From IRS Pub 17, Chapter 5:
Other compensation. Many other amounts you receive as compensation for sickness or injury aren’t taxable. These include the following amounts.
Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments.
Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income.
Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy.
From the last bullet, your "lost wages" are not taxable.
