How Do Car Accident Settlements Work?

A car wreck could cause catastrophic injuries or even the death of a loved one. What follows sometimes includes loss of the ability to work and mobility. Even minor injuries could leave you with significant psychological issues, including post-traumatic stress disorder, depression, and anxiety. If another person or entity caused the accident, you could recover compensation for injuries and losses.

If you have been involved in a car accident, a car accident attorney can help you exercise your right to pursue compensation from the at-fault driver and others who might share liability for the driver’s actions or inactions. To recover damages in the form of compensation, you must go through several steps.

Immediately After the Accident

To recover damages, you have to start a claim. You only have a claim if you can show you suffered injuries or other losses. While at the accident scene, allow the emergency medical technicians to check you. As soon as you are released, seek medical attention as soon as possible—the sooner, the better.

This starts the documentation of your case. Even if you believe your injuries are minor, you should always get checked—some injuries take hours or even days to manifest. Other injuries could take weeks or even months. Allowing the emergency medical technicians to check you at the scene and then seeking medical assistance as soon after the accident as possible creates a paper trail for injuries that could manifest later.

Contact a car accident lawyer for a free case evaluation. Once you retain the firm, it can get the process started. The sooner the investigators can get started on your case, the better, as evidence could disappear. Weather and the inadvertent actions of the defendant and the police could destroy evidence. For example, if the police release the vehicle to the defendant, and the defendant immediately repairs it to drive it to work, the repairs could destroy evidence.

Accident Investigation

Once you retain a car accident lawyer, your legal team will start gathering evidence. In most cases, they will investigate the accident, review your medical records, and speak to witnesses. They’ll also ask for a copy of the police report if you don’t have it.

Remember that the police report can only reflect what you and others tell the officer, so even if the police say you contributed to the accident, contact a car accident attorney. An investigation could find otherwise.

Witnesses and Expert Witnesses

As part of the accident investigation, your lawyer will most likely depose witnesses at the scene. Your legal team might call in expert witnesses, including medical and accident reconstruction experts. Medical experts can testify as to the severity of your injuries.

If your doctors believe your injuries will cause long-term or permanent disabilities, the testimony of a medical expert is essential, even for the settlement process. A medical expert can create a report for the defendant’s insurance company that backs up your doctor’s findings.

How the Settlement Process Begins

According to the Centers for Disease Control and Prevention, unintentional injuries—such as those resulting from car accidents—are the fourth leading cause of death in the U.S., behind only heart disease, cancer, and COVID-19. Most traffic accidents result from negligence (reckless or careless behavior) from one or more roadway users. The negligent individual is generally liable for injuries caused in accidents, with compensation through their auto liability policy.

The claims process generally begins when the claimant’s attorney establishes a value to the claim and sends a demand for the claim’s total value to the at-fault party’s insurance provider, along with details of the accident that caused the injury and documentation of expenses.

The insurance provider has three options when receiving a third-party insurance claim (a claim made on a policy of their insured by someone other than the insured).

1. They can accept their insured’s liability and pay the claim as demanded.
2. They can deny the claim and provide the claimant and their attorney notification and a reason for the denial.
3. They can offer to settle the claim out-of-court for less than its full value.

What an Attorney Can Do During the Settlement Process

Up to 96 percent of all claims in the U.S. resolve through a settlement, not litigation.

If the at-fault party’s insurance provider makes a settlement offer, your car accident attorney can take the following actions:

• Confer with you about the offer, advising you whether the offer fairly compensates your injuries.
• If you wish to accept the offer, your attorney can relay that information to the insurance provider, who will then ask you to sign a settlement agreement.
• If you do not want to accept the offered settlement, your attorney can negotiate with the insurance provider to get them to increase their offer.

Some of the things an attorney cannot do during the settlement process include:

• Pressuring their client into accepting a settlement offer.
• Accepting settlement offers for their client. The claimant is the only one who can decide whether to accept an offer.
• What Often Happens to Claimants who Don’t Have an Attorney

Attorneys bring some essential qualities to the table regarding settlement negotiations: experience and understanding of the law.

