Car Accident Payment Agreements Explained
A car accident payment agreement letter is an important document that outlines the terms and conditions for a car accident payment agreement. This type of agreement details how the involved parties will resolve and pay any damages or compensation due as a result of a crash. It is a legally binding contract that both the parties involved in the accident must agree to and sign prior to the settlement of such damages or compensation. Without this agreement being in place, disputes can arise between the involved parties about how an accident settlement should be paid or distributed. Such confusion is often resolved in court during a civil litigation process, which can prove to be costly for all involved. Prevention through the use of a car accident payment agreement letter saves everyone money, and allows the parties to spend their time and money more wisely.
Until the injured party receives compensation or settlement from the insurance company, the responsible party for causing the collision is still obligated to pay for damages and injuries sustained from the crash . This agreement can be beneficial because it protects the rights and interests of both parties involved in the accident. Although some accidents might seem relatively minor, the expenses accrued by the victim can be significant. If compensation or the settlement is not forthcoming as needed, having a car accident payment agreement in place ensures that the responsible party must satisfy his or her obligations to the other party. For example, if a hospital or physician requires payment upfront, without any waiting, having a car accident payment agreement in place ensures that the responsible party must fulfill his or her obligations to the claimant for any and all medical expenses that are required to be paid prior to any compensation or settlement being released. In such cases, the car accident payment agreement can also be used to have the insurance company cover all such medical costs.
Essential Features of a Car Accident Payment Agreement Letter
When your client arrives next week, please have the following information prepared: the date on which the incident occurred; details of the incident including the location and the street addresses of the at-fault driver and your client; your client’s insurance company location (both for coverage and for inspections); billings from your client’s medical providers for this injury to date; as well as all correspondence from any insurance companies; and payments that have been made by you for this claim. If your client will be paying all outstanding medical bills as they are incurred, please note in the letter that you will forward any requests for payment when the bills are received by you. If you will not be paying the bills, please advise your client of this as well as advise them of the necessity to pay any outstanding deductible. Also confirm if the client will be responsible for any co-insurance payments and what those payments will be.
There should be at least two essential components included in the payment agreement letter: liability acknowledgment and payment terms. The liability acknowledgment should state that the at-fault driver admitted liability or fault and that the case will be treated as if it had already entered a stage where liability is no longer an issue. Payment terms should set up a specific payment method that is fair to all parties and covers all potential costs. This part of the agreement should address any anticipated expenses (such as expert witness fees) and give the client guidance about what will be expected of them in terms of additional payments to cover these expenses as they arise. It should also include any provisions for giving the client penalty rewards (such as a percentage discount) for paying off the balance of the costs within a specific amount of time or making installment payments for the balance of the costs.
Steps to Write a Car Accident Payment Agreement
Starting the Agreement
Begin with your company’s letterhead and include the date at the top of the letter. Address it to the policyholder rather than the claim adjuster who has been working with them on the claim.
The first paragraph should begin by stating the purpose of the agreement and acknowledging that there is some reason for concern in the claim that needs to be addressed.
For example, you could start the letter by saying:
"We have reviewed the circumstances of your claim and your current needs, and we have concluded that there are significant uncertainties associated with the payment of the total amount of compensation due to you as a result of the accident. In order to avoid the increases in costs, interest and uncertainty that may arise from this uncertainty, we have decided to enter into an agreement with you that will completely resolve your claim and compensate you fairly for the damages you have suffered."
After setting the stage in this way, then move into the terms of the agreement and how it applies to the situation.
The Terms of the Agreement
In the next paragraph of the agreement letter, move into the terms of the agreement. This can follow a simple structure as follows:
"Subject to the terms of this Agreement, (claimant’s name) agrees to accept the payment of (amount) as full and final settlement of all claims arising out of the accident on (date), including any claims for medical payments pursuant to my automobile insurance policy and/or uninsured motorist benefits under my automobile insurance policy. The payment will be made promptly upon receipt of a complete and signed release from (claimant’s name). This payment shall discharge (insurer’s name) from any and all claims arising out of the accident on (date)."
The main point is to keep it simple and straightforward – you don’t want any confusion about it being a release agreement.
Concluding the Agreement
Finally, close the agreement with language that clearly conveys the understanding that the payment is a complete release and that future costs will not be owed under the same claim. For example:
"In exchange for this payment, (insurance company) and (claimant’s name) agree that this amount is a complete release and settlement of the claims arising out of the accident on (date) and that no further amounts are owed or will be owed as a result of this agreement."
Beyond this, the agreement should simply end with a line for the claimant’s signature, making them accountable just as you are by signing it as their insurer. It is very important that you both sign it and that you keep both originals of the agreement for your own records.
Legal Aspects and Common Traps
When drafting a car accident payment agreement letter, it is imperative to be aware of the legal ramifications of this document. Like any contract, the payment agreement letter must be clear, precise, and signed by both parties for it to be enforceable. Ensuring that you have all the necessary documentation and evidence to support your claims is also essential. When in doubt, consult a lawyer. Failure to comply with legal standards may result in the invalidation of the agreement , leaving you without a means of recovering your accident-related losses. One common pitfall when drafting a car accident payment agreement letter is to make unwarranted assumptions about the extent of damages and losses that have occurred. Be sure to make a comprehensive list of everything included in your agreement letter; double-check to ensure you haven’t left anything out. If the list isn’t exhaustive, or if you have failed to take into account all of the expenses related to the accident, the other party could take advantage of you.
Example of a Car Accident Payment Agreement Letter
Dear (Name),
This is a letter of agreement between the following parties: (Your name) of (your address) and (Driver name) of (Driver address). The payment agreement outlined in this letter between the two parties is for the amount of Five Thousand Dollars ($5,000.00) payable by (Driver) in exchange for the repair of your (make/model) automobile. This agreement is effective the date it is signed by both parties.
As outlined in Section I, the payment agreement can be executed and satisfied in either of the two following provisions:
•Provision 1 – (Driver) will make five monthly payments of (1/5 of $5000.00) on the first of each month until this debt is paid in full. The agreement (or promissory note) does not require the payment of interest.
•Provision 2 – (Driver) will have your car fully repaired by (date) by a certified body shop. (Driver) agrees to pay all damages from his/her own funds and not interest. (Driver) understands that failure to fulfil this agreement will allow you to seek full recovery from him/her in the courts.
This section titled "Additional Provisions" is optional, but can be used to further outline the details of the agreement.
Under the laws of the State of (Virginia), should a default of this agreement occur, you agree to give (Driver) thirty days (30) notice before filing any legal action through the courts. To be enforceable, the agreement must be signed by both parties. Any change to the agreement must be made in writing and signed by both parties.
Sincerely,
(your name)
(YOUR SIGNATURE) (Date)
(DRIVER’S NAME)
(DRIVER’S SIGNATURE) (Date)
Signing and Executing Your Car Accident Payment Agreement
Upon receipt of the payment agreement sent by the other driver, it is now your turn to ensure that details are finalised. Notably, both parties should take time to read the payment agreement letter. It is possible that it is not worded in the manner that was agreed upon between both the driver and yourself. However, if you have carefully drafted the document, the only remaining task may be that of obtaining the necessary signatures from all of the parties involved . The final step of the process is that the payment agreement letter should be distributed to both the driver’s insurance company and your own as well. The above process should ensure that a car accident payment agreement letter is free from dispute. Importantly, both parties are required to uphold the terms of the agreement and if this does not occur, both may be liable to penalties.