If you have a possible personal injury case, you might wonder if you will get a personal injury settlement. This article will give you an idea what to expect if you have a possible case.
This article is not about what your personal injury settlement is worth (see this article for injury claim value). Rather, this article goes more into depth about factors that affect the timing and justification for a personal injury settlement.
Will I get a personal Injury Settlement?
The answer to this question is never an unqualified “yes.” We’ve been in this business for a long time, and one thing we learned is that there are no guarantees. Cases are often a battle, and your foe is typically a billion dollar insurance company. You have to understand the process to understand the answer to this question.
Settlements are voluntary on the part of the parties; the parties have to agree. That’s not always easy, and certainly not a guarantee. Some people are simply unreasonable, no matter what the facts are. Look at politics for instance! People simply don’t agree — we are indeed humans! And typically you are negotiating with an insurance company, who may not be reasonable at all.
If you get hurt due to someone’s negligence, you may very well have a case, even a great case. Maybe you got rear-ended at a red-light by a drunk driver. Should be a slam dunk, right? Well, technically, in order to hold that person accountable, you have to actually file a lawsuit, win that lawsuit, establish your damages, obtain a judgment, and execute on that judgment. There could be appeals, delays, etc. This process may very well take years.
Settlements occur when the parties understand the risks, costs, and benefits of trial, and know that everyone is best served by settlement. Each side has different considerations and risks
For the plaintiff, (the injured party), they might have immediate needs to pay bills. Injuries can be devastating financially with mounting medical bills, lost work, etc. Unfortunately for the plaintiff, they may not be able to afford years of litigation, even if they might get more money at trial. Trials are exhausting, lengthy, risky, and expensive. Every case is different, but it can be very difficult for plaintiff’s to hold out for trial. Ideally, we hope our clients can hang on for trial, because we don’t want them to make a desperate settlement decision. But money in hand is better than a risky trial in some cases.
For the insurance company, time is less of an issue. In fact, the longer the insurance company can avoid payment the better for them.
Now on the other hand, going to trial can be a risky move for insurance companies too. For one, they have to pay a lawyer, and it can cost a minimum of about $50,000 for a insurance defense lawyer to go to trial, and much more for complicated cases. Also, the plaintiff can perhaps win much more at trial than the insurance company thinks it should pay. Trials are determined by juries – real humans – and humans oftentimes find human life more valuable than insurance companies do with their Excel spreadsheets. Thus, insurance companies have real risk too.
Personal injury settlements often happen when the parties assess their respective risks, and choose to settle. Oftentimes, one or both of the parties are not 100% happy. Most personal injury settlements involve some concessions, and you are rarely sure you got a great deal. But the risks are real, and settlements at least provide some certainty.
In our opinion at Duckworth Law, the only way to handle a case is to get the case ready for trial. Never expect a settlement, because insurance companies see that as weakness. Insurance companies are afraid of big verdicts at trial, so you must be willing and able to go to trial to get a big settlement. This is the reason that insurance company studies show that people who hire lawyers obtain 3 times more in settlements, on average, than without a lawyer. If you don’t hire a lawyer, it’s clear you can’t or won’t go to trial, so what real risk does the insurance company have?
When will you get a Personal Injury Settlement
Similar to the above question about whether you will get a personal injury settlement, when you get a personal injury settlement is even more of an elusive answer. There is never a set time for settlement and it all depends on risk and leverage.
Every lawyer is different, and every case is different. In most of our cases, we provide the insurance with an opportunity to settle the case prior to filing a lawsuit. If a case can settle before a lawsuit for fair value, it can be good for all parties. There also can be some legal advantages to giving the insurance company an opportunity to settle prior to litigation, and if they fail to act reasonably, you can be entitled to attorney fees in some cases. The pre-litigation offer is one possible leverage point.
But again, the insurance company is not necessarily required to settle pre-litigation, and you may get a crummy offer, if any. The pre-litigation offer only works well in some cases, where the threat of a lawsuit actually worries the insurer. In some cases, the insurer has clearly dug its heals in, and we know it is not worth making a demand. It’s just a waste of time, because the insurer’s offer, if any, won’t be enough. In those cases, we might recommend filing a lawsuit without even talking to the insurer about settlement. They need to know we are serious before we can expect any legitimate offer.
Once a lawsuit is filed, cases can settle at any given time. Typically, settlement depends on some leverage point. Potential leverage points include before or after the deposition of a critical witness, after exchanging initial discovery, while an important motion is pending, or after you’ve won an important motion. All these event exert some degree of leverage on the parties, which might spur serious settlement discussion.
Most Montana judges also require parties to go to mediation with a professional mediator prior to trial. Mediation is where a professional mediator will go back and forth between the two parties and try to see if a settlement is possible. Mediations can be successful, but they often aren’t successful or even beneficial if they don’t revolve around some critical leverage point.
Trial is the ultimate leverage point. The closer the parties get to trial, the more pressure on everyone. Cases often settle right before or even during trial.
When a case might settle is totally case and party dependent. From a plaintiff’s perspective, you must treat your case as if it’s going to trial to maximize a personal injury settlement. That is why a lawyer is so important, and that’s not just self-serving rhetoric, it’s the hard truth. Insurance companies are only reasonable when they have real risk, and that means you are prepared to go to trial with a skilled lawyer.
Is your Personal Injury Settlement Taxable
As with most questions in law, it depends. One major caveat here: Duckworth law is not in the business of giving tax advice, and we are not tax professionals. You must consult with your accountant or tax advisor for all final accounting questions. Our knowledge is limited to the general arena of personal injury cases.
Generally, in our experience most personal injury settlements are NOT taxable. The IRS has a specific regulation(s) that exclude from gross income any amounts paid “on account of personal physical injuries.” The IRS has guidance on its website about personal injury settlements, including links to the actual regulations.
But there is more too it than that, and this is where you likely need to talk with a tax professional. For instance, some things might be taxable like punitive damages, lost wages in employment cases, non-physical injury, deducted medical expenses, etc. Thus, it would be dangerous to assume every settlement is tax-free, which is why we always tell people to consult with their accountant to be sure. Although most personal injury settlements are tax-free, every case is different and you want to be sure.
No Personal Injury Settlement – Go to Trial!
Some cases just need to go to trial. There are cases where insurance companies simply offer nothing, or very little, and you have no choice. Some cases the plaintiff strongly believes their case is worth a lot, even if the insurance company is making a decent offer. Either way, trials are a wonderful way to get a brutally honest result for everyone.
Nothing in this article is meant as specific legal advice for a specific case, as every case is different. If anything, what this article shows is why it is so important to consult with a lawyer like Duckworth Law prior to making any major decisions on your case, and certainly before accepting a personal injury settlement. Personal injury cases are high stakes, and you will be fighting a worthy foe. Call us to discuss your personal injury case.