They also know the common tactics that insurance companies use to avoid paying out large amounts on claims, such as:

• Making low settlement offers early after the accident when the victim is less likely to have an attorney or understand their claim’s value. This type of settlement offer is often made with the statement that it is the “maximum” amount of compensation available, though it usually isn’t. Many individuals who do not have an attorney and receive a settlement offer before they know the value of their claim will accept the offer and later realize it wasn’t enough to cover the expenses and effects of their injury.
• Convincing the victim to offer a recorded statement and then asking redundant or misleading questions to use the statement against the claimant to reduce the claim.
• Convincing the claimant to release their entire medical history for the insurance adjuster to evaluate the claim. There are only limited reasons why an insurance adjuster needs to see medical records, and they never need to see the claimant’s entire medical history. This tactic often yields records that they use to portray the pain the victim feels as stemming from a pre-existing condition rather than an injury caused in an accident with the insured.

Filing the Claim in Court

If the at-fault party’s insurance provider fails to pay the claim’s value or gets the claimant to agree to a settlement offer, the victim can file their claim in court. However, the settlement process does not necessarily end when you file suit. Filing a lawsuit is the catalyst that makes the insurance provider increase their settlement offer. This increase is because litigation is expensive and allows the insurance provider little control over the outcome.

Recovering Damages After a Car Accident

One of the most common questions we get from our clients is, “How much is my case worth?” No attorney can tell you this without reviewing your case, including investigating the accident, and reviewing your medical records.

Although many cases might seem similar, they are different, as people heal differently. In many cases, the cause of the at-fault driver’s negligence is different, which could affect the case’s outcome. Some states allow you to recover punitive damages if the defendant’s actions or inactions were grossly negligent.

Vehicle Accident Injuries

The severity of your injuries plays a significant part in the compensation you might recover after a car accident.

Accident injuries could include:

• Bumps, bruises, cuts, scrapes, and scratches.
• Strains and sprains.
• Pulled and torn muscles and other soft tissue injuries.
• Simple and compound fractures.
• Road rash.
• Chemical and thermal burns.
• Internal injuries.
• Simple and compound fractures.
• Head, neck, and shoulder injuries.
• Traumatic brain injuries.
• Ear injuries, including deafness, especially if the accident causes an explosion.
• Back and spinal cord injuries.
• Amputation of a digit or limb.

You could also suffer secondary injuries, such as infection or post-traumatic stress disorder. The at-fault driver is also responsible for medical expenses and non-economic damages related to secondary injuries.

A secondary injury manifests because of a primary injury. For example, if you sprain your ankle and favor that leg, you might cause the knee in the other leg to become overextended or cause back pain. Other secondary injuries include anxiety, chronic pain, depression, reduced range of motion, and loss of sensation. These injuries often take days or even months to manifest.

Additionally, accident injuries could exacerbate existing illnesses and injuries. The at-fault driver is also responsible for the extra medical expenses and non-economic damages for these injuries.

Compensatory Damages

After an accident, you could recover compensatory damages in the form of economic damages and non-economic damages. Most accident victims collect economic damages, which have a monetary value. However, in most cases, only those who suffer catastrophic injuries or lose a loved one recover non-economic damages, which do not have a monetary value.

Catastrophic injuries are those that cause long-term or permanent disabilities. While each insurance company has its own definition of long-term and permanent disabilities, the Social Security Administration defines them as injuries lasting at least 12 months or resulting in death.

Economic Damages

Sometimes referred to as special damages, economic damages have a monetary value and include:

• Medical expenses: Doctors’ appointments, surgeries, follow-up appointments, prescriptions, prescribed over-the-counter medications, ambulatory aids, medical equipment such as oxygen tanks and beds, hand controls for your vehicle, and updates to your home, including but not limited to widened doorways, handrails, grab bars, and wheelchair ramps.
• Therapy expenses: Physical, occupational, cognitive, and psychological therapies.
• Income: You could recover lost wages from the time of the accident through the time of settlement or a trial award.
• Loss of future earning capacity: If you can no longer work or lose a loved one, you could recover the wages you or your loved one would have brought into the home. If you are able to work part-time or your injuries force you to take a full-time job that pays less than your previous job, you could recover the loss of partial future earning capacity. You could recover the compensation to make up for future earning capacity from the time of settlement or trial award through the time you would typically retire.
• Death-related expenses: Funeral and burial expenses, cremation expenses, certain probate costs, and probate attorney’s fees and costs.

