While a goal of every adjuster is to resolve a case with a compromise and release, an overlooked beginning settlement strategy for adjusters is to only offer a stipulated award to resolve the case.
The amount paid for a C&R is a factor used to determine the employer’s experience modification. Every employer wants a low X-mod, and an adjuster negotiating a lower C&R is a big help to lower the cost to the employer.
Applicants’ attorneys try to negotiate a compromise and release that gets them the largest attorney fee and to avoid ongoing work on the case. One of their negotiation tactics for a compromise and release is to assert that the applicant will continue to treat and the case will become more expensive, especially if surgery is necessary. They know all of the possible future medical care and what it might cost. Their first C&R demand is usually very high.
However, they are really trying to avoid a stipulated award, since the applicant's attorney will lose a lot of time and staff time dealing with the utilization reviews, independent medical reviews and coordinating with the applicant and medical treatment, with no chance of getting more money. Applicant’s attorney will never want to work for free, month after month and year after year, if the case is resolved with a stipulated award.
Assume a workers’ compensation case with 30% permanent disability ($37,990), and with future medical care, a reasonable C&R would be $70,000. In this hypothetical, the attorney’s 15% fee for a stipulated award is $5,699.85 ($37,990 x .15% = $5,699.85) and the fee for a C&R is ($70,000 x .15% = $10,500). Applicant’s attorney will always negotiate for the higher fee.
Here are two hypothetical settlement negotiations.
In our first example, let’s say the adjuster and attorney only discuss a C&R. In this scenario, it’s foreseeable that the attorney will usually demand $90,000 for a C&R with an adjuster’s counter of $50,000. After some discussions, it will resolve at $70,000 for a C&R, and the attorney will get the higher fee of $10,500.00 and not have to do any more work on the file.
For our second example, let’s say the adjuster uses the negotiation strategy of offering only a stipulated award and not offering a C&R in the first offer. Call the attorney's office and advise that the case is worth 30% permanent disability and you can send the stipulated award over to resolve the case. The office will still counter with $90,000 for C&R to double the fee the stipulated award would give.
The adjuster should reject the $90,000 and offer the stipulated award again, saying that if the attorney wants to lower the demand, the carrier will consider a C&R, but the demand is too high. The attorney will change the negotiation tactic to avoid the lower fee of the stipulation (only $5,699.85) and ongoing work for free, month after month and year after year.
Applicant’s attorney should make a new offer of $80,000 to avoid the free work, and now with the first offer of $50,000 the case should settle at $65,000.
That may not seem like a lot for workers' compensation, but the adjuster and attorneys' goal is to reduce costs. A $5,000 savings over 100 cases is $500,000 less paid on claims, and that savings significantly helps the employer’s X-mod.
In conclusion, it’s important to be unafraid to offer only a stipulated award at first in hopes of achieving the ultimate goal of a lower C&R amount. After all, we know that the applicant’s attorney will never want to work for free.
Gregory L. Choate is an associate attorney at the Law Office of Bradford & Barthel’s San Diego office. This entry from Bradford & Barthel's blog appears with permission.
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