What is a Moratorium?

A moratorium is a credit given to the employer for any future benefits it may have to pay in the future. It is an agreement between the claimant and the respondent, usually a following the conclusion of the negligence action which gave rise to the workers’ compensation claim, ie a car accident which happened on the job, in which the parties agree the claimant shall forgo all benefits up to a certain dollar amount. By way of example, if a claimant is injured in a third party motor vehicle accident, and the claimant receives $10,000.00 in his pocket following the conclusion of that case, the respondent will seek to have a moratorium or credit in the amount of $10,000.00 for any future medical or indemnity benefits that would otherwise be payable to the claimant following the conclusion of the negligence claim.

The philosophy behind this moratorium is that the claimant should not be able to reap the benefits of a recovery against the third party, and then double-dip, by later requiring the workers’ compensation insurance company to pay for future benefits for which the claimant has already been compensated in the third party claim. In essence, the claimant has already recovered $10,000.00 for any future medical benefits or wage loss and should not be entitled to get another bite of the apple from the workers’ compensation carrier.

The amount of the moratorium is not set in stone, but rather, can be negotiated between the parties depending upon the circumstances. The moratorium agreement should be memorialized in writing and then approved by the workers’ compensation commissioner at a hearing.

Leave a Reply