Non-economic Damages

Sometimes referred to as general damages, non-economic damages do not have a monetary value and include:

• Pain and suffering, including emotional distress.
• Loss of quality of life if you have to make life-long changes such as taking prescription drugs or using ambulatory aids.
• Loss of companionship if you can no longer enjoy or participate in family activities and events.
• Loss of consortium if you can no longer have a physical relationship with your spouse.
• Loss of use of a body part, such as an arm or a foot.
• Loss of use of a bodily function, such as your eyesight or bladder.
• Inconvenience if you have to hire someone to do the chores you usually do, such as house cleaning, grocery shopping, lawn maintenance, and home repair and maintenance.
• Amputation of a digit or limb.
• Disfigurement or excessive scarring.

Punitive Damages

Not all states allow you to recover punitive damages. Unlike compensatory damages, the court does not order the defendant to pay punitive damages to make you whole again. Instead, the court orders the defendant to pay punitive damages as a punishment for his grossly negligent or intentional behavior. Some states require you to litigate to receive punitive damages, but in some cases, it is worth the extra time it takes to get them.

Beginning Settlement Negotiations

Once your legal team gathers all of the information it needs to put your case together, your car insurance lawyer helps in discussing your options, including what might be a fair and reasonable settlement. Once you and your attorney develop a plan of action and a proposed settlement, the attorney will draft a demand letter.

The Demand Letter and Response

A demand letter is a professional document to the defendant’s insurance company. The demand letter usually gives the facts of the case, the amount you believe you are entitled to, and a reply-by date.

Once the insurance company receives and reviews the demand letter, it has three options:

• Accept the demand stated in the letter and cut a check for the requested amount.
• Submit a counteroffer.
• Deny that its client was at fault.

If the insurance company denies that its client was at fault, your option is to file a court case. If the insurance company responds with a counteroffer, you can accept it or send in another counteroffer. Counteroffers could go back and forth several times, depending on the case circumstances. Each case is unique, so the insurance company will most likely respond differently than it has with other cases.

You can continue going back and forth as many times as you like. Or, if the insurance company refuses a fair and reasonable settlement, you can file a lawsuit.

If the insurance company accepts the settlement, which is rare, then the attorneys will recommend filing a lawsuit.

Because litigating a case is expensive and the insurance companies sometimes have a high risk of failing, they will re-enter settlement negotiations. If they lose at trial, they not only have to pay their attorneys but will have to pay your attorney’s trial expenses, too. It is usually much cheaper for them to settle, even if the amount is higher than they want to pay.

Accepting a Settlement Agreement

Once you and the insurance company settle on a fair and reasonable compensation amount, one of the attorneys—usually the insurance company’s attorney—drafts a settlement agreement. The insurance company then forwards the agreement to your attorney, who will review it.

If your attorney believes the agreement adequately meets the terms you agreed to, he will review the agreement with you. If you have changes and your car accident attorney agrees with them, he will submit them to the attorneys on the defendant’s side. If the insurance company’s attorney agrees with the changes, she will make the changes and forward the agreement back to your attorney.

Once everything is satisfactory, you will sign and notarize the agreement. Your attorney forwards the signed agreement to the insurance company’s attorney, who then processes the agreement and cuts a check to your attorney.

Processing the Check

Once your car accident lawyer receives the check, he deposits it into an escrow account. He must wait until it clears the bank to take the next steps. Depending on the amount, it could take up to 14 days to clear the bank.

Once it clears the bank, your attorney:

• Pays any of your outstanding medical expenses. Be sure to submit all of your invoices to the firm. The best way to handle this is to forward copies as you receive them. You should always keep a copy for yourself.
• Reimburses your health and auto insurance companies if you used them to cover medical expenses while waiting on your settlement.
• Deducts the firm’s percentage and any hard costs the firm covered during the pendency of your case. The contingency agreement you signed when you first retained the car accident law firm contains the firm’s percentage and outlines potential hard costs, such as fees for depositions, postage, copies, filing fees, and other costs.
• Cuts you a check for the remainder

Once you receive the check, you can deposit it and spend it as you see fit.

If you suffered injuries or lost a loved one in a car accident, contact a car accident lawyer for a free case evaluation as soon as possible.