If you're involved in a car accident and you're entitled to compensation for your injuries and other losses, the car insurance company of the driver who was responsible for causing the crash may contact you to try and settle the claim.
Your first reaction to a settlement offer may be relief. Now you'll get money to pay for your medical bills, and to get your car fixed and back on the road, all without having to hire an attorney and file a lawsuit! But don't get too carried away, because you'll also have to sign a document called a "release" before the car insurance company sends you any money. What exactly is a release and what is the legal impact of signing one?
A release is a legal document in which an individual agrees to give up, or release, certain legal rights. A release is also sometimes called a waiver. The purpose of the release is to end a legal matter (such as a civil lawsuit) and allow the parties to move on.
In the case of car accident claims or lawsuits, a person who signs the release gives up the right to sue certain individuals or entities as they relate to the specific accident. This means, if you sign a release from the other driver's car insurance company, you will shield the insurer and its driver from any further legal action arising from the accident. In return, you'll receive a settlement check.
When you receive the release from the car insurance company, do not sign it until you have taken the following five things into consideration.
You may need your car insurance company's permission before signing the release. This is due to a legal concept called subrogation, which is very important in car accident cases, especially underinsured motorist cases. Here's how it works.
Imagine you're involved in a car accident with another driver whose car insurance policy limits aren't enough to fully compensate you for your losses. If you have underinsured motorist coverage, your car insurance company should make up the difference, up to your UIM limits. Your car insurance company will then use the subrogation provision in your car insurance policy to recover (or, more realistically, attempt to recover) the difference directly from the other driver.
Your car insurance company is using your legal right to go after the other driver to receive reimbursement for the underinsured coverage payment it just gave to you; this is how subrogation works. However, should you sign a release without your car insurance company's permission, your car insurance company's ability to go after the other driver is now gone. As a result, your insurance company may try to deny your underinsured motorist coverage claim.
Legal documents can be intimidating, and you may feel like there's no point in reading the release if you won't be able to understand it. However, you will probably understand more of it than you might think, especially the most important terms— such as the settlement amount and the details of the settlement payment.
Additionally, don't take the word of the car insurance company's representative as to what the terms of the release are. Always check it over yourself to make sure there are no misunderstandings.
Just because you feel fine and all your medical and repairs bills are fully covered by the settlement check, that doesn't mean you have been fully compensated. Many injuries from car accidents aren't discovered until a period of time after the crash. That last thing you want to do is agree to a settlement of $20,000 for medical bills when a month later it turns out you need another $10,000 in medical treatment for injuries that have only recently presented symptoms. Remember that once you sign the release, you can't get anything else from the other driver or the other driver's car insurance company.
Not only will an experienced attorney be able to explain exactly what the release says and answer any questions you may have, but there may be certain legal rights you aren't aware of that will vanish if you sign the release. Your attorney will point these out for you.
For example, let's say you confirmed with your doctor and mechanic that the car insurance company's settlement amount is enough to pay for all your repairs and medical bills. But you may have valid claims for other losses that you may have overlooked or failed to consider, such as lost wages or pain and suffering. You won't know for sure unless you have an attorney review the release and ask you the right questions.
This tends to be an issue when more than one person or entity is responsible for the accident. For instance, let's say you have a release that only applies to a commercial truck driver that hit you. The settlement amount isn't enough to fully compensate you, but you're not sure if you should reject the release and file a lawsuit to try to recover the full amount. If it turns out that you have legal claims against the commercial truck driver's employer and another individual driver, you might be more willing to sign the release.
The decision to sign the release will depend on a variety of factors and circumstances. Make sure you have the whole picture before you make your decision.