Personal Injury Claim Settlements

On this page we will discuss personal injury claim settlements. The factors which should be considered in your injury claim evaluation has already been covered under our Injury Evaluations page. It is important to remember that your involvement in an accident that was not your fault was not a lottery ticket, but neither should you left with out-of-pocket expenses and you are certainly entitled to additional compensation for your pain and/or suffering, any lingering symptoms or permanency, and your inconvenience. A Judge that we like to work with once said that if BOTH sides to a settlement negotiation walk away thinking that they could have done better, than the settlement must be a fair one.

The list of personal injury claim settlements discussed here is by no means complete as each case is different, but it is a thorough discussion. It is important to remember that personal injury claim settlements are usually tax-exempt. You may wish to confirm this with your tax advisor in your state.

Personal injury claim settlements may take many forms. The most common is simply a check for the agreed-upon amount payable to the injured party or claimant. If the claimant is an adult, then the check is made payable to him or her. If the claimant is represented by an attorney, then the attorney is a co-payee on the check. If the claimant is a minor child, the check will be made payable to the parent and/or legal guardian of said child. If there are any legal liens against the settlement, then the lien-holder may be listed as a co-payee on the check; alternatively, the insurance company may issue one check to the lien-holder and a check for the balance to the claimant. An example of a lien-holder may be the hospital or physician that treated the claimant for accident-related injuries.

The insurance company will want the claimant to sign a “release” in return for the settlement payment. The release may come in the form of specific wording on the settlement check to take effect when the check is cashed, or it may be a separate contract for the claimant to sign. In some rare instances, an insurance company might be willing to offer an “open-ended medical release” which will net the claimant a settlement payment and a promise that the insurance company will pay any additional accident-related medical expenses within an agreed-upon period of time.

Another form of personal injury claim settlement may be what is called a “structured settlement”. Usually used when the injury is of a severe and/or permanent nature, a “structured settlement” is an annuity purchased for the claimant by the insurance company with the claimant’s approval. Here is a very basic explanation of this type of settlement. The insurance company will usually provide the claimant a portion of the total settlement, usually at least enough to cover any outstanding medical expenses, and then use the settlement money to buy the annuity. The annuity will then pay a set amount of money to the claimant at certain set times over a certain amount of years. Since the annuity is an investment, the total amount of money that the claimant will eventually be paid is more than the amount of money paid by the insurance company. This can be particularly valuable to the claimant when the value of his or her claim is more than the available insurance policy limits.

For example, a young woman’s injury leaves her with a large facial scar and facial nerve damage, but the only potential recovery she has is against the at-fault driver’s insurance policy with $20,000 in liability policy limits. Rather than take the $20,000 as a settlement, she might opt to accept a structured settlement which would net her more money over a period of years. These structured settlement annuity payments are also generally tax-free as they arise from a personal injury claim. If you are considering a structured settlement of your personal injury claim, you may wish to confirm this with your tax advisor.

A “court approved settlement” is usually seen in the settlement of minor children’s claims of a few thousand dollars or more. This means that the insurance company and a representative for the child will need to request a hearing before a Judge who will decide whether or not the settlement is appropriate for the child. This court approval is done as much for the insurance company’s protection as for the injured minor’s.

Structured settlements (discussed above) may be appropriate for large settlements for minor children who might have no actual need for the personal injury claim settlement money until they reach the age of maturity. A portion of the total settlement could be set aside for the parents to use to pay any outstanding medical expenses, and the rest would be put into a annuity to begin payments when or after the child has reached the age of maturity. As with other personal injury claim settlements for minor children, this will need to be court-approved.

There are other alternative settlement forms that we have heard of. One adjuster interviewed told a story about a claim that she handled in the late 1980’s. The claimant was a healthy young male who got a goose-egg on his head and did not wish to see a doctor. He took an over-the-counter pain reliever. He did not want to admit that he was “injured” per se, but he did tell the adjuster that he would take a six-pack of beer for his inconvenience. From what she says, she delivered it in person.

This article is written for informational purposes and is not intended to take the place of competent local legal counsel.

Other related articles:

The Insurance Claims Handling Process

How Loss of Consortium Can Increase Your Personal Injury Claim's Value

Settlement Releases

Personal Injury Claim Values

Statute of Limitations State by State

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