​How Do Car Accident Settlements Work?

Every year, tens of thousands die in preventable injuries and accidents, and many more are seriously injured. Unintentional injuries or accidents are the fourth leading cause of death in the United States, accounting for around 6 percent of all fatalities. For most people, cars are their main form of transportation.

With more than six million car accidents a year in the U.S., these accidents are a leading cause of injuries and fatalities. For the most recent year reported, 371,368 traffic collisions occurred in New York, according to the Traffic Safety Statistical Repository maintained by the New York Department of Motor Vehicles (DMV).

Many of these cases result in a personal injury lawsuit. Plaintiffs file between 300,000 and 500,000 lawsuits annually in the U.S. Car accidents make up more than half of those lawsuits.

What is a personal injury lawsuit?

​How Do Car Accident Settlements Work?

A personal injury lawsuit is a civil case that arises when someone is liable for an accident that harms another person. The injured person may then file a lawsuit to collect damages for their injuries. Damages typically include medical expenses, lost wages, and pain and suffering. Each case is different, but typically the injured party files a civil complaint alleging that the at-fault party negligently caused an accident and harmed them.

Most car accident lawsuits are settled outside of court. Approximately 95 to 96 percent of car accident cases end in settlements. A settlement happens when all parties agree upon a negotiated sum of money. Therefore, the injured person (called the plaintiff) accepts an agreed-upon financial compensation from either the at-fault party (called the defendant) or an insurance provider. A plaintiff agrees to give up the right to legal action in exchange for money in the settlement, and the case does not conclude by trial and a decision by the judge or jury.

If you have been injured in a car accident, you may want to know how car accident settlements work. The car accident settlement can be reached either before a court case or even in the midst of one. Deciding whether to accept a negotiated settlement or go to trial can be difficult.

The pros and cons of settling a car accident lawsuit

There are risks and rewards to going to trial or settling the case. Going to trial is risky because there is no guarantee of a successful verdict (although if you lose at trial, you may be able to appeal). Trials tend to be lengthy and are a matter of public record. However, you may win more money at trial than if you settle. Also, some people want the satisfaction and closure of trying the case in court.

If you choose to settle the case, there is always the chance that you may have won more money by going to trial. However, you know what you will receive and control the outcome. In addition, settling the case usually means a quicker and less stressful resolution. Finally, some people want the settlement agreement to be private and not a matter of public record, which would be the case if the issue went to trial.

What factors affect the settlement amount?

There are many factors to take into account when negotiating a settlement amount. Some cases are relatively straightforward, but others are more complex. For example, the number of parties involved or factual disputes about what happened may make the case more difficult to resolve.

Other factors may include:

  • The severity of the injuries. The settlement amount is likely much more significant if your injuries are severe or permanent, such as brain damage or spinal injuries. Severe injuries generally require expensive medical treatment and a more extended recovery period. The injured person may lose income, be unable to return to their job, or continue in their chosen career. It is difficult to assess the cost of non-economic damages, such as pain and suffering. In some cases, the attorney takes the total cost of economic expenses and multiplies it according to the nature of your injuries.
  • Who may be at fault? Some cases involve more than one opposing party, with varying degrees of fault. The opposing parties’ negligent actions or omissions can impact the settlement.
  • What are your medical expenses? Your medical expenses start with the ambulance ride to the hospital. The costs include emergency room care, additional hospital stays, surgeries, ongoing doctor visits, medication, rehabilitative therapy, and any adaptive equipment necessary to function and live in your home. Tragically, some people only make a limited recovery. Consequently, they may need expensive medical treatment and personal care indefinitely.
  • What is the amount of your property damage? You may have property damage from the accident, such as the cost of car repairs or replacements and any personal items damaged in the accident.
  • Insurance policy limits. Policy limits tell you how much insurance will pay for specific claims.
  • How strong is your case? Your lawyer can help you build a solid case supported by substantial evidence, allowing settlement negotiations.
  • Can you wait? Sometimes settlement negotiations are an exercise in patience. Most people want to conclude the matter and receive a settlement as soon as possible, but obtaining a full and fair settlement may mean playing a waiting game. The insurance company may try to delay the process so that the injured party will give up and accept less money. They may continue to make lowball offers until it is near the time of trial or even after the trial has started.


Damage awards are financial compensation for the losses suffered in the accident. You should always seek medical care after an accident, even if you think your injuries are minor. The symptoms of some injuries do not show up immediately. Also, your medical records may help establish your damages.

Other typical damages in a car accident case include:

  • Medical bills
  • Lost wages
  • Pain and suffering
  • Emotional distress
  • Disfigurement
  • Disability
  • Wrongful death

In rare cases, punitive damages may be awarded if the at-fault party behaved extremely recklessly or maliciously.

What is the settlement process?

Settling a case is more complicated than just submitting a claim to the insurance company and receiving a check. It is usually a matter of negotiation. No two settlements are alike.

