Full and Final Settlements in Arizona Workers' Compensation: Understanding the Requirements

In Arizona's workers' compensation system, injured workers typically receive benefits for medical care and lost wages until they reach maximum medical improvement (MMI).

However, a full and final settlement offers an alternative to ongoing benefits. This type of settlement allows an injured worker to resolve their claim for a lump sum payment, relinquishing their right to future benefits related to the injury.

Statutory Requirements

Full and final settlements are governed by Arizona Revised Statutes § 23-941.01. This statute sets forth specific requirements to ensure these settlements are made knowingly, voluntarily, and with a full understanding of their implications.

Key statutory requirements include:

• Compensable Claim: The settlement must resolve a claim that has been accepted as compensable by the insurance carrier or adjudicated as compensable by the ICA.

• Termination of Disability: The claim must involve a period of disability that has been terminated by a final notice of claim status, an ICA award, or a stipulation from the involved parties. This ensures that temporary benefits have ended, and the focus is on resolving potential permanent disability benefits.

• Written Agreement: The settlement must be documented in a written agreement signed by the injured worker, the carrier (or self-insured employer), and their authorized representatives. This formalizes the terms and ensures a clear record of the agreement.

• Disclosure of Information: The carrier must provide the injured worker with detailed written disclosures regarding:

  • Future Medical Benefits: Reasonable anticipated future medical expenses, their projected costs, and how those costs were determined, along with the portion of the settlement allocated to future medical benefits.

  • Future Indemnity Benefits: Total amount of future indemnity benefits, the worker's rated age (if applicable), life expectancy, the source of life expectancy data, the present value of future benefits, the discount rate used, and the amount of the settlement representing future indemnity benefits. This transparency allows the worker to understand the financial implications of the settlement.

• Attestations: The agreement must include specific signed attestations by the worker and all parties. These attestations confirm crucial aspects of the settlement, such as:

  • Understanding of Rights: The worker affirms that they have read the agreement and understand the rights being settled and released, including the right to rearrange benefits or reopen the claim.

  • Voluntary and Informed Agreement: The worker confirms that the settlement was reached without coercion, duress, fraud, misrepresentations, or undisclosed agreements. This protects the worker from undue influence.

• Approval by Administrative Law Judge: The settlement must be submitted to an ICA Administrative Law Judge for review and approval. The judge will scrutinize the agreement to ensure it complies with all statutory requirements and is in the worker's best interest.

• Payment Within 15 Days: Once the settlement is approved, the lump sum payment must be made to the worker within 15 days.

Full and final settlements can be a complex but beneficial option in workers' compensation cases. Injured workers should carefully consider the implications of forgoing future benefits and seek legal counsel to ensure they make informed decisions that protect their long-term well-being.