How Car Accident Settlements Work
In some situations, particularly if no one was severely injured or there wasn’t a lot of property damage, your lawyer may advise you to settle a car accident claim with insurance companies out of court. But settling isn’t always the right option. Insurance companies look for reasons to deny claims, and if they can’t deny a claim, they will almost always pay out the least amount possible.
An insurance company is more likely to come up with a fair and reasonable settlement if the claimant retains a lawyer, because the company knows that if it doesn’t, the lawyer might file a lawsuit against them.
Beginning the Settlement Process
Texas has a statute of limitations that sets a time limit on how long you have to file a court case against an at-fault driver, but insurance companies give claimants even less time to file a claim—often 30 days or less. As soon as possible after an accident, you should contact the other party’s insurance company to start a claim. Only give the representative your contact information, insurance policy information, the at-fault driver’s insurance policy information, the date, time, and location of the accident, and, if you have retained an attorney, your attorney’s contact information. Let the representative know that your attorney will contact the company soon.
If you hire an attorney, their office will send a notification letter to the insurance company stating that they represent you and describing any injuries you suffered in the accident. The insurance company will respond with a reservation of rights letter that tells the attorney the insurance company acknowledges your claim, but it reserves the right to investigate your claim. This letter does not mean that the insurance company accepts liability for the at-fault driver.
The Demand Phase
After an attorney makes contact with the insurance company, they will begin to work with you to gather all of the evidence they need to prove your claim. This evidence will include a record of any medical bills you have received, and whether your doctors expect you will need additional surgeries, therapy, or other additional care. Your attorney will also need to know if doctors expect your injuries to be long-term or permanent. This is some of the information your attorney will figure into the amount they will request from the insurance company on your behalf.
Write down what you remember about the accident, if possible. You might not remember everything at one time. Add to your notes as you remember facts. This will help your attorney recreate a narrative of what happened in the accident. Once the attorney, with your help, comes up with a fair and reasonable figure for the damages you have suffered, the attorney will write a demand letter to the insurance company.
The demand letter will also discuss any other information the attorney discovered after a thorough investigation of your case. This often includes a summary of your injuries, pain and suffering, and the cost to repair or replace your vehicle and any other personal property damaged in the accident.
Once the insurance company receives a demand letter—and often before it even receives the letter—it will also investigate the accident. The insurance company will not respond to a demand letter without doing its own investigation and it will try to find any reason to deny your claim.
The insurance company will then respond with a counteroffer. In almost all cases, the company will say that your demand for damages is too high. Always keep in mind during this phase that you have leverage: insurance companies don’t like to litigate. The outcome of litigation is always uncertain, plus insurance companies must pay their lawyers to represent them in court.
This is all part of the negotiation process. Offers usually fly back and forth several times. You don’t have to back down and take a lower amount unless you decide you want to. You can always decide that you want to litigate if you and your attorney believe that you will get a fairer award from a jury.
The insurance company eventually will reach a point where they won’t continue negotiations, this is their top offer. You can agree to the offer, or you can decide to litigate. There are pros and cons to both options, but the decision is up to you.
Accepting the Settlement Offer
If you decide to accept the settlement offer, you will have to sign a settlement agreement, sometimes referred to as a release. Once you sign the release, you cannot go back and sue the at-fault driver for anything else related to the accident or the injuries and other damages you suffered in the accident.
Once you sign the release, it usually takes a couple of weeks to get your check. Because you have an agreement, the insurance company cannot back out. They must send the check to your attorney. Check with your attorney to see if anyone has a lien on your settlement for any accident-related bills you have not paid yet—you must pay those liens before you use the funds for anything else.
Lienholders might include:
- Medical providers;
- Workers’ compensation policies;
- Child support collectors;
- Your car insurance company; and
- Private health insurance companies.
If you know about these liens early, you can plan for them in the settlement agreement.
- Taxes. If you receive compensation for lost wages and/or future lost wages, that portion of your settlement might be taxable. Always check with your accountant before you spend the money, as this could result in a high tax bill.
- Public records. If you settle your case and the settlement is not included in any court documents, your settlement is not a matter of public record. However, if you choose to litigate, the court case is a matter of public record. If for any reason your settlement ends up in court documents, then the settlement also becomes public record.
- Insurance companies. Often, insurance companies try to violate your rights if they believe they can get away with it. One of the ways they do this is to ask you to sign a release for your medical records. While you do have to share some of your medical records, it is better to let your attorney review your records and send what the insurance company is entitled to, instead of giving them access to all of your medical records.
- Mediation. If you cannot come to an agreement during negotiations, the insurance company might request mediation. In mediation, a neutral professional helps to facilitate negotiations between you and the insurance company. You may or may not come to a settlement during this process—you do not have to accept the insurance company’s offers and you cannot force the insurance company to pay a higher amount than they are willing. The purpose of mediation is to provide an opportunity for structured negotiations.
If you were injured or lost a loved one in a car accident, a car accident lawyer can listen to you, evaluate your case, answer your questions, and help you decide what to do next.