A compromise and release (C&R) is an agreement for the insurance company to issue you a lump sum payment to settle the entire workers’ compensation case. The value of the settlement depends on your present (and projected future) lost wages and medical care expenses.
Here are five key things to know about C&Rs:
- A C&R will occur when your injury has been denied by the insurance carrier.
- A C&R will also occur when your condition is considered permanent and stationary, and the amount of disability has been determined.
- A worker’s compensation judge must approve C&R agreements.
- If you settle with a C&R, you will not likely return to work for the same employer after the injury.
- You can redo a C&R if there is a valid reason the C&R was incorrectly approved.
In this article, our California labor and employment attorneys will explain:
- 1. What is a compromise and release?
- 2. What does a settlement agreement contain?
- 3. What is the process for executing a C&R?
- 4. Can I appeal a compromise and release?
- 5. Is a C&R the most common way to settle a California workers’ compensation case?
A Compromise and Release is a contract for the insurance company to pay an injured worker to end their workers’ compensation case.
1. What is a compromise and release?
A Compromise and Release agreement (C&R) is a settlement of your entire worker’s compensation claim.
You have the right to settle your claim.1 Though you do not have to do so.
When you settle a claim by C&R, you give up:
- the right to reopen the claim later
- any right for the insurance company to pay for additional medical treatment related to your work injury
However, you can instead settle part of your claim and keep these items. This agreement is a Stipulated Award.
1.1. Time and place of C&R approval
A judge must approve a C&R.2 The judge can approve it at any hearing, including
- a Mandatory Settlement Conference,
- a Status Conference, or
- a workers comp trial.
A C&R can also be approved as a “walk-through,”3 meaning you can go before a judge without a hearing on the court calendar. A C&R can also be mailed to the court for approval.4
The insurer will agree to pay the C&R settlement within 30 days of its approval by a judge.
Example: Arnold’s case is set for a hearing. He recently saw his doctor, who told Arnold his condition had stabilized, and he was unlikely to improve.
Arnold attends the hearing. The attorney for the insurance company offers to settle Arnold’s case for $24,000. Arnold agrees and signs the C&R.
At the hearing, the judge approves the settlement. Arnold’s case is over. He will be mailed a check within 30 days of the hearing.
1.2. Settlement at the California Workers’ Compensation Appeals Board
The insurance company will give the injury claim a claim number after you file a claim for workers’ comp benefits. A claim number is different from the case number. A case number is assigned by the Worker’s Compensation Appeals Board (WCAB) when a document is filed with the court.
Normally the first document that will be filed with the court is the Application for Adjudication of Claim. This will give the claim a case number.
If there is no application filed, the C&R settlement will be the first document filed with the court.5 Therefore, the case number will be given at the time of settlement.
If you have an attorney, they will take 15% of the total settlement amount.
Example: Darcy has been satisfied with the benefits provided by the insurance company for her injury.
When it’s time for her claim to end, the insurance company adjuster calls Darcy and negotiates a Compromise and Release for $16,000.
The insurance company mails the agreement to Darcy to sign. She returns it to the insurance company.
The insurance company takes the agreement to the WCAB to walk thru a settlement.
A judge reviews the settlement amount and the medical reporting and approves the agreement.
Darcy will be paid within 30 days.
1.3. Return to work
An insurance company will only agree to a C&R if you are not returning to work for the employer.
As a C&R ends your entire claim, if you return to the same job, you could file another claim.
1.4 Is the compromise and release settlement taxable?
Workers’ compensation benefits are not taxable. This includes payments you receive in a Compromise and Release workers’ compensation settlement.12
Example: Joan receives a C&R settlement of $85,000. In the same year Joan earns $30,000 working.
Joan’s taxes will only be calculated based on the $30,000 Joan earns working. She will not be taxed on the $85,000 C&R. She gets to keep the entire $85,000.
2. What does a settlement agreement contain?
A Compromise and Release includes:
- the date of injury
- case number
- injured body parts
- where the injury occurred
- whether it is a specific injury or cumulative trauma
- whether there is temporary disability or permanent disability
- the dollar value of the settlement6
A C&R in a case where the worker dies (a death benefits case) must include:
- date of death
- name of widow/widower
- name and ages of all children
- names of all other dependents
- whether dependents were totally or partially supported by the deceased worker
- amount of death benefit
- who receives death benefit payments
The C&R will end your claim to receive any further amount of money for the dates of injury and parts of the body listed.
The agreement may list
- your average weekly wage,
- amount of temporary disability, and
- amount of permanent disability.
Though this information is not required.
There may be deductions from the settlement for permanent disability, an overpayment of temporary disability, or other deductions.
2.1. How is a compromise and release settlement calculated?
A C&R is meant to settle every issue in your case except for the Supplemental Job Displacement Voucher, which can only be settled in specific situations.
The value of the settlement comes mainly from the
- amount of permanent disability and
- future medical care that you will receive.
The temporary disability has usually already been paid while you are still being treating for your injury and cannot work.
Permanent disability
The amount of permanent disability benefits you receive is based on the severity of the injury. A doctor will give you a rating for each part of your body with an injury. The percentage of disability converts into a dollar value.
If the insurance company hasn’t paid the permanent disability at the time of the C&R, it will be included in the C&R value.
Future medical care
No one knows how much future medical care you will need in the future for your injury. Though the insurance company can estimate the value based on what it pays other injured workers.
