Accident Settlement Agreements Explained
The accident settlement agreement is a written contract in which the injured driver (or pedestrian or passenger) essentially agrees to accept a sum of money and promises to drop his or her claim, in full, against the insurance company, regardless of how much financial and personal suffering was caused because of the at-fault party’s negligent conduct.
The agreement will almost always include a "general release" clause that allows the at-fault party to walk away from any further responsibility for the injury or loss of income . The payment arrangement may or may not be structured as a lump-sum payment, and may instead be made as a structured settlement with the payment(s) being doled out over a period of time.
An accident settlement agreement is not usually put into writing until all responsible parties agree on an acceptable dollar amount to settle the case. In the case of fatal vehicular accidents, a judge and jury in civil court will often decide who is responsible and how much money should be paid to the family of the victim.
Essential Elements of a Settlement Agreement
In addition to the recitals discussed above, an agreement to settle an accident case contains several key components. The parties to the agreement are clearly identified. A distinction is made as to whether the person or entity signing the agreement is doing so on their own behalf. If the injured person has begun receiving benefits under a state or federal program (Social Security benefits, Medicare, Medicaid, etc.), an additional component includes the assertion by the injured person that they have made full disclosure of all benefits received, or that they are not entitled to any such benefits.
Of course, the most significant component of a settlement agreement is the actual amount of money being paid as part of the settlement.
Another central component of a settlement agreement outlines the specific terms and conditions under which payment is expected. Unfortunately, most settlement agreements will include legalese that says if payment is late for more than a specific period of time, the entire agreement could be considered void. Even if the injured person or their attorney can prove that the delay is probably just somebody’s mistake, it can create a lot of work to get the settlement back on track. One of the many reasons to use a lawyer for settling an accident case is their experience with these types of issues.
How to Reach a Settlement
Both sides in an accident lawsuit usually want an amicable and early resolution. That is almost universal and might surprise you because it seems that everyone knows that all cases in the US are bound for trial. Well, that is true, but only if the case does not settle. Statistics show that 97% of lawsuits ultimately settle – and most of them before the date of trial. So how do we get there? The process starts with a reasonable and fully documented demand letter with forms that include supporting documents and photographs if available. Insurance adjusters have a menu of values for injuries, property damage, etc. that they use to make an early offer. That is usually not a good one for you. Many times the adjuster will come back with a counter-offer to try and further discount the value of the case to the insurance company. Having a lawyer involved at an early stage of the case is conducive to an early settlement. An early lawyer opinion can help determine if it is worth filing the lawsuit. Sometimes it may not be justified and the parties can agree on an acceptable settlement amount without court action. If the accident is minor, then you can expect the settlement process to be easy and quick. If there is a major injury, a court action is likely. Litigants who engage in settlement discussions tend to maximize their recovery and minimize their losses. Imagine a world where going to court was not necessary. The money gained can be used to help meet your medical bills or to compensate for lost wages. A negotiated settlement comes with the benefit of avoiding a long trial process and spending money on attorney fees.
Considerations and Legal Counsel to Keep in Mind
When you’re hurt in a car accident, one of the first things the at-fault insurance company or their lawyers will do is leash out for a settlement. An agreement comes with a variety of waivers and releases. When you contract for an accident settlement, you are usually waiving your right to sue the person who caused the accident or your right to seek compensation for any future injuries you may have as a result of the same incident. As you can imagine, this can be a dramatically costly error the moment your health drops in the future because of the same accident.
In addition to your rights under the law, some liability insurance policies also have provisions that provide coverage if the injured driver requires time off work. Most of the time, however, if you settle your accident claim with the at-fault parties insurance then you eliminate your right to collect certain accident benefits such as lost wages.
As a general rule of thumb and for your own protection, always consult a lawyer before signing any accident settlement. A lawsuit isn’t as much about you going after money as it is about you protecting yourself against future actions and future losses. It may be a stretch to think that you may need to sue after you’ve just settled with the person you believe hurt you, but if you don’t prepare for the worst and the worst happens, you will have no recourse.
Don’t sign anything without reviewing it with a lawyer and knowing the risks long term.
Pitfalls to Avoid
Common Mistakes to Avoid in Understanding Accident Settlement Agreements
One of the biggest mistakes I see in accident settlement agreements is that the injured person, before signing it, reads a few lines but never seeks competent legal advice from a personal injury attorney. Maybe that’s not what they intended to do but they are under such stress and duress from the accident, it’s no surprise when this happens. However, when it does, it’s most unfortunate because this could make or break your case. Lawyers that handle lots of personal injury cases will read it and know when something doesn’t seem right. You have rights! The insurance company is in the business of making money and you saw what happened to you. They don’t care about you in particular; they want to minimize their loss; that’s why you need an advocate! Seek out advice from a competent qualified personal injury attorney once you receive a settlement agreement and before you sign anything.
Another common ineffectiveness of settlement agreements is that the injured person does not ask enough questions or for clarification. They receive the proposed settlement agreement and look it over and it begins to sound good (believe me they work hard and make it sound good) and they sign it and send it back in . Then it’s too late, I can’t do anything! Here we go again, seeking out the advice of an attorney should have been the first thing on the list! Experienced lawyers are going to make sure you understand everything and they’ll ask you questions about your injuries and the facts surrounding your injuries; why didn’t you ask about how much compensation you felt was warranted? You just allowed someone to dictate it to you and even sign something that you didn’t understand completely!
