't 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 Association's 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. For example, if a person's PPD award is $25,000, the carrier stops paying once they've paid that full amount. At the same time, once a carrier agrees to PPD 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 at the same time. In the case of PTD benefits, however, injured workers are only entitled to workers' comp payouts while they are unable to 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. Colorado also places caps or limits on how much a worker can receive in temporary total disability benefits and permanent partial disability benefits.

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 recently changed to increase the lump sum limit and add a provision so that the limit adjusts for inflation every year. Therefore, the lump sum limit applying to your case depends on the date of injury.

The effect of requesting a lump sum in PPD cases versus PTD 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 doesn't do a lump sum request, benefits are paid weekly or bi-weekly. How they are paid is completely up to the injured worker.

The loved ones of a worker killed on the job can also submit lump sum requests. 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's only one dependent receiving death benefits. If there are multiple dependents (spouse and children), they can each make a lump sum request, but they are all limited to an amount equal to twice the individual limit.

Legal Advice on Lump Sum Requests

Deciding whether to receive your workers' compensation benefits in the form of gradual payments or as a lump sum can be a difficult decision. The benefits of taking a lump sum are that all parties agree with the amount of the award. This is advantageous 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, if you request to receive lump sums for more than $10,000, you may be waiving your legal right to appeal your impairment rating payout. It's inadvisable to do this without first consulting a workers' comp attorney.

Clearly, there's 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 an experienced workers' compensation attorney. For work injury cases in Colorado, contact The Babcock Law Firm to discuss your case today.

To learn more about other limits to workers' comp benefits, check out the articles listed below or download our comprehensive (PDF) Colorado Workers' Compensation Guide for complete information on benefits, claims, etc. today.

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