How Personal Injury Cases are Settled

It's Often Best to Settle Your Case Out of Court

When one person suffers harm at the hands of another individual, company or entity, they can usually collect damages from the responsible party. There are two ways to do this: the injured victim may be offered and accept a settlement outside of court, or they may need to go through with a civil lawsuit in order to collect damages. While a civil lawsuit might occasionally net the plaintiff more money than an out of court settlement, the vast majority of personal injury cases settle well before a jury is sent to deliberate. There are many reasons for this.

Understanding Settlement

Settlement occurs when a potential (or actual) defendant makes an offer of payment to an injured victim or potential plaintiff.

1. The offer of settlement may be made before any lawsuit has ever been filed, after a potential claim arises.
2. It may be made after a case has gone to trial and a trial has begun, as long as no final verdict has come back.
3. Some settlements are made once a jury is deliberating, since one or both parties might become nervous as the jury debates their fate and decide that they prefer the sure thing of a settlement.

When a defendant makes an offer to a plaintiff of a settlement, the plaintiff must relinquish any and all potential future claims against the defendant arising out of the accident or incident. The plaintiff does this by signing a full liability release. For example, in a car accident case, the car insurer may offer the plaintiff $50,000 to settle the case. The plaintiff, to receive that $50,000, would have to agree not to sue as a result of the car accident.

Settlement and Insurance Companies

Settlements are almost always offered when insurance companies are involved in a case, which happens in the vast majority of personal injury cases. The reason that an insurer is almost always involved is because most people and companies buy insurance to protect themselves from areas of potential liability. For example:

• A doctor buys medical malpractice insurance. This will kick in if he or she has a claim made against him for medical malpractice. This means an injured patient deals with a malpractice insurer.
• A driver is required by law to buy liability insurance in case he gets into a car accident and causes damages. This means that when a driver has a car accident claim, the car insurer is going to be involved.
• A homeowner buys homeowner's insurance which will kick in if that homeowner is sued for dangerous conditions on the property or if the owner's dog bites someone. Likewise, renters may have renter's insurance for the same situations, and corporations or businesses may have insurance on their premises as well.
• Some corporations that are subject to a lot of litigation may have a blanket "liability" policy that will kick in in various situations when they are sued. These policies could kick in when the company produces a defective product, or if the company is sued for employment discrimination.

The fact that so many personal injury cases do involve insurance companies goes a long way towards explaining why so many cases settle; insurers have the money to pay out claims, expect to pay out some claims, and are risk averse and don't want to end up with no control over costs when they have to go to trial, pay legal fees and deal with a jury.

An insurer that refuses a reasonable settlement offer that is within the policy limits may become responsible for an entire court verdict, even the part that is over the policy limits, in certain instances. This doesn't mean settlements always come from insurance companies. A company that is sued, even if it doesn't have liability insurance, may choose to settle as well, as may an individual.

Why Do Most Cases Settle?

The fact that so many cases settle, especially when insurance companies are involved, naturally leads to the question of why? Why is it better for a plaintiff to settle, and why is it better for a defendant to settle? There are many reasons, including:

1. Settlement allows a defendant to control risks and avoid legal costs.

If the defendant knows he is going to be held responsible, he might not want the case to get in front of a sympathetic jury that could award large pain and suffering or punitive damage awards for the plaintiff. Instead, the defendant or insurer may prefer a settlement where it has control over how much to offer.

2. Settlement can allow a defendant to keep the cases out of the public eye or out of the paper.

This is important for some companies especially. For example, if a company produces a defective product and only a few people are injured by it, the company may want to try to arrange a quiet out of court settlement and avoid major publicity that might accompany a trial. When a settlement agreement is drafted, it gives a company (or any defendant for that matter) the opportunity to negotiate terms of that agreement that work for everyone. This can include a requirement of confidentiality.

3. Settlement allows a plaintiff to avoid a protracted trial.

Trials can extend for months, or even for years if there are appeals. A plaintiff who needs income and has medical expenses may not want to wait that long to get financial relief. A plaintiff also may not feel up to going through a long trial, putting on a case, presenting evidence and doing everything else necessary to win a legal battle

4. Settlement allows a plaintiff a guaranteed victory.

When a case is taken to court, there is always a chance (however small) that the plaintiff will lose the case and will thus receive nothing. If a plaintiff has a settlement offer that guarantees him some type of compensation, he may be reluctant to give that up to take a chance.

All of these reasons help to explain why it is sometimes best for both parties to settle, provided that they can agree on reasonable settlement terms.

Continued: Settling Your Personal Injury Case: Part 2

Next Steps

16. Personal Injury Litigation
17. Insurance Companies and Injury Claims
18. Hire a Lawyer or Handle Your Own Case?

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