An Overview of Settlements and Awards in Iowa Work Comp

Under Iowa Workers’ Compensation law there are many different types of settlements. In this post I am going to give an introduction and overview of the main categories of settlements. In a later post I will get more into the pros and cons of the different kinds of settlements, and which types of settlements fit best with which types of cases.

I think the best way to start explaining the different kinds of settlements is to first talk about the results if you take a workers’ compensation claim to trial and win and receive an award. You can then see how the different types of settlement compare to a trial award.

Award from trial
. If you take your case to trial and win, the award from that trial is going to have three main valuable components. First, there will be an award for a specific amount of weekly cash benefits. Second, the award will entitle the worker to lifetime medical benefits relating to the work injury. Third, the award gives the injured worker a right to bring a review reopening claim if the injury gets worse within three years of the last payment of benefits.

Here is an example of the value of a review-reopening claim. A worker might suffer a back injury and end up receiving a 25% industrial disability award that entitles the worker to 125 weeks of permanent partial disability benefits. Over time the back condition might worsen so that the worker’s industrial disability increases from 25% to 50%. As long as the worker brings the review-reopening action within three years of the date of the last payment of benefits on the original injury, he is entitled to receive compensation for the increased disability. Under this example the worker would be entitled to another 125 weeks of permanent partial disability benefits in his review-reopening action.

Note: You can click here to get more background on the work comp terms and concepts used in this post.

I will now talk about the main categories of settlements, and how they all have different ways of handling the three award components of: weekly cash benefits, medical benefits, and the right to later bring a review-reopening action.

Open File Settlement
. Open file settlements are authorized under Iowa Code Section 85.35(2). An open file settlement is technically called an “Agreement for Settlement.” However, I think the term open file settlement does a better job of helping describe the nature of the settlement.

Basically, in an open file settlement the worker and the defendants agree to resolve the case as if it had gone to trial and the claimant won. Therefore, the worker is given weekly benefits, although instead of a workers’ compensation deputy deciding the amount of the benefits, the parties are striking an agreement on the amount of the benefits. Second, the worker receives his right to lifetime medical benefits for the injury. Third, the worker receives his right to bring a review-reopening action if his condition gets worse.

The way it was explained to me is that the term “open file settlement” refers to how the insurance company handled the case after settlement. In an open file settlement the worker’s right to receive lifetime medical benefits and the right to a review-reopening remained alive and active. Therefore, the insurance company could not close the file and put it in storage, but kept it as an open or active file.

Closed File Settlement
. In a closed file settlement, the parties agree that the injured worker will be paid a set amount of money. However, the parties also agree that the injured worker is not entitled to any future medical care, and the worker is not entitled to bring a review-reopening action if his condition worsens.

Closed file settlements are technically referred to as “compromise settlements” and are authorized by Iowa Code Section 85.35(3).

The term “closed file settlement” also refers to how insurance companies treated the case after it was resolved. In a closed file settlement once the insurance company writes the check to pay the agreed amount of money, they can close the file and put it in deep storage because they do not have an obligation to do anything else related to the case in the future.

Hybrid of an Open File Settlement and a Closed File Settlement. It is also possible to negotiate a settlement that has parts of both an open file settlement and a closed file settlement. The parties can agree in a hybrid settlement to pay cash up front, close out or eliminate the right to a future review-reopening; but leave future medical care open.

Effectiveness of Settlements. Under Iowa law even though the parties might agree to the settlement terms, no settlement is effective until it is approved by the Workers’ Compensation Commissioner.

The parties are required to use the forms of the Iowa Workers’ Compensation Commissioner for the different types of available settlements.

Future Settlement Blog Posts. Down the road I will be talking about some other settlement issues. This includes settlements in extremely serious injury cases in which the worker may also be receiving Social Security Disability benefits, and may have medical coverage through Medicare.