To Commute Or Not To Commute

Clients will often ask whether they can receive their specific award in a lump sum rather than over a period of weeks, and sometimes years, depending on how big the award is. The answer is that the claimant can file a motion for commutation in which the claimant requests that the workers’ compensation commissioner authorizes a one time lump sum payment at a specified discount rate rather than being weekly. In considering this motion, the commissioner must satisfy himself/herself that doing so is in the best interests of the claimant. Depending upon which commissioner this motion is entertained The claimant should furnish copies of documents which would demonstrate what the claimant is earning every week, and what the claimant is spending every week by way of mortgage obligations or rent, utility bills, revolving credit card bills, alimony or child support obligations, and the like. The more dire the claimant’s financial circumstances are, the more likely that the commissioner will approve a motion for commutation.

The discount rate to which the insurer is entitled depends upon the current interest rates. Because the current interest rates are at historic low, so is the discount rate by which the lump sum must be discounted (currently 3% as of September 2009). Obviously, as the interest rates go up in the future so will the discount rate.

The claimant must be aware that if the commissioner approves the lump sum commutation, then the claimant will not be able to receive any temporary total or temporary partial benefits until such a time as the original periodic payment of his/her specific benefits would have elapsed, (even if the claimant becomes incapacitated again). By way of example, if the claimant commutes his 10% of the back (37.4 weeks), then the claimant cannot collect any temporary total or temporary partial benefits for the next 37.4 weeks, even if he/she becomes totally incapacitated.

The claimant is advised to discuss the pros and cons of such a commutation carefully with his lawyer.

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