Commutation

Workers injured while performing their normal job duties may be entitled to workers compensation. Workers' compensation law provides for six types of settlements, all of which must be approved by the Workers' Compensation Commissioner.

Commutation is payment for workers' compensation benefits in a lump sum payment rather than having workers' compensation benefits paid on a weekly basis. Not only must the lump sum payment be approved, it must also be in the employee's best interest.

Commutation may be a full commutation payment, which eliminates the obligation of the insurance company to pay any future costs, including medical costs, which arise from a work injury. Employees who receive full commutation may not reopen their workers' compensation case. A partial commutation may also be offered. Under this agreement the employee may be paid a portion of the future benefits but may also have rights in the future to additional benefits, such as payment for medical expenses.

Workers who agree to full or partial commutation should make sure the lump sum payment offered is adequate and will fully cover the costs of their injuries, especially if they are forfeiting their right to future compensation.

What type of benefit may be commuted?

Workers compensation benefits may include payment for loss of wages, loss of earning capacity, medical expenses, disfigurement and permanent for injury benefits. In some cases if the compensation for one of these categories is relatively low the insurance company may choose to buy out the benefit and make a lump sum payment to the worker.

The most common benefit which is commuted is temporary partial disability benefits or benefits paid to claimants who have lost some of their earning capacity. Insurance companies may decide to make a lump sum settlement offer for loss of earning capacity rather than pay a relatively small weekly benefit to the worker.