Personal Injury Settlements/Settlement Considerations
- What is a settlement
- What are the ramifications of an offer or an acceptance?
- What are the ramifications of agreeing to settle?
- What are the ramifications of a counter-offer?
- What is a release?
- Should you settle your claim?
- What is the alternative to settlement?
- Payment of health insurers, medical providers, lawsuit loans, other claims for reimbursement.
- UIM situations (Auto cases only)
- Confidentiality (Certain cases only)
- Structured settlements (Certain cases only)
What is a settlement
In the context of a personal injury claim, settlement is essentially an agreement by the claimant to give up all or part of his or her claims in exchange for some valuable consideration. Typically, this involves the claimant agreeing to give up all or part of his or her claims in exchange for payment of some amount of money.
An agreement to settle is contractual in nature, and such an agreement has binding legal effect.
What are the ramifications of an offer or an acceptance?
Advice for client:
Before authorizing your attorney to either make or accept a settlement offer on your behalf, you should understand that an acceptance by either party may, and likely will, have the effect of creating a binding legal contract which cannot be retracted.
Thus, you should not make or accept an offer unless, you are certain it is a deal you are willing to live with.
What are the ramifications of agreeing to settle?
When settling a personal injury claim, the injured party is forever giving up their right to pursue that claim. Subject to certain exceptions, when an injured person gives up their claim, they are giving up all claims for all harms, regardless of whether they are known or unknown, or of whether they have occurred, or may occur in the future. The fact that the injured person did not expect, anticipate or know about some type of harm caused by the injury-causing event, is typically not a factor which would allow the injured person to later retract a settlement agreement.
In the personal injury context, settlement is typically a one-time event. That is, once you settle your claim, you are typically done and are usually barred from ever coming back for more compensation from the settling party.
What are the ramifications of a counter-offer?
In addition to being a new offer, a counter-offer constitutes a rejection of whatever offer is being countered.
What is a release?
Typically a personal injury settlement requires that the claimant sign what is often called a release of all claims or a general release.
A personal injury release will typically involve: 1. An acknowledgement that in exchange for payment of some amount, the claimant is giving up his or her right to pursue certain claims. 2. An acknowledgement that the claimant is giving up his or her right to pursue claims for harms known and unknown, and for harms which have arisen or which may arise in the future. 3. An acknowledgment that the claimant is relying on his or her own judgment and not a representation from the released party. .
Some releases include additional requirements, like an acknowledgement that the claimant will pay/satisfy any claims for reimbursement resulting from the injury causing accident/incident. (This typically includes things like reimbursing health insurers or healthcare providers for expenses resulting from the accident/incident.)
Should you settle your claim?
Ultimately the question of whether to settle is up to the injured party. An injured person’s lawyers should provide guidance and advice as to what the lawyer sees as the best choice, but the final decision is belongs to the injured person.
A good lawyer will often review with the client the various strengths and weaknesses of their claim and how such considerations might affect settlement negotiations or a potential verdict.
What is the alternative to settlement?
Typically if an injured person is unwilling to settle he or she has two options. They can drop the suit, or they can push on toward trial.
Payment of health insurers, medical providers, lawsuit loans, other claims for reimbursement.
Any amounts due to third parties out of the settlement will obviously reduce the amount the injured person is able to recover. This includes amounts due health insurers, medical providers, lawsuit loans, and any other claims for reimbursement.
For example, when injury-related medical expenses are covered by a health insurer, the health insurer is typically entitled to reimbursement for the expenses covered.
UIM situations (Auto cases only)
A UIM claim is a claim for under insured motorist benefits. Such a claim arises when a claimant’s damages exceed the amount of insurance coverage available in the liability phase.
For example, if the claimant obtains a judgment for damages of $500,000.00 and the available liability coverage is $300,000.00 and the claimant has $1,000,000.00 of UIM coverage, then the claimant can collect the first $300,000.00 from the liability insurer and the remaining $200,000.00 from the UIM insurer’s $1,000,000.00 policy.
When settling the liability portion of an auto case it is usually good practice to give the UIM insurer 30 days of notice before settling in order to preserve the UIM claim.
Confidentiality (Certain cases only)
In certain cases defendants will request confidentiality as a condition of settlement. This typically involves a promise by the claimant, and his or her attorneys to keep some or all of the information related to the case secret. Confidentiality agreements typically seek to keep the dollar amount of the settlement secret.
As a matter of policy Hall Law P.A. is generally opposed to confidentiality agreements. Such agreements are simply contrary to our core values. Secrecy keeps the public in the dark about activities that could be harmful to other members of the public. Secrecy is a means for wrongdoers to avoid additional scrutiny. Secrecy can allow wrongdoers to carry on their harmful activities without making safety changes. Further, confidentiality agreements, by their nature, put a burden on the settling claimant to promise never to discuss certain topics. Sometimes the topics that are to be kept secret are difficult to keep secret. Defendants often seek contractual agreements indicating that the violation of the promise to maintain secrecy carries a penalty of some type.
There are other considerations regarding confidentiality which should be discussed with a lawyer.
Structured settlements (Certain cases only)
In cases involving high dollar amounts, or in cases involving minor children or in cases involving clients with special needs, a structured settlement may be appropriate.
A structured settlement is a settlement in which some or all of the client’s portion of the settlement is used to purchase, typically from an financing company, payments to be made in the future rather than one present lump sum payment. As explained below there are advantages and disadvantages to using a structure to settle a case.
Some of the advantages of a structure are:
- In the case of a minor, it is possible to delay delivery of the settlement proceeds to the minor beyond the minor’s 18th birthday, thereby avoiding the risk that an immature 18 year old will squander the settlement proceeds.
- In the case of a client with special needs it may be possible to fund lifelong benefits for the client.
- The need for the client to invest or otherwise manage the settlement proceeds is eliminated.
- The investment return on the settlement proceeds is locked in for the term of the structure.
- Typically, because the rules require the structure be placed with a highly rated company, the structure is reasonably secure.
- There can be tax benefits.
- The return on the structure is tied to interest rates which are prevailing at the time the structure is purchased, this is an advantage when the rates are high at the time the structure is purchased. The higher the rates are, the greater the potential advantage.
Some of the disadvantages of a structure are:
- If circumstances change, it will normally not be possible to accelerate the receipt of the settlement funds.
- The return on the structure is tied to interest rates which are prevailing at the time the structure is purchased, this is a disadvantage when the rates are low at the time the structure is purchased. The lower the rates are, the greater the potential disadvantage.
- Typically, the return on a structure is lower than the average return on equity investments as measured by the 100 year average annual increase in the value of publicly traded equities
- While structured settlements are generally considered very safe, they are not without risk. The viability of future payments does depend on the viability of the company responsible for making the future payments