Gently Feral,
I've read your first post on the subject and now this one. I would say that because you mentioned a non-industrial (or non-work related) injury, albeit by error, the claims adjustor should do exactly what they did. WC is a huge fraud area for the insurance industry (I work in the industry) and is subject to a fair amount of abuse. Not saying that you're trying to abuse it, just that's what automatically comes to the adjustor's mind.
I agree with exjdub, you need to lawyer up immediately. The settlement amount went down as soon as you said non-industrial. I don't live or transact business in CA, so I can't make any plaintiff lawyer recommendations.
I also agree with Jean. Many HR managers do try to be fair and helpful. Its not in their best interest from a company morale standpoint to treat people who have been injuried on the job poorly, especially in a tight labor market.