Responding to the First Personal Injury Settlement Offer

Strategies to consider after you've received an initial response to your injury claim.

Most personal injury cases settle out of court during the insurance claim stage, often before a lawsuit is even filed. In fact, when you start an injury claim, your attorney will usually focus on "building your case" with the goal of getting the best settlement possible. Exactly when that settlement might be reached is often less of a concern.

This article discusses what you should consider when responding to the first settlement offer you receive.

The First Settlement Offer Will Probably Come Before You File a Lawsuit

When a liability insurance policy applies to the accident that caused your injury, and it's pretty clear that the insured party was at fault for the accident, it's a safe bet that you'll get a settlement offer pretty early on, usually within the first month or so.

For example, if you're rear-ended at a stoplight, and you notify the other driver's insurance company that you intend to file a claim for injury and vehicle damage, the insurer is almost certain to make a settlement offer soon after, in the hopes that you'll accept the deal, sign a release, and the matter will be resolved.

Don't be too hasty, though. If your claim involves serious injury, and the nature and extent of your losses aren't yet clear, you'll probably benefit from getting legal advice before accepting any settlement. Once you agree to accept the insurance company's offer, you can't turn around and ask for more money later—even if it turns out your injuries are worse than you thought and you'll require extensive medical treatment in the future.

How Much Can the Other Party Realistically Pay?

Before accepting or rejecting a settlement offer, consider the other side's financial means to pay your claim. For instance, what if whoever caused the accident doesn't have much (or any) insurance coverage?

In that case, you'll need to consider whether the other party has enough money to pay up if you file a personal injury lawsuit and you win at trial. If they don't have adequate insurance, money, or assets, you're not going to collect much, no matter how big the court award is. In such a case, accepting a lower settlement offer and avoiding the hassle of going to court could be your best option.

Of course, if you're determined to hold the responsible party accountable, you might be willing to go to court and take your chances on whether any judgment could actually be paid. Don't be surprised though if a personal injury lawyer is hesitant to take your case.

How the Other Side's Insurance Affects the Settlement Process

If the person or business responsible for your injuries has insurance that covers the accident, then the insurance company will usually be in the driver's seat when it comes to settlement terms. And you won't need to worry about the insurance company running out of money—there are even state "insurance guarantee" funds to cover a claim if an insurance company goes bankrupt.

The other side's insurance policy will have limits, and those can significantly affect your settlement options. It's possible to collect injury compensation beyond the policy limit, but the person or business responsible for the accident will have to pay out of pocket for anything beyond that limit. So, if the policy limit is low and the other side is broke, a relatively small settlement offer might be as good as you're going to get.

If the policy limit is high, you won't need to consider how much money is available when considering a settlement offer. Instead, you can focus on other factors.

Consider the Timing of the Settlement Offer

The other primary factor to consider is when the first offer is made. A settlement offer made before you've hired an attorney and developed your case will most likely be the kind of lowball offer the insurer dangles in the hopes of getting a claimant to bite. If the other side knows you're desperate for cash or unfamiliar with the insurance claim process, the offer will likely be even lower.

But, if you're already represented by counsel and your case has been adequately developed before the first settlement offer from an insurance company comes in, it'll probably be closer to what you could get if you go to court.

(Learn when to consult an attorney in a personal injury case.)

Know When to Settle Your Claim

It might be tempting to follow standard negotiating tactics and refuse the first offer, no matter what it is, counter with a higher amount, and hope to meet in the middle. But that's not always your best strategy. It could even cost you under some states' litigation settlement rules.

In some states, if you refuse a settlement offer, go to trial, and the amount of money awarded to you is equal to or less than the settlement offer, you'll be required to pay the defendant's attorney fees and court costs. So, be wary of automatically refusing a reasonable first settlement offer.

A Personal Injury Lawyer Can Help You With Your Case

You might be tempted to try to handle a personal injury claim yourself. That might be a sound strategy if your injuries are minor, and the other side isn't putting up a fight on key issues like who's at fault for the accident. But when your claim involves serious injuries or complicated legal issues, or you're simply not comfortable going up against the insurance company by yourself, you might want to consider hiring your own lawyer.

Just like any other profession, attorneys run the gamut when it comes to skill and reputability. Some attorneys make it a practice to do very little work on a case. Instead, they tell their client to accept a low settlement offer and then collect their 1/3 contingency fee. This might benefit the attorney, but it doesn't usually serve the client's best interests.

Before you hire an attorney, be sure to get references and check their track record. (Learn how to find the right personal injury lawyer for you and your case.)

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