What is a Settlement Agreement for My Personal Injury Claim?
A personal injury settlement agreement is a legally binding contract between an injured party and an insurance company that outlines the terms of a settlement following an accident or injury. Upon an agreement, the insurance company will provide compensation of some form to the injured party so as to relieve their liability in the matter. The injured party receives financial restitution in a monetary form or as payment of treatment costs, in exchange for a full release of liability for the at-fault party’s insurance provider.
A settlement agreement fulfills two parties’ obligations: when an injured person accepts a settlement , they agree to forgo any further legal action against the liable person and their insurer, while the insurance company fulfills its obligation by providing compensation.
A personal injury settlement agreement functions as a release of the injured party’s legal rights-the document states that the injured party will receive compensation from the defendant in exchange for relief of any further claims or future claims related to the incident.
What to Include in a Settlement Agreement
The critical components of a settlement agreement include the terms of payment, the admission or non-admission of liability by the defendant, and whether or not the settlement agreement contains a provision precluding the parties from speaking to others about the terms of settlement. A personal injury settlement agreement will typically spell out the details of how much money the defendant is going to pay the plaintiff as part of the settlement, when they are going to make such payment, and how. The settlement may be paid in a lump sum or in periodic installments over time. The settlement agreement may also specify what funds belong to the attorneys, and what funds belong to the plaintiff.
The settlement agreement will also advise whether the defendant admits or denies liability for the accident and injuries sustained by the plaintiff. The plaintiff can be assured that the defendant will deny liability. Sometimes the term "accident" is used in the settlement agreement as a more neutral term. When an insurance company pays a settlement amount, it may be referred to as the "insurance proceeds". The personal injury settlement agreement is a contract like any other contract. Therefore, there needs to be valuable consideration for it to be a valid agreement.
The fourth element in a settlement agreement might be a provision about whether the terms of settlement are required to be held confidential and between only the parties to the settlement. There might be a provision that prevents disclosure to family and friends but that doesn’t mean there can be no disclosure to other professionals such as physicians, psychologists, or accountants. There are no bright lines as to "confidentiality." Generally an agreement that prevents a plaintiff from discussing the amount of settlement with anyone would be considered to be overly broad and invalid, and therefore, not supported by consideration. An agreement to "keep the terms of settlement confidential," usually just means that the plaintiff can’t publicize the terms in the newspaper or on the internet.
How to Negotiate an Appropriate Settlement Amount
While some personal injury claims can result in a favorable outcome without the need for extensive negotiation, almost all successful personal injury cases involve negotiations between the victim and the defendant (or the defendant’s insurance company). These negotiations can take many forms. For example, it’s common for the defense to push back on important issues early in the process. Or in certain complex cases it may be necessary to conduct a round of negotiations once both sides have submitted their respective preliminary evidence. Experienced personal injury attorneys know when to dig in their heels, when to concede certain claims and how to maximize the settlement offer. When trying to arrive at a favorable settlement, the plaintiff generally negotiates through his or her attorney. This is important because defendants and insurance agencies almost always have attorneys present at every stage of the claims process. And when it comes to negotiations, the presence of legal counsel can make a world of difference. Settlements also hinge on things like your injury, its expected permanence and severity, your willingness to go to court and the opposition’s willingness to litigate. Additionally, the size and financial strength of the opponent plays a significant role in negotiations. In other words, negotiating a settlement is rarely a straightforward process. Even with a competent attorney, victims with less serious injuries often feel pressured by insurance companies to settle quickly and for a low amount. The lower the severity and permanency of the injury, the easier it is for insurance companies to settle your claim for a small amount. Settlement offers are largely based on economic damages like lost wages and medical bills. Because non-economic damages (pain and suffering) are more difficult to value, insurers often offer policy limits in such instances, but always resist paying more than required. But the amount of money you’ll need for future expenses isn’t always obvious right away, which is why it’s crucial to discuss your options with an attorney in the early stages of your claim.
The Legal Aspects of a Settlement Agreement and What to Avoid
The Choice of Law: It’s important that both parties understand what law applies to the claims being released.
Release of Unknown Claims: This language is standard and works both ways. But it is especially beneficial for the insurance company. If you don’t have an open claim after the case is settled or for some other reason you ever believe you may have a claim under the settlement agreement, you need to do two things to protect your rights: (1) Never sign a full and final release until you are absolutely certain and can prove that you have no additional claims against the defendant; and (2) Do not sign a "Release" of any sort unless it has language protecting your rights if new information comes to light.
Confidentiality Provisions: Litigation is a public affair and once a case is over, it is over and the public has no more right to know about the case than the parties do. This is not entirely true, however, especially with personal injury cases, because they can sometimes affect the public good. For example, if the other party was negligent , but that negligence was only discovered in litigation, then the problem may exist for other people. In that case, secrecy is not in the public interest. So terms of confidentiality should be negotiated carefully and they need to be specific to the facts of the case.
Cooperation: Insurance companies typically want the claimant who settled his or her claim to cooperate with other claimants who are represented by the same lawyer. This is done to make those other claims easier to defend because the cooperating claimant will not be able to say anything inconsistent with the theory that all of the injuries were sustained purely accidentally. But a claimant should not just agree to cooperate because the insurance company says it is standard. You will always need to know the scope of the cooperation provision. Will you be required to submit to an independent medical examination? When will you cooperate? Must you keep the insurance company updated on your treatment? Are there other claimants? If so, how many? What territory is covered by the cooperation provision?
When is it Important to Contact a Personal Injury Attorney
It is vital that a victim of an accident consult a personal injury attorney before signing a personal injury settlement agreement. While you may have a good understanding of your rights, having personal injury counsel review the settlement agreement is necessary for several different reasons. Insurance companies often utilize personal injury settlement agreements that are very favorable to them, rather than disfavorably tilted toward the victim. Why would they do this? Insurance companies understand that most victims do not have a valid legal understanding and that they will probably have no problem forcing their customers to sign an unfair personal injury settlement agreement. An honest personal injury attorney is unlikely to advise a victim to sign an unfair personal injury settlement agreement, as a fair and just settlement will be likely to serve the needs of both the victim and the insurance company. There are several different scenarios in which a personal injury victim can be forced into signing a settlement agreement:
How Settlements Affect Future Claims
When you accept a settlement agreement, you are generally agreeing to forgo any and all future claims against the party responsible for your injury. This means that, in most cases, a settlement of one personal injury lawsuit bars you from bringing subsequent lawsuits against the same party as well as any similar lawsuits against other parties who may have been partially to blame for your injury .
This is not to say that all future claims against the responsible party are barred. For example, if additional damages were uncovered after the settlement, the injured party may have a claim against the responsible party for those damages. Examples of damages uncovered after settlement could include additional medical expenses or lost wages.