Five Things To Know About Car Accident Settlement Agreements

Before you accept a car accident settlement, the insurance company will insist that you enter into a written settlement agreement. Although this is not an unreasonable demand, “the devil is in the details,” so to speak. You need to fully understand the nature and consequences of your settlement agreement before you sign it. This can be difficult if you are not familiar with the way settlement agreements work.

You also need to understand that you are under no obligation to settle your claim at all, despite what the insurance company may tell you. You can always take your claim to court. Even then, you can still settle your claim at the last minute. In case you choose to settle (and most parties do), below is a description of five important things to know about car accident settlement agreements.

A Settlement Agreement Provided by the Insurance Company Will Be Stacked Against You

A Settlement Agreement Provided by the Insurance Company Will Be Stacked Against You

The insurance adjuster is not your friend. They represent the insurance company, a for-profit business that loses money every time they pay a claim. Every dollar they pay you is a dollar out of the company’s bottom line. They also have a fleet of expensive lawyers working for them who have drafted a form agreement that will inevitably include terms that work against your best interests. 

The meanings of these terms, or the degree to which they work against your best interests,  might not be obvious to anyone but a lawyer. A settlement agreement might, for example, require you to arbitrate any disputes. Depending on the terms of the arbitration, this might guarantee that you lose any dispute that may arise with the insurance company. The agreement might also provide for installment payments rather than a lump sum or other nasty surprises.   

You Can Demand Non-Economic Damages

Almost everyone is aware that when you settle a car accident claim, you are entitled to reimbursement for your medical bills. Almost as many people realize that you are entitled to reimbursement for lost earnings and out-of-pocket expenses. Quite a few claimants, however, do not realize that they are entitled to non-economic damages. Non-economic damages include intangible claims such as pain and suffering, emotional distress, disfigurement, and loss of enjoyment of life.

Since non-economic damages often add up to well over half the value of a personal injury claim, not knowing the value of your non-economic damages can cause you to seriously undervalue your claim. The insurance company might exploit this by providing you with a settlement agreement containing a settlement amount that looks adequate but is actually woefully insufficient. Don’t let this happen.

The Agreement Will Release Unknown Parties for Undiscovered Claims

The terms of just about any settlement agreement will contain a broad “release of liability.” As you might expect, it will release the insurance company from any further liability. It will also release the at-fault driver from liability. Furthermore, it will probably release even parties that you have not identified for injuries that you have not yet discovered.

Suppose, for example, that your doctor diagnoses you with a spinal cord injury that you didn’t even realize you had until after you signed the settlement agreement. Or suppose you discover that a defectively manufactured auto part contributed to the accident. Under a broad release of liability, you cannot claim damages for your spinal cord injury, and you cannot sue the manufacturer of the defective part.

The moral of this story is that you need to understand as much as possible about your circumstances before you risk signing away your rights. You might even insist on refusing to sign an agreement that releases undiscovered parties from liability. At least talk to a lawyer about it.

Wait Until You Know the Full Value of Your Claim Before You Sign a Settlement Agreement

Do you know the full value of your car accident claim? If you are still undergoing medical treatment, the answer to this question must be no. There is no way for you to know in advance exactly how much your future medical treatment will cost. 

As a result, it is best to wait until you complete medical treatment before you settle on the value of your claim. You should also return to work full-time before you settle your claim. That way, you will know the exact value of your lost earnings.

Sometimes, however, you just can’t do this. If your injuries caused you long-term disability, the statute of limitations might prevent you from waiting until you know the exact value of your claim before you settle. The danger is that you will settle for too little and then run out of money years later. If you find yourself faced with this prospect, hire an expert to estimate your future medical expenses and lost earnings before you sign the agreement.  

You will need to sign the settlement agreement yourself. An insurance company representative will sign on behalf of the company. Once both parties sign the agreement, it becomes a binding legal contract. That means you can’t back out of it or renegotiate its terms later. If you don’t keep your end of the bargain, the insurance company can sue you on a contract claim. Of course, you can sue the insurance company if they fail to keep their bargain.

Because your settlement agreement is a binding legal contract, you will need to read the fine print before you sign. You will need to make sure you understand every term and every nuance. 

A Personal Injury Lawyer Can Help You Negotiate and Draft a Settlement Agreement

An experienced personal injury lawyer will have negotiated and drafted many personal injury settlement agreements. They will understand the tricks and pitfalls involved. Moreover, they will not fall for any of the tricks that insurance adjusters like to use against unrepresented claimants.

You don’t need to worry that you can’t afford a car accident attorney. Personal injury attorneys don’t charge by the “billable hour.” Instead, they calculate their legal fees based on a pre-agreed percentage of whatever amount they win. That puts your lawyer on your side because the more money you make, the more money your lawyer makes. By contrast, the interests of you and the insurance company are adverse to each other.