Your attorney represents you in the negotiating process, which generally includes:

  • The attorney and the law firm’s support staff investigate the accident. The investigation usually involves reviewing police and medical reports, visiting the accident scene, and interviewing witnesses. They may work with accident reconstruction experts and other professionals to determine who was liable for the accident.
  • The attorney may send a demand letter to the parties who may be liable, or they may proceed to file a lawsuit.
  • The other party responds by contesting issues of liability and damages. For example, they may challenge the facts or claim someone else was liable. If your attorney filed a lawsuit, the opposing party files a response, and the case proceeds according to the rules of civil procedure. Both sides continue to gather information.
  • Negotiations may begin right away or later as the parties prepare for trial. This process can be complicated depending on the number of parties involved and the difficulty of the case. In some cases, the court might order the parties to participate in mediation to encourage settlement discussions. Once negotiations begin, they typically proceed with several offers and counter-offers.
  • The parties reach an agreement and prepare settlement papers. The agreement usually includes the basic facts of the case, the agreed-upon damages, and the release of claims. Once the parties sign the agreement, the settlement is final.

What are the different types of settlement?

A lump sum settlement is the basic type of settlement. The defendant pays the plaintiff a single full sum owed in the settlement. However, this may be more money than the defendant can pay at one time.

In a structured settlement, the agreed-upon amount is paid out regularly over a specified period. The arrangement of these settlements, such as the amounts of payments and how often the payments occur, will vary. Usually, a structured settlement involves an annuity policy funded by the defendant’s insurance company for the plaintiff’s benefit. The payments may continue for years or even the rest of the injured person’s life.

Sometimes individuals who receive a lump sum settlement spend all of their money quickly buying unnecessary high-ticket items or making poor investment choices. A key advantage of a structured settlement is that it can protect against this risk. A structured settlement makes it easier for the injured person to deal with the expenses that arise due to their injury’s serious or permanent nature.

This helps if they suffered a catastrophic injury that causes serious and permanent damage. They generate a steady income over time, which may be necessary to cover future contingencies, such as unexpected new medical treatments for their condition.

A structured settlement also has certain tax advantages. However, anyone considering a structured settlement should consult a qualified attorney or tax advisor to advise them regarding tax implications and any applicable state law.

Despite these advantages:

  • Portions of the settlement are not always tax-free. Again, the plaintiff should consult a qualified tax advisor to review the document before signing.
  • The payments received far into the future may not cover all of the plaintiff’s expenses.
  • Structured settlements generally cost the defendant less than lump sum settlements. If the amount the defendant spends purchasing the annuity is not disclosed, it is more difficult to assess the proposed settlement offer.

How do you know whether to accept a personal injury settlement proposal?

Settling a case is a matter of compromise. In all negotiations, both parties typically need to give something up to reach an agreement. What are you willing to compromise on to settle? If an offer is on the table, it can be very difficult to decide whether to accept the proposal but your personal injury lawyer can help you understand your options.

Factors to consider and discuss with your attorney include:

  • What are the strengths and weaknesses of the evidence on both sides of the case?
  • What minimum amount are you prepared to accept to avoid going to a trial?
  • Realistically, what is the most likely outcome of the case?
  • In similar cases tried in the same area, what has been the verdict or amount awarded to the plaintiff?
  • How will the settlement affect your taxes?
  • Does the defendant have insurance coverage or other resources necessary to pay the settlement amount?

What can an attorney do to help negotiate a larger settlement?


People often wrongly assume they can handle settlement negotiations on their own. Sometimes the insurance company will make a quick offer or suggest that you do not really need a lawyer. It may be tempting to accept an early offer because you are traumatized or facing serious financial problems due to the accident. You probably just want the whole thing to go away. However, it is essential to remember that the responsible party’s primary goal is to resolve the matter as fast as possible and for the least amount of money.

Unfortunately, sometimes, insurance companies do not act in good faith. By accepting the offer, you lose the right to seek additional recovery in court. Studies show that not only are you more likely to get compensation if you have a lawyer in a personal injury case, but your settlement is going to be higher. There are many reasons for this.

First, simply having an experienced personal injury lawyer on your side usually means the other side will take your claim more seriously. That’s because personal injury attorneys don’t just accept the first offer that is made. They carefully prepare their case so that they can negotiate and fight for the maximum amount possible.

Your lawyer will know the law, the procedural rules, and any deadlines involved in your claim. You must understand your rights in order to make an informed decision. Your attorney has the skills and resources to help you determine the best course of action in your particular circumstances. Long-term, severe, or disabling injuries may affect the rest of your life, so you need to obtain the best settlement possible.

For example, your attorney may:

  • Your legal team will investigate the accident
  • Gather and preserve evidence,
  • Examine the available insurance coverage,
  • Establish the full nature and extent of your injuries,
  • Calculate all past and future losses,
  • Represent you in negotiating a settlement and/or in any court hearings.

If a car accident injured you and you are considering a settlement, you need to understand your legal options and the proposed settlement. For more information or a free case evaluation, contact a car accident lawyer near you today.