In a C&R, the insurance company offers you a lump sum cash payment instead of continuing to pay for your medical care.
Some C&Rs may require a Medicare Set Aside. When you are receiving Medicare, some of the settlement money must be set aside to pay for Medicare medical expenses.
2.2. Settlement of other issues
You will be asked to initial and specifically agree to also settle:
- earnings (average weekly wage)
- temporary disability (wage loss payments)
- jurisdiction
- apportionment (portion of the injury pre-existing or not caused by work)
- employment (you were an employee when injured)
- injury aoe/coe (it is a work injury)
- serious and willful misconduct (employer intentionally caused the injury)
- discrimination (you were fired for filing a claim)
- statute of limitations (claim was timely filed)
- self -procured medical treatment (you got medical treatment on your own)
- supplemental job displacement benefits ($6,000 voucher for retraining)
Your signature on a C&R must have two witness signatures or be notarized.
The family of injured worker can’t later file a death claim after a C&R settlement is reached.
A C&R must be approved by a workers’ compensation judge. The judge has to make sure the settlement is adequate based on the injury and medical reporting and benefits already paid.
3. What is the process for executing a C&R?
A workers’ compensation judge must approve a C&R. The judge has to make sure the settlement is adequate based on your injury and medical reporting and benefits already paid.7
There are generally two types of cases that a C&R settles – disputed injury or based on medical reporting. They require different types of information for a judge to review.
3.1. Disputed injury
When an insurance company denies an injury, it does not provide benefits. The only way for you to get benefits is to have a trial and have a judge determine that there is a work injury, or you can settle the claim with a C&R.8
Example: Isaac claims he injured his back falling off a ladder. No one saw it happen.
His supervisor believes Isaac injured his back helping a friend move over the weekend. Based on this the insurance company denies the claim.
Instead of having a trial to determine whether his injury was work-related, Isaac agrees to accept a settlement of $15,000 with a C&R.
If Isaac lost his trial, he would receive nothing. The judge knows this and approves the settlement.
3.2. Based on medical reporting
When the insurance company is providing benefits, your case will not settle until a doctor determines your condition to be permanent and stationary, meaning it is unlikely to improve further.
The judge will not approve the settlement until you had all the necessary treatment and your condition has stabilized.
At that point, a medical report will provide the percentage of permanent disability. The judge can determine if the settlement is in line with the value of the permanent disability and future medical care.
The judge will request that the medical report on which the settlement is based must be filed with the court along with the C&R.
Example: Karen’s injury was accepted by the insurance company. Her condition is determined to be permanent and stationary.
The permanent disability of her injury is worth $19,000. The remainder of the value is the future medical care.
Karen agrees to settle her claim for $35,000.
3.3. Failure to approve C&R
A judge has several options when considering whether to approve a C&R.
A judge can:
- issue an order approving the C&R
- request that the medical reporting the settlement is based on be rated for the percentage of disability by the Disability Evaluation Unit
- give you up to 30 days to modify the settlement as suggested by the judge
- set the case for a hearing9
Example: Brett agrees to settle his California workers’ compensation claim with a C&R for $7,500. An insurance company attorney tries to get it approved by a judge at the WCAB.
The judge doesn’t think $7,500 is enough money to settle Brett’s case.
The insurance company contacts Greg and agrees to settle the case for $12,000. The judge approves the settlement.
4. Can I appeal a compromise and release?
You can appeal10 a judge’s Order Approving a C&R or reopen it for good cause.11
Example: Debra settles her claim with a C&R. After the settlement, Debra realizes the insurance company had given her incorrect information regarding the value of the case.
Debra files a Petition to Reopen her claim to get a new agreement at a higher amount.
5. Is the C&R the most common way to settle a California workers’ compensation case?
Most injured workers prefer to settle the entire workers’ compensation case. It gives you an immediate lump sum settlement.
The benefit of future medical care may not be appealing to you as you may have private health insurance. You do not necessarily need the workers’ compensation insurance company to pay for future medical care.
When contacted by the insurance company about a C&R settlement, you should carefully consider your case’s value. You should attempt to negotiate a settlement and not rush into an agreement.
Call us for help…
Contact our law firm for legal advice. Our workers’ compensation attorneys assist clients throughout the state.
For help with filing a workers’ compensation system claim in California, completing workers’ comp forms or appealing a denial of benefits, contact us at Shouse Law Group. Our firm helps police officers, firefighters and other workers to get compensation for their job-related injuries in California.
Legal References:
- Cal. Lab. Code § 5000.
- Cal. Lab. Code § 5001.
- Cal. Code Regs. tit. 8, § 10417.
- Cal. Labor Code section 5002.
- Cal. Code Regs. tit. 8, § 10878.
- Cal. Lab. Code § 5003.
- Cal. Code Regs. tit. 8, § 10882.
- Cal. Code Regs. tit. 8, § 10870.
- DWC/WCAB Policy and Procedural Manual § 1.90 (rev. 2013).
- Cal. Lab. Code § 5900.
- Cal. Lab. Code § 5803; see also California Ins. Guarantee Assn. v. San Diego County Schools Risk Management etc., (Fourth Appellate District, Division One, 2019) 41 Cal. App. 5th 640.
- IRS Pub. 525, Taxable and Nontaxable Income, p. 18