What is a Car Accident Settlement Agreement?
A car accident settlement agreement is a legally binding contract between a plaintiff (the victim) and defendant (the at-fault driver or his/her insurance company). It typically comes at the end of, and resolves, any pending trial or settlement negotiations. Essentially it is an agreement to release the defendant, or any insurance company, from further claims on the subject of the accident, in exchange for a sum of money.
The contract usually also details payment terms, including the amount to be paid to any medical providers for bills owed by the plaintiff. In most situations, the Defendant will not pay the money directly to the Plaintiff. Rather it will be sent to his or her attorney, from which certain expenses such as attorney fees and medical bills will be deducted . When the amounts are deducted, the remainder is paid to the plaintiff directly.
In almost all instances, car accident settlement agreements include a provision affirming the plaintiff’s understanding that the contract effectively releases the defendant from any and all future claims for the same injuries. These releases also commonly apply not just to the defendant driver, but also his or her insurance company and anyone else who might bear liability to the plaintiff in relation to the subject accident or injuries.
There are, however, some exceptions to this, which is why it is extremely important for potential plaintiffs to consult with an attorney about the likelihood of future claims against anyone else in relation to the accident.
Settlement Agreement Elements
When it comes to car accident settlement agreements, there are several key components that will be found in most agreements. First is a clause relating to liability and a stipulation of no liability on the defendant’s part. Even if it is clear that the defendant was liable for the accident, the fact that you’re entering into a settlement agreement means that you’re waiving your right to take the case to trial. Because of this fact, all parties sign a stipulation that the settlement is made without any admission of fault.
Perhaps the most important component of a settlement agreement is a release of liability. This is a clause that indicates that you’re giving up your right to sue the defendant in the future. This release of liability gives the defendant the peace of mind of knowing that once the settlement funds are exchanged and the case settled, that person will not have to deal with any more lawsuits from the plaintiff. This clause also makes sure that the plaintiff is not able to go back on his or her decision to settle. That is the purpose of having a notary public witness your signature on the agreement – so that it can’t be claimed later on that the agreement isn’t valid or was obtained through misrepresentation or duress.
A settlement agreement will include information about how payments will be made, whether in a lump sum or through a structured settlement. Typically, the defendant’s insurance company will send the funds to your attorney, who will then send it on to you (minus legal fees and costs). There are also clauses relating to how the insurance company will report the settlement to the IRS.
Sometimes settlement agreements will include clauses about confidentiality. These clauses prohibit you from discussing the terms of the settlement with other people. The reason for such clauses is that the defendant wants to maintain some confidentiality about the incident, lest it happen again with another person, or another person secretly records the conversation. It also shields the defendant from engaging in discrimination due to the circumstances of the accident. At the same time, it prevents you from discussing the case with others, a fact that you should keep in mind before signing.
How to Settle
When attempting to negotiate a settlement, you should have all of your paperwork in order. Firstly, this means having all your medical bills and documents collected in one organized place, like a file folder. Next, you should find all your lost wages and if you lost any vacation or sick time due to the accident, be sure to keep those records as well. Your lawyer will request copies of all your medical bills and documents to submit to the insurance company. Talking with your doctor to see if they can also submit a request that you get reimbursed for your co-pays is also a good idea.
The insurance company may send an adjuster to speak to you about your case. If so, it’s in your best interest to have your attorney with you when dealing with the adjuster. Having your lawyer present will likely ensure that you are offered a fair amount of compensation. If you hired an attorney for your case, you should never speak to the adjuster without your lawyer present. Insurance adjusters are trained to trick people into admitting fault. You need to be very careful about what you say around the adjuster, in any situation. You can easily harm your case.
Your lawyer will likely start off by sending out a demand package and will then attempt to negotiate a favorable deal that works out for both of you. If the adjuster turns down the initial offer, your lawyer will increase your offer and if they don’t, they’ll very likely be forced to file a lawsuit.
Pros and Cons of Settling Your Car Accident Claim
There are pros and cons to settling a car accident case as opposed to going to trial:
Benefits of Settlement
First, a case can settle any time prior to a verdict in trial. In other words, you can settle the case within a few hours after the auto accident if you’d like! (Usually, if you were to do that, you’d be signing a very small check for a very small amount of money in regard to medical bills, lost wages, pain and suffering, etc). But in any event, a case can settle any time before or during trial, even if it is via mediation or other pretrial means. As a car accident attorney, we’ve settled cases after jury selection and just before opening statements!
