Personal Injury Settlements

What Causes a Personal Injury Case?

A personal injury case typically arises when someone gets hurt and another person or company may be legally responsible for causing the harm.

The person who was hurt can sue in the hope of receiving damages to make up for the harm they received.

Some of the most common personal injury cases include:

• Medical malpractice
• Product liability
• Wrongful death
• Workplace accidents
• Defamation
• Assault

Personal injury cases can result from many situations, with auto accidents being one of the leading causes. According to the National Highway Traffic Safety Administration, almost 43,000 people died in auto accidents in 2022 — and there were many more injuries.

While something like getting hit by a car or slipping on a wet floor may be what first comes to mind when you think of a personal injury case, personal injury law covers more than physical injuries. 

Any damage to the physical, mental or emotional wellbeing of a person may be defined as a personal injury if someone else caused the damage by doing something wrong or not doing something they should have.

For example, a personal injury may be a long-term illness caused by a toxic consumer product or as a side effect of a drug. It may be the mental distress of being confined to a small workspace because of storage issues at a workplace. Someone or something ruining a person’s reputation may even be enough cause for a personal injury lawsuit.

A personal injury settlement is a payment resulting from a personal injury case. A very small percentage of these cases go to trial. Most cases are resolved through an insurance settlement, which is an agreement between the injured party and an insurance company representing the responsible party.

Thomas J. Brock, CFA®, CPAInvestment, Corporate Finance and Accounting Professional

Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.

Negligence

One important factor to keep in mind when considering if your situation meets the criteria for a personal injury case is the concept of negligence.

To win a case based on negligence, the plaintiff must prove four things:

Duty of Care

The defendant had a responsibility to be careful in the situation.

Breach of Duty

The defendant either did something wrong or did not do what they should have.

Causation

The defendant’s behavior caused the plaintiff’s injury.

Damages

The plaintiff has suffered as a result of the defendant’s reckless actions or failure to act.

If you cannot prove negligence in your case, it is unlikely you will receive a personal injury settlement.

How Do Personal Injury Lawsuit Settlements Work?

How a personal injury case works depends on the situation. In some cases, the process is cut and dry. For example, when a car insurance company acknowledges its insured client as the one at fault, winning a settlement might be more straightforward.

In fact, only a small portion of personal injury cases actually reach a courtroom. Parties settle most cases out of court. This means they choose to save time and resources rather than bringing a personal injury suit to trial. Typically, the plaintiff’s lawyer and the defendant’s lawyer agree on the compensation amount for the plaintiff.

But before negotiations begin, the plaintiff must formally file a lawsuit, and they must give the defense attorney adequate time to perform all pretrial explorations and research. The magnitude of the case determines how the rest of the suit will progress. In smaller instances, the two opposing lawyers will simply negotiate back and forth until the plaintiff accepts an offer from the defense.

Often, the defense attorney represents an insurance company. If the insurance company is not willing to begin earnest settlement discussions, the case will come to a standstill. However, if you find yourself waiting on the insurance company’s response, know that defense lawyers and insurance companies can use this strategy to test a plaintiff’s willingness to settle. They may view an overly eager or impatient plaintiff as someone likely to settle for a lower offer. 

Every case is different, and it’s not uncommon for personal injury claims to take months or years to resolve. It often takes patience to receive a fair and just settlement.

Read More: How Structured Settlements Work

Personal Injury Settlement Payouts

It’s important to remember that a personal injury settlement’s purpose is to make you “whole” again following an injury. The goal is not to put the plaintiff in a better financial position; it’s to cover the out-of-pocket expenses they have accrued as a result of the incident and give them the money they need to cover future expenses and restore as much normalcy to their life as possible.

Some important questions to consider prior to distributing payment include:

• How much of the payout will contribute towards legal fees?
• Will the plaintiff consider a partial settlement?
• What is the minimum monetary amount they will accept to avoid trial?

If you or someone in your family is injured due to negligence, it is imperative to contact an attorney as soon as you can so they can begin properly documenting all treatments, procedures and surgeries. This will help bring the scope of a potential settlement into focus.

Treatments like physical therapy or chiropractic visits can continue for years after a serious injury. Because of this, predicting future and long-term needs can be just as important as tallying the cost of medical care you’ve already received. 

Keep these factors in mind when deciding on a proper settlement value:

• Related medical bills
• Length of medical treatment
• Amount of lost income
• Long-term treatment or post-accident treatment
• Receipt of long-term diagnosis
• Pain and suffering damages

Besides determining the fair cash value of the settlement, it’s also important to explore the different payment options available to you. Many personal injury settlements come as structured settlements, which can provide you with a steady stream of tax-free income for many years. Structured settlements are usually paid through annuities, which are owned and administered by life insurance companies.

Here’s a real-world scenario to consider: If a disability leaves you unable to work, the bodily injury settlement you receive will have to replace your income. Even if you expect to return to work after you recover, make sure you consider whether the long-term effects of your injury may force you to retire early. In this case, you might design a structured settlement to send you periodic payments once you reach a certain age.

Make sure you and your team fully explore the long-term significance of your injury so that the offer you accept includes money set aside for possible future expenses. Once a personal injury payout has been awarded, the only way to access the money ahead of schedule is to sell future payments on the secondary annuity market.

Frequently Asked Questions About Personal Injury Settlements