Most personal injury cases settle out of court, well before trial, and many settle before a personal injury lawsuit even needs to be filed. Settling out of court can provide a number of advantages over litigating a case through to the (often bitter) end. This article discusses those advantages in detail.
Typically, the injured person (the plaintiff) in a personal injury lawsuit will have a contingency fee arrangement with his or her attorney. The most common arrangement is that the attorney will receive around 33 percent of any pre-trial settlement and about 40 percent of any amount received after trial begins.
A defendant will typically hire an attorney and pay an hourly rate, so the very time-intensive lawsuit process represents a significant out-of-pocket expense for the defendant, compared to settling. Paying more to attorneys is not the only expense of litigation. Expert witnesses, court costs, travel and lost time from work can all add up considerably. (Learn more about the cost of taking a personal injury case to court.)
Keep in mind that the earlier a case settles, the less expensive the litigation process is for both parties, particularly a defendant paying at an hourly rate. The pre-trial discovery process can involve numerous depositions, including depositions of experts. Some plaintiffs’ attorneys will agree to pay pre-litigation expenses like expert witness fees up front, but some do not—and if the fees are paid up front, they then come out of any award or settlement. If the defendant’s liability and the nature and extent of the plaintiff’s injuries are fairly clear early on, both parties benefit from settling earlier.
If the defendant’s attorney is being paid by an insurance company, these considerations change in theory. An insurance company is under an obligation to settle cases in “good faith” and is technically not permitted to settle a case early simply to save on litigation costs. However, if the plaintiff accepts or proposes a reasonable settlement offer, the defendant cannot refuse the offer simply because he or she is not paying the bill.
Although a typical personal injury trial will not last more than a few days, the process can be extremely stressful for everyone involved. Both parties can be subjected to examination and cross-examination on the witness stand, and have their past (and their character) publicly scrutinized. In addition, the weeks leading up to a trial can be very labor- intensive for both parties, not just their attorneys. With a settlement, an agreement is negotiated, the defendant (typically) pays some damages to the plaintiff, and the matter is concluded.
While a jury may award the plaintiff much higher damages (more money) than what the defendant offers to settle the case, there is no guarantee. Trials are notoriously unpredictable. Key evidence might be excluded by the judge, eyewitnesses might come across as unreliable, inconsistencies in the plaintiff’s testimony might come out, etc. The modern legal system is designed to take surprises out of the trial process, but the system is not fool proof.
Even more unpredictable than proving liability, however, is just what the jury will award a plaintiff who wins at trial. What a plaintiff receives is up to the jury’s discretion, and predicting what that number will be ahead of time can never be more than an educated guess. With an out-of-court settlement, both parties have negotiated control over how much a defendant must pay out. In fact, many states encourage settlement by requiring the plaintiff to pay the defendant’s attorney fees if the plaintiff wins less at trial than what the defendant offered to settle. (More: What's the "average" personal injury settlement?)
A trial will often not commence until more than a year after the initial lawsuit is filed. Even after one of the parties wins at trial, the other party can prolong the uncertainty by appealing the outcome. Even with a relatively simple personal injury case, it is not uncommon for the entire process (from filing the lawsuit to receiving damages awarded at trial after several appeals) to take three or four years (sometimes significantly longer). With a settlement, on the other hand, the parties know exactly how much money will exchange hands, and both can put the matter behind them after the settlement agreement is signed (settlements aren't appealable). Learn more about how long it takes to settle a personal injury case.
Unless the judge orders the records sealed, which will rarely ever happen in a personal injury case, all the details of a trial are public record. This means all of the witness testimony, all of the evidence, everything the two sides used to make each other look as bad as possible, will be available for anyone to read. By settling the personal injury case out of court, the parties are in complete control of what remains private and what remains public, including the terms of settlement.
If a defendant loses at trial (or loses any subsequent appeals), he or she has been officially declared liable for the plaintiff’s injuries. If the parties settle, however, the defendant is not required to admit liability. This may not be ideal for a plaintiff who feels morally invested in proving a defendant’s guilt, but it is a significant bonus to a defendant concerned about having a public record of negligence or intentional wrongdoing.