How Does a Settlement Work?

In personal injury cases, a settlement involves negotiations between injury victims and liable parties that result in an agreement for the liable parties to compensate the victims. Settlements can involve different amounts of money, with some involving thousands or even millions of dollars, depending on the nature of the case, severity of injuries, and the amount of injuries and damages involved.

Knowing the answer to, “How does a settlement work?” can give you a better idea of what to expect during the claims or legal process in a personal injury case.

What Is a Settlement?

A settlement is a specific agreement that plaintiffs and defendants in a personal injury case reach when the defendant agrees to pay a set amount of money as compensation for causing injuries and other damages. This settlement helps prevent the case from going to court when both parties reach it during the claims process. 

Personal injury claims settle before a lawsuit is filed in most cases, and the settlement typically covers a variety of damages that liable parties caused through negligence. For example, a settlement can cover medical bills, lost wages, lost earning capacity, and other economic damages. Additionally, a settlement may compensate for pain and suffering, disfigurement, and other types of non-economic damages.

Why Would a Settlement Offer Be Made?

Insurance companies often make settlement offers in personal injury cases as a means of avoiding higher payouts and going to court. To satisfy injury victims and end the case as quickly as possible, insurers tend to make small offers that are often far below the actual value of the damages sustained. If these offers are high enough, injury victims may be eager to accept them even though they stand to recover more, which is why it’s typically not in plaintiffs’ best interests to accept the first offer from insurers.

Before accepting any offer from insurance companies and defendants, plaintiffs should know how much compensation they deserve for their injuries and other damages. They may not be aware of all costs, including expenses and hardships they may face in the future. For example, someone who sustains serious debilitating injuries in a car accident may spend years making a full recovery, and he or she may not be able to work again, or at least not in the same capacity as they would have before the injury. As a result, the injury victim may qualify for compensation that covers these future expenses and lost earning capacity, which an initial settlement offer may not cover.

Generally, injury victims should receive a complete medical assessment to determine what to expect in the future when recovering. This prognosis can help them determine what their settlement should be. They can then begin negotiating a settlement with defendants.

How a Settlement Is Achieved

The process of reaching a settlement begins with an insurance claim in most cases. Injury victims open the case by filing a claim against the liable party’s insurance company, at which point negotiations will begin to reach a settlement that both sides can agree to in the case. Typically, the settlement offer that the defending party makes at first will fall below what the plaintiff wants.

As negotiations continue, the plaintiff may continue to push for a fair settlement, and the defendant may respond by offering an increasingly large amount. At some point during negotiations, both parties may reach an agreeable settlement. In rare instances, they may not reach a settlement during the claims process, leading the case to go to court and begin the trial process.

When the Plaintiff Either Agrees to or Rejects the Settlement

Depending on the settlement amount both sides reach, the plaintiff has the option to either accept or reject the settlement. 

When the plaintiff accepts the settlement, the liable party and defending insurer will pay out the full amount in the form of a check. The one condition that plaintiffs must meet to receive this check is to sign a release that essentially states that the plaintiff will no longer pursue a claim or lawsuit against the liable party. By signing this release, you won’t be able to file another claim or lawsuit to recover further compensation, which is why it’s important to ensure the settlement is the right amount before accepting.

Conversely, if the plaintiff rejects the settlement, this will either result in a lawsuit or enable plaintiffs to continue with a lawsuit if they planned to file one already. The legal process would then begin to reach a settlement, in which cases a judge or jury would be responsible for determining whether the plaintiff warrants a settlement and deciding on the amount of that settlement.

How an Attorney Can Help You

If you’re planning on filing a personal injury claim and reaching a favorable settlement from liable parties responsible for injuries and other damages, you’re better off hiring a personal injury lawyer than negotiating alone. 

An experienced personal injury attorney can help with these types of cases in several ways. One of the main benefits of hiring an attorney is the ability to effectively negotiate with insurers and liable parties.

When negotiating a settlement, you’ll connect with an adjuster from the defendant’s insurance company. This adjuster may appear friendly, and that initial offer may seem appealing, but remember that insurance companies want to avoid paying out as much as possible. They will look for any reason they can find to either reduce the total settlement amount or deny your claim. As such, failing to present the proper evidence or making the wrong statement could give insurers reason to refuse to pay out the full amount your case is worth. You may also want to accept the first offer when it seems high, especially if you don’t know the full amount you’re able to recover.

An attorney can work with you to determine how much your case is worth and continue negotiating to recover a fair settlement. He or she can also gather sufficient evidence to support your claim, prepare statements to provide insurers, and even take your case to court if you’re unable to reach the settlement you deserve during negotiations.

Ultimately, having a reliable lawyer by your side will better equip you before you get into negotiations with liable parties and their insurers, ensuring you start the claims process the right way. An attorney can also help you file on time before the statute of limitations runs out for your case.

With a better understanding of how does a settlement work, you can more adequately prepare a successful personal injury claim or lawsuit.