Another common mistake when inquiring about insurance carrier settlement agreements is trying to handle it yourself. Sometimes people get hurt and they just don’t know what to do or who to turn to. They don’t know who the liable party is and they’re in a total panic, trying to recover from their injuries. They try to deal with the insurance company(s) on their own and go overboard acting as their own Investigator. They write to insurance carriers and request all sorts of documentations, they gather police reports and take months to months of follow-ups to get anything done. By the time they do so, the claim is as good as dead! The investigation is a very delicate part of the process; it takes time and patience. A lot of people do rush through it, trying for the quick fix. What I’m telling you now is the results of clients coming to me after they’ve made such mistakes, which cost them dearly and delayed the process drastically. It’s almost always better to be safe, than to be sorry. Insurance companies have lawyers and insurance brokers, you might want to at least consult with a competent personal injury attorney before trying to play hard ball.
Deciding When to Decline a Settlement Offer
"Settlement happens when both sides see they can do better by settling than by pursuing their case. We win cases when the other side sees that, more than anything else, and if you have a lawyer who knows how to look in the mirror and be honest with the jury about the pluses and minuses of your case, then you generally do have options."
If you’ve received an offer to settle a claim, you might be wondering about the pros and cons of accepting or rejecting the offer. The advantages of rejecting an offer include (in theory at least) the ability to hold out for a better offer or, if those negotiation efforts fail, the ability to pursue the claim in court.
In some cases, it may actually be beneficial to explore the possibility of a counteroffer in an effort to increase the amount of the award from the defendant. The defendant may simply be trying to save time and money by making a lowball settlement offer to start off with. There is a chance that he would be willing to make a higher settlement offer, but the best way to find out may be to seek the help of an experienced lawyer. Another factor that may be at play in your decision about whether to accept or reject a settlement offer includes your knowledge about the legal issues at stake in your case. Do you have a full picture of how much money you deserve to be compensated from the negligence of the other party? Do you see your prospects of winning, and the dollar amount in damages you may win, if you were to actually file a lawsuit? If you think you are more likely to win your case than the defendant is to win in court, you might want to consider rejecting the settlement offer on the table in hopes of obtaining a larger settlement amount later on. Consulting with an experienced attorney about your accident case can help simplify the decision-making process.
"If the offer is fair, I’ll take it." That’s a common sentiment among people who deal with injuries and damage from a car accident. This doesn’t apply to just car accidents, it also applies to truck crashes, motorcycle wrecks, slip and falls, and chemical exposure injuries. OK, so some of you reading this are probably saying, "Yeah, right. There’s no such thing as a fair offer." It’s a fair question, is there? Even when the pain and suffering is obvious, the answer generally boils down to the following factors: the plaintiff’s damages and the defendant’s exposure. Neither of these factors is easy to calculate, as any lawyer can attest.
The plaintiff’s damages include their medical bills, lost wages, damage to property, and pain and suffering, among other things. For example, a plaintiff with $200,000 in medical bills and $1.5 million in lost wages, pain and suffering, and other such damages, has a reasonable expectation of a fair offer to settle. Depending on the defendant’s exposure to the claim, a settlement of $2 million could reasonably compensate the plaintiff. But, if the defendant’s exposure is substantially greater, a settlement of $4 to $6 million might be more like it. The defendant’s exposure is more difficult to calculate. In addition to how much insurance coverage is available, it’s also important to consider the degree of fault the defendant had. Given the plaintiff’s damages and the defendant’s exposure, a fair settlement offer can be determined.
Completing and Implementing the Agreement
Always, the first step is to speak with your personal injury attorney who will most likely insist on agreement terms in a written document. Typically, an agreement can be final once signed and is enforceable unless an appeal is taken, or there is a specific provision in the document for a later time in the future such as for one party to do something like pay a certain sum or make an installment payment, or provide evidence of something like words or actions.
However, being able to recover against a defendant or a settlement insurance company in the future if that is necessary requires a final judgment based on the settlement agreement, even if it is short of a final judgment settling the case, a stipulation for substitution of parties (the defendant names on the initial law suit) so that the new party implementing the agreement terms is now the remaining defendant, and a stipulation to entry of judgment.
It is especially important to enforce the agreement with a valid new party and stipulation to enter judgment because in the absence of such an entry of judgment, your ability to collect against the defendant after the expiration of the statute of limitations may be jeopardized. An additional positive byproduct of this process is the fact that the statutory attorney’s fee amount, if applicable can then be collected as well from the defendant.
Sometimes settlement companies within law firms recommend a routine once the agreement is signed as to what to do with the money. An account , often times, is set up at a trust institution by the attorney firm. The funds, and there can be multiple checks, are deposited into the account. When a client wants the money, it must be transferred from the trust account to a general account or typically, a trust disbursement account.
If the amount exceeds $50,000.00, or the amount is contemplated to be disbursed over time, but it is enough, the money may be moved to a blocked account where both parties, plaintiff’s attorney and the disbursement party, for example, may need to sign an order to transfer the money out, with a return of the principal, and any interest as may have accrued in the period of time. In addition, some plaintiff’s attorneys have themselves loaned money to their clients as a result of settlement, in order to get the check out of a trust account, wherein the disbursement party would have had to undertake further legal processes to get their portion.
Clients when reading this, if you wish to have your attorney carry out a disbursement procedure like that above, you must plan to seek the help of your local bank or other financial institution to help you set up the account and to sign whatever signing authority you will need to a disbursement party, you will need your local bank manager or representative for example, to sign too.