Often times, the insurance company will float a settlement offer prior to filing a lawsuit. This is likely going to be a low ball settlement offer, but it’s always good to consider once as the case proceeds. Sometimes, after a lawsuit has been filed, the insurance company only makes settlement offers that cover the medical bills (generally the medical lien amounts). It’s generally not a good idea to consider these offers too seriously.
In addition, once a lawsuit has been filed, the defense might retain an investigator to conduct an examination of the plaintiff/patient. If the accident or injury is minor, generally, it’s a great idea to consider accepting the defense offer to settle before hiring the doctor or physician to conduct the examination of the plaintiff/patient. In other words, if it’s determined that the accident was minor and the plaintiff/patient is better off accepting the settlement offer, then getting into a big dispute with the defense over whether the plaintiff/patient is injured. (Yes, this happens, a big time!).
A settlement means that if the case is settled before trial, it does not have to be filed with the court, and that’s very helpful from a cost point of view as there are no significant court filing fees, nor is there a need to pay filing fees at the courthouse.
Downsides of Settlement
First, once you settle the case you (and the court) are done. In other words, no one can take any action to pursue the case further. So, be sure you want to settle the case before you settle the case! All kidding aside, it’s important to at least consider all possibilities when considering the resolution of a case.
Common Car Accident Settlement Mistakes
Mistake: Unclear Scope of Release
Your agreement will likely have a release section. This part of the agreement prevents you from making any more claims about this case in the future. It will not only apply to the people that you have sued, but also any of their family or companies.
Make sure that your release is clear and does not apply to third parties as mentioned above if this is not what you want. If your release is too broad you may be prevented from making other claims or getting compensation for future mistakes by someone you sign a release with.
Mistake: Assigning your rights away
None of us know exactly what the future will bring. It is wise to avoid assigning away any rights that later impact how much the insurance company should pay. For example , you don’t want to assign away your right to work for your employer after settling with an insurance company. Doing so may cause a future employer to refuse to hire you because they are now aware of your claim.
Mistake: Ignoring Subrogation Rights
Insurance companies like to claim they are entitled to both the money you receive from them and the money you receive from a third party. This is called subrogation. Typically it is included in the policy you signed with your insurance company when getting insurance. Make sure you understand your rights when settling your claim. Does the other policy have a subrogation provision? Does the settlement agreement impact that? Whether or not you agree to reimbursement from the insurance company whose policy you are claiming against requires you to review the policy and often state law with a lawyer.
The Legal Process of Settling an Agreement
The agreement reached in the midst of negotiations over your car accident case is typically embodied in a written settlement agreement. A "binding" agreement between the parties to a lawsuit is only legally binding if it has received a court’s approval. In the context of the settlement of a car accident personal injury case, the agreement is not legally binding and enforceable unless either (a) it is approved by a judge, or (b) the claim for damages is made the subject of a court diary judgement and the parties stipulate to the entry of a judgment in accordance with their settlement agreement.
Assuming that the voluntarily required formalities have been observed, a settlement agreement is legally binding and enforceable according to its terms. If during settlement conferences and negotiations the defendant actually tenders payment to the plaintiff, such tender by the defendant, not being occasioned by mutual mistake, was "unqualified and unconditional," and the plaintiff accepts the payment, it is binding and enforceable. In such cases, in the absence of fraud or mutual mistake work out by counsel in the course of negotiations between the parties are entitled to the same legal effect as a judicial order, i.e., the right to enforce the parties’ agreement in such manner as is feasible from all the circumstances.
Such agreements in writing as are entered into as a result of the efforts of the court as an aid to settlement and without formal findings of fact or conclusions of law are entitled to the same force and effect as that given to the stipulations of the parties, and if agreed upon in open court, they are conclusive and binding.
When You Need an Attorney
In general, most cases are settled without a lawsuit, but retention of a lawyer very early on may help to prevent a lawsuit and any undue stress or inconvenience that may accompany a lawsuit. Once a lawsuit is filed, an attorney is normally required. However, there are some situations where hiring a lawyer is advisable even before a lawsuit is necessary or has been filed.
In Virginia, delays in filing a lawsuit can prevent the injured person from recovering compensation, so it is always advisable to consult with an attorney as soon as possible. Also , in many cases special needs such as future medical care for the injury or long-term disability require a negotiable settlement amount. This is especially true in cases of catastrophic injury. A lawyer is qualified to fully explain all the settlement options available to an injured person. There are many things that can and often do go wrong in settlement negotiations if you don’t have legal representation. Insurance companies may deny liability, coverage, or other issues that necessitate court involvement. The insurance adjuster may make low ball offers to make the injured party settle before his/her attorney can investigate. If you are being pressured by the insurance company, or by the negligent party, you should consult an attorney immediately.