The Basics of Settlement Agreements
It is common that people injured in a car accident will agree to resolve potential or existing disputes with the other parties, insurance companies, and doctors through an agreement or release of all claims.
A settlement agreement is a contract, and when a person enters into a settlement agreement with a claim’s adjuster from an insurance company, they are bound by its provisions and agree to release the other party from all future claims relating to the car accident. There can be a lot of confusion surrounding the term "settlement agreement." Many people seem to hear the term used as equivalent to the term "release." However, while a release and a settlement agreement can encompass the same subject matter, they are not the same thing.
A settlement agreement that advises a person that the other party has made an offer to settle a claim for less than the person is seeking is not a release. A settlement agreement is an offer to settle a claim , and the claimant must accept it by signing and returning it according to the instructions contained within the agreement. Only after the agreement is signed by a representative of both parties may a release then be simultaneously exchanged.
If the claim is pending in court, and a settlement agreement resolves all issues related to the case, in many contexts the release is combined with the settlement agreement in order to avoid the expense of reenacting the lawsuit solely to enter a final judgment.
Some settlement agreements contain terms that do not condition the settlement on the execution of a release. For example, because some states allow a minor to be involved in a settlement without having to notify the court, some settlement agreements will include settlement provisions that do not contain any mention of executing a release, and provide instead that a lump sum payment (that also might have some tax benefits) is being made in exchange for dismissal of a pending lawsuit.
Basic Terms of a Settlement Agreement
A car accident settlement agreement typically contains three key components. First and most importantly is the compensation the injured person is going to receive. This can be the total amount to settle or it may be broken down by property damage, medical bills and lost wages. Importantly, an insurance company will typically take credit for every dollar you are going to owe the medical providers and they’ll include the final lien amount in the settlement agreement. This is an important point because this spare change amount can be significant. When I settle a case, I send an email to my client with a spreadsheet providing the full financial breakdown of what the case will look like after payment of medical liens, attorney fees, and costs. One miscalculation or failure to include a subrogation amount can lead to a contract dispute after the settlement is finalized. Having an itemized file showing your specific lien amounts is evidenced based proof of what actually took place.
The second component of a settlement agreement is your admission of liability. Often times the insurance company wants you to sign an admission that you were at fault for causing the accident or a statement that no one else was at fault. This kind of language is not necessary if the insurance company is going to issue you a check. But sometimes, the insurance company will ask you to sign an admission of fault and then use that statement against someone else you blame for the crash. The insurance company might then have a third-party blame what you did to that party and then after paying you, they sue the third party for repayment (subrogation). The beauty of settlement is that it allows a plaintiff to sue as many parties as you want but once you settle with one party, you cannot sue any more for the same injury. You can either receive your settlement and never sue anyone or refuse to settle at some risk that you’re stuck with all of the blame for the crash instead of just one party. An experienced personal injury attorney understands these risks and can provide you with options that protect your interests. A common way to address this issue is to only settle with some of the negligent parties and keep the other negligent parties on the hook (or looking into it in the future) while allowing the settlement. Your right to sue the other negligent parties does not go away just because you enter into a settlement agreement with one party. If you settle with the driver, you can continue to pursue your claim against the car manufacturer, the employer of the driver, or any other negligent party you believe may be responsible for your accident. If the case does not settle, then you know all the other negligent parties are on notice that they are at risk of being sued.
The third component of a settlement agreement is a release of liability. Once you settle and are paid, the defendant will want a release. That release says you agree not to sue anyone that you could have sued for the accident or related damages. The release becomes a permanent bar for future claims. If you sign a settlement agreement and then you later try to sue someone, your case will be dismissed. Once you have a settlement, you cannot go back and sue the other negligent parties unless you never signed a release and the statute of limitations has expired against those defendants. Someone you can sue in the future if the case settles is your own insurance company. If you have underinsured motorist coverage that has not been extinguished, you can still sue your car insurance after you’ve settled with the other parties involved in the crash. This is another really important reason to get competent legal advice before signing any documents.
Advantages of Car Accident Settlements
Attorneys who are experienced in litigating disputes are happy when their clients settle their cases. They understand the value of settlement in resolving a dispute in a timely, cost-effective and certain fashion. Any experienced personal injury lawyer will tell you that there are multiple benefits to settling an accident claim on behalf of the victim. Among some of the most important are: It is fast – A settlement agreement is completed much sooner than the lengthy trial process. In most cases, it takes too long for an accident case to reach trial. Even once the case gets to be heard, these cases involving liability become time-consuming. A settlement agreement finalizes the case much more quickly. It is cheap – The court costs associated with a trial can be a lot. With the many appeals, motions and hearings scheduled prior to the actual trial date, the budget for these cases can get out of hand. From court fees to witness fees, trial-based litigation adds up fast. Settling an accident case on time and under budget often saves your client a significant amount of money. It is certain – A trial does not guarantee that your client will be successful. There is always a chance – even in a strong case – of being unfairly decided against by an unsympathetic judge or jury. A settlement agreement creates an outcome that is fair and certain. The settlement saves time, money and the frustration associated with the appeals, hearings, investigations and conferences of a trial. Majd Korek absolutely loves to settle cases as soon as possible after they have been properly investigated, written and organized by the law firm.
Common Legal Issues
There are a few potential legal considerations that people looking to settle a car accident agreement should keep in mind at this stage of their case. The first is the statute of limitations. This is the law that sets the time limit in which you have to file your lawsuit by. The statute of limitations for personal injury cases in Illinois is two years from the date of injury, meaning that if you don’t either reach an agreement or file a lawsuit in two years, you’re out of luck and have no claim for injuries from that crash. In action, this means that when you reach an agreement you usually sign a form approving it and discharging the Defendant, which then is approved by a Judge who releases his or her version of the agreement, returning it with a signed Order approving your agreement to settle.
