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Indemnity Dispute Settlement Guidance

For approval a settlement must meet the requirements of the Texas Workers' Compensation Act and the Rules of the Division of Workers' Compensation of the Texas Department of Insurance. For your convenience, the most important sections of the Act and rules are listed below and may be accessed by clicking on the individual links. An unusual and significant aspect of the settlement process is that a settlement may only be approved if the Commissioner, or designee of the Commissioner, is satisfied that the settlement "is in the best interest of the claimant". (Section 408.005(e)(3)). This guidance is provided to assist parties in proposing settlements.

The provisions of a DWC Form-025 (Benefit Dispute Settlement) should:

  1. State the weekly/monthly rate to be paid for all income benefits noted in the terms of the Settlement and the dates of the period(s) for the payments. Also, have a provision that payment will be made in a lump sum with interest for all accrued income benefits, if the payable date is past.
    example: "The claimant is entitled to and will be paid supplemental income benefits at a monthly rate of $1630.58 for the 13th, 14th and 15th quarters (6/1/06 - 2/28/07). Accrued but unpaid benefits will be paid in a lump sum with interest paid at the rate provided by TX Labor Code, Section 401.023. Unaccrued benefits will be paid as they accrue and are payable."
  2. State that the Settlement resolves entitlement to all past and future income benefits.
    example: "All other income benefits have been paid and the claimant is not entitled to any further or future income benefits".
  3. State that the parties waive their right to future Division proceedings related to liability for and entitlement to income benefits.
  4. Define the compensable injury.
    (The injury is defined based on any agreements of the parties, the MMI/IR report establishing the injured worker's IR, Section 408.0042, and any waivers under Labor Code, Sections 409.021 and 409.022. A settlement's definition of the compensable injury may not exclude an injury or diagnosis that has already been finally established as part of the compensable injury.)
  5. State the date of maximum medical improvement and the impairment rating based on a final decision or a doctor's certification.
  6. State that the parties have the right to continue to request Division proceedings to resolve disputes regarding liability for and entitlement to medical benefits. This also applies to Extent of Injury disputes, including those for specific diagnoses that arise after the date of the settlement.
  7. List all prior written and oral agreements of the parties. Give the date and a summary for each agreement.
  8. May include a provision for payment of attorney fees; however, the parties may only agree that the injured worker's attorney will limit the fee request to a specified amount for approval by the Division. Parties cannot agree to the specific amount of attorney fees that the carrier will be liable for and have to pay. That is because the Division, through a separate attorney fee request process, must approve the amount of attorney fees to be paid.

The terms of the Settlement should be stated on the DWC025. If additional space is required, the parties should attach additional pages as necessary. Only one form DWC025 should be submitted. The number of additional pages should be noted at the end of box 13 on the DWC025. All participants signing the DWC-25 should initial each additional page.

In addition to the DWC025, the parties should provide:

A joint explanation or separate explanations from each party stating why the parties believe the settlement is in the best interest of the injured worker. The joint explanation or separate explanations must have supporting information that may or may not be incorporated into the settlement at the discretion of the parties. That supporting information should address:

  • The amount of workers' compensation income benefits the claimant would have received if found entitled to benefits during the period covered by the terms of the settlement.
    (example: the injured worker's SIBs rate is $1100; therefore, he/she could receive $9900.00 for the three quarters, if found entitled.)
  • The injured worker's expected wages, if any, and the reduction of income benefits payable under the settlement based on those expected wages.
  • The amount of Social Security Disability Indemnity (SSDI) benefit the injured worker receives with the offset for workers' compensation benefits and the amount SSDI will increase once workers' compensation benefits cease.
  • Other sources of future income or financial support for the injured worker.

    (The relinquishment of any SIBs may not be in the injured worker's best interest if there is no other source of financial support beyond SIBs.)
  • An agreed prospective medical treatment plan from a doctor, in accordance with §413.014(f).
    (Prospective medical treatment plans will give an indication of whether the medical condition would affect potential future indemnity benefits. As a settlement may not limit medical benefits, actual treatment may change as necessary for the nature of the injury.)

General settlement considerations (Helpful Hints)

No agreements should be pending when a settlement is submitted. Any pending agreements should be withdrawn and incorporated into the settlement.

Correcting Settlement provisions
Only the persons who signed the settlement may make corrections. Corrections are made and effective only if each person who signed the settlement also initials the settlement where the change is made.

Court appeals
Issues that have been appealed to District Court shall not be included on a settlement. If parties wish to resolve those issues, they will need to apply to the Court.

Court orders and judgments
If disputed issues have been finally resolved through judicial action, a joint affidavit outlining the terms of the Court settlement with an affirmation that the Court's judgment has become final and is no longer appealable is required. A copy of the court's judgment may also be enclosed with the settlement.

Dates must be correct as calculated by the Act and Division rules.

There can be no partial SIBs quarters unless it is the last SIBs quarter and it is shortened because of the expiration of 401 weeks from the date of injury in accordance with TX Labor Code Section 408.003.

Income Benefit payment amounts
Income Benefit payment amounts shall not exceed the statutory maximum.

Illegible settlements must be rejected because their terms are unknown and cannot be enforced. A common cause of illegible settlements is repeated faxing.

Lump sum payments
Parties cannot agree to lump sum income benefit payments except as permitted by the Act and Rules. Only accrued income benefits are paid in a lump sum. Interest must be paid on income benefits that have accrued and the payment date has past.

Maximum medical improvement (MMI) and impairment rating (IR)
An MMI date must be based on a doctor's certification. An IR must also be based on a doctor's certification. The parties may not settle on an IR without also settling on the MMI date.

Rejected settlements and reconsideration
Rejected settlements shall not be reconsidered; however, the parties may submit a new settlement. A copy of a previously rejected settlement is not a new settlement and will be rejected. The parties must sign the new settlement after the date the prior settlement was rejected. Before submitting a new settlement the parties should make appropriate changes to the settlement to address the concerns that led to rejection of the prior settlement.

Settlement effective date
The settlement is not effective until it is signed as approved by the Commissioner or the Commissioner's designee. Until the settlement is signed and approved the parties must continue to preserve all their rights (i.e. filing required paperwork within the required timeframes, complying with SIBs qualifying requirements, etc).

Travel to obtain healthcare
Reimbursement for travel to obtain healthcare may be affected by a settlement. Injured workers may still request reimbursement, and if treatment was not available within 30 miles, reasonable expenses should be paid. However, the Division will not grant a request for dispute resolution should the carrier not reimburse.

Settlements may not:

  • Limit or terminate an injured worker's right to medical benefits.
  • Be made until the injured worker has reached maximum medical improvement and a valid impairment rating has been established.
  • Agree to a date of maximum medical improvement and/or percentage of impairment that has not been certified by a doctor pursuant to §408.124.
  • Allow a carrier to pay monies, to any party, in exchange for a Settlement that there was no compensable injury, or for dropping their claim.
  • Waive a party's right to third party subrogation or agree to relieve a party from the effects of an administrative violation.
  • Dismiss or withdraw an administrative complaint.
  • Include issues that are addressed by a Decision and Order, Appeal Panel Decision or Court Decision that has become final.


General Definitions

Settlements and Agreements

Entitlement to Medical Benefits

Resolution at Benefit Review Conference, written agreement


Dispute Resolution - Agreements, Settlements, Commutations
Chapter 147


DWC Form-025, Benefit Dispute Settlement

Point of Contact
For Settlement related issues for injuries occurring after 1/1/1991

Allen Craddock
Director of Hearings

Last updated: 6/21/2018