How a Personal Injury Case Is Settled

Understand how (and why) most personal injury cases settle out of court, usually well before trial.

Updated by , J.D. · University of San Francisco School of Law

When you're injured in an accident that was caused by someone else's negligence, there are usually two ways to get compensation from the at-fault party: be offered and accept a personal injury settlement outside of court, or go through (or at least start) the civil lawsuit process.

While a lawsuit might ultimately net you more money than a settlement would, the vast majority of personal injury cases settle well before trial, and often before a lawsuit is even filed. Let's take a closer look.

Understanding Personal Injury Settlements

Settlement occurs when an insurer adjuster or a defendant (the person or company you're suing) makes an offer of payment to you, the injured person.

When might this happen? Almost anytime:

  • The offer of settlement may be made before a personal injury lawsuit has been filed, but after a potential claim arises.
  • It may be made after a court case has been filed and a trial has begun, as long as no final verdict has come back.
  • Some settlements are even reached after trial, while the jury is deliberating, since one or both parties might decide they prefer the "sure thing" of a settlement.

Once a settlement agreement is reached, the plaintiff must relinquish all potential claims against the defendant arising out of the underlying accident or incident. The plaintiff does this by signing a full liability release. For example, in a car accident case, the car insurer may offer the plaintiff $50,000 to settle the case. The plaintiff, to receive that $50,000, would have to agree not to file a lawsuit or pursue any other legal remedy in connection with the crash.

Personal Injury Settlement and Insurance Companies

Settlements are almost always offered when insurance companies are involved, which happens in the vast majority of personal injury cases. Insurers have the assets to pay out claims, and they expect to pay out a certain number of claims as part of their business model. Insurers are also risk-averse and don't want to put their financial fate in the hands of an unpredictable jury, while paying the not-insignificant costs of litigating a personal injury case all the way through trial.

Why Do Most Personal Injury Cases Settle?

The fact that so many cases settle, especially when insurance companies are involved, naturally leads to the question of why? There are many reasons, including:

1. Settlement allows a defendant to control risks and avoid legal costs.

If the defendant knows he or she is at fault for the accident that led to the injury claim, or if fault is a cloudy issue but the plaintiff's injuries are significant, the defendant might not want the case to get in front of a sympathetic jury that could give the plaintiff a large damages award.

2. Settlement can allow a defendant to keep the case out of the public eye or out of the paper.

This is especially important for larger companies with a public profile. For example, if a company produces a defective product and only a few people are injured by it, the company may want to try to arrange a quiet out-of-court settlement and avoid the sort of major publicity that might accompany a trial. When a settlement agreement is drafted, it gives a company (or any defendant for that matter) the opportunity to negotiate terms that work for everyone. These terms usually include a requirement of confidentiality.

3. Settlement allows a plaintiff to avoid a protracted trial.

Trials can extend for months, and the ultimate outcome of the matter can remain up in the air if there are appeals. A plaintiff may not want to wait that long to get financial relief, or may not feel up to going through a long trial, putting on a case, presenting evidence and doing everything else necessary to win a legal battle.

4. Settlement allows a plaintiff a guaranteed (if not always gainful) win.

When a case is taken to court, there is always a chance (however small) that the plaintiff will lose the case and receive nothing.

Learn more about how long personal injury cases take to settle, and how to negotiate a fair personal injury settlement.

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