But it’s crucial that you are aware of the statute of limitations so that you don’t miss it. For example, if your case is set to expire on a Friday, you must file a lawsuit by that Thursday at the latest in order to preserve your right to recover your damages from the crash. So then you have a decision to make – do you rush the agreement and get it approved by the Judge by February 12? Or do you take your chances and hope that it will be approved after that date? Most Judges will approve an agreement into the 80s or even 90s, meaning Thursday the 12, or if you think the Judge will be in a good mood and since Presidents Day is the following Monday, you may get the Judge to approve the agreement on Tuesday, February 17, which is 30 days after the 12th and is when the statute of limitations expires.
One caveat to this discussion: the statute of limitations may be different depending on the type of Defendant involved in the accident. In Illinois, filing a lawsuit against a governmental entity (like the City of Chicago or the State of Illinois), requires that you give them notice of your claim within a certain period of time (typically 180 or 365 days) before you file suit against them. So for example, if you had an accident there, and failed to give 180 days notice, you may want to settle your case against those Defendants before the time runs out.
A second issue to be aware of is whether your insurance premiums may increase as a result of the accident. It is possible that the Defendant will tender payment for your losses by issuing a payment directly to you. If this happens, it may be possible for your insurance company to argue that since they were aware of the payment, the value of the claim was reduced to that extent and they can avoid paying for your claim. Also, some insurance policies contain provisions that if you take money directly from the Defendant you are not entitled to collect insurance funds for the same loss. This is why experienced Chicago car accident lawyers usually get the Defendant to issue a payment to the insurance company directly.
Third, keep in mind that signing a settlement agreement is typically final. Please note that some settlements, such as for workers’ compensation, are structured settlements that allow you to recover funds periodically over time, instead of in a one-time lump sum. Keep in mind that a structured settlement is not a refund of premiums if you commit fraud on your insurance carrier or deceive them about the accident.
Negotiating an Appropriate Settlement
Negotiating a fair settlement after a car accident requires strategic planning and a comprehensive understanding of your rights. Every step of the negotiation process is critical to maximizing your recovery, and it all starts with creating a strong case for compensation.
From the moment of the collision, you’ll need to carefully document all aspects of your recovery. Whether you’re seeking treatment from a paramedic, hospital, or private specialist, make sure to save all of your medical records and any receipts for healthcare-related expenses. Establishing a clear connection between your injuries, medical treatment, and the accident itself is the first step towards sealing a favorable settlement. Even if you don’t seek immediate medical attention, be sure to document the details of your injuries.
For serious accidents, medical documentation is the most important element of a settlement case. Less serious injuries often allow for a settlement without creating the same degree of documentation. These cases often settle based on proof of lost wages and some evidence of treatment.
For example , if your doctor prescribes a medication for pain relief, you’ll likely need to demonstrate that you submitted receipts for the pain medication, and that you could not work as a result of your injuries. Since insurance companies will not be able to verify this information through medical records, it will be important to keep in touch with your lawyer about your medical condition after the accident.
Keep in mind that insurance companies conduct their own independent investigations after a claim is filed. Insurance companies will want to settle your case in an efficient manner, but only once they have determined that the offer is fair and just. Never accept an offer without having your lawyer review the full facts of your case.
When negotiating with your insurance company, be prepared to provide detailed documentation. There are many details involved in your case that are important for obtaining a fair settlement offer, so take notes throughout the process. Keep in mind that the negotiation process can be difficult. For the best results, you’ll need to prepare for anything.
Pitfalls of Settling Car Accident Claims
You should absolutely try to explore the possibility of doing a settlement agreement with the insurance company. However, there are many mistakes you can make by doing agreements, like stepping into the wrong situation that you weren’t aware of. For that reason, you need to know some of the common mistakes people make when settling their car accident case. The biggest mistake is that people settle their car accident case before they know the full extent of their injuries. I get calls all the time from people who make an agreement after a car accident, and then a few months later, all of a sudden, they have a problem with their neck or their back again and they want to see if they can reopen the case. Unfortunately, once you make an agreement, it’s done and there is no way to reopen it. Those are insurance contracts and the insurance company has no obligation to work in good faith once the agreement is made.
The other mistake that people make is that they do not explore continuing medical treatment. A lot of insurance companies will ask you questions that imply that you are better or that you have healed. You must be careful in answering those questions, because if you say yes, all of my treatment is done, as far as the insurance company’s concerned it’s done. It’s the end of the road, and that sign-off may not be the case. You may still need future treatment, but you’re so quick to make a deal that you really have to be careful answering those questions.
The third mistake is to not read the agreement in full. Most people who are desperate for money have a tendency to want to just grab the check and sign the agreement and not read it. You need to know the phrases that the insurance companies put in the standard agreements and understand that this is an insurance contract. The terminology included is motored vehicle accident or car accident. It’s a pretty broad release. Make sure you only agree to the amount of money that is fair to you.
A simple way to avoid these problems is to hire an attorney to review the agreement. They have an obligation in law to do a full explanation of how it works so that the client understands it. If you think that you have a situation that needs to be explored by an attorney, then you should go get a free consultation. They’re there to educate you about the process so that you don’t run into these kinds of problems.
When to Consult with an Attorney
When you have a serious injury or your liability is disputed, you need to ask yourself if it’s in your best interests to obtain a legal opinion before settling your case. In these situations, we recommend asking a personal injury lawyer to look at the facts and to tell you what you are entitled to and whether the settlement is fair for you .
The same is true if your medical bills are very high or your medical condition is serious. When the injuries and costs are significant and you’re looking at permanent impairment, then you should seek legal counsel.