What is a Settlement in a Personal Injury Case?

Personal injury lawyers like to spit out legal terms. "We sent the defense a 998 offer to compromise." "I warned the Plaintiff's attorneys that I will have to file a MSJ." "Before the CMC, I need to run down to central to file an Oppo." I know. It can get confusing.

Some terms like "settlement" are widely recognized, but the mechanics of a settlement in a personal injury context is not well known. This blog post will go over a "settlement" in greater detail.

A settlement can occur prior to, during, or after a lawsuit is filed. Most motor vehicle accidents, for example, involve automobile insurance. When a person is injured as the result of another motorist, he or she will make a claim with the automobile insurance of the other motorist.

Once the insurance is involved, a claim could be "settled" before a lawsuit is filed. A civil lawsuit can be filed when there exists a "cause of action" against another individual, or entity. "Negligence" is the cause of action most utilized in automobile accidents. The other driver may have ran a red light, and thus been negligent. The negligence resulted in injuries to the plaintiff, who filed the lawsuit against the driver who ran the red light -- and the bad driver then becomes the defendant in the lawsuit.

But again, it might not be necessary to file a lawsuit. The negligent driver's insurance will contact the injured person to try to "settle" the claim. A number of factors go into the decision of when it is appropriate to settle a claim. Experienced attorneys can advise on when a settlement would be prudent.

As an illustration, let's say that it makes sense for the claimant to settle a claim. The other driver has no assets; he also has a low policy limit, $15,000 in bodily injury liability. So far, the claimant has over $8,000 in medical damages, and continues to experience excruciating pain. The insurance company, recognizing that the claim likely exceeds $15,000, offers to "settle" the claim for the policy limit of $15,000. Claimant accepts. What happens?

Well, the claimant must execute a release of all claims against the negligent driver, in exchange for a sum of money, which was in this hypothetical $15,000. A release prevents the claimant from filing a lawsuit against the negligent driver. No lawsuit was filed, but a "settlement" was reached.

After a lawsuit has been filed, "settlements" get a little more complicated. Automobile insurance will always provides liability coverage for a negligent driver. Insurance also pays for the cost of litigation, meaning that: if the negligent driver is sued, the insurer will pay an attorney to defend the negligent driver in the lawsuit.

Therefore, a settlement will involve a new party once a lawsuit has been filed: the defense attorney. The defense attorney represents the negligent driver, but answers to the insurance company. Once a defense attorney reaches an agreement with the plaintiff's attorney (and is authorized by the client), a few things must be done before settlement.    

The defense attorney, or plaintiff's attorney, must file a "Notice of Settlement" with the court. This ensures that future court dates are vacated. Then, a release is executed, which, as explained above, will be a payment in exchange for the plaintiff to forfeit his cause of action against the negligent driver. Once payment has been satisfied, the plaintiff will file a "Request for Dismissal with Prejudice." Once a dismissal has been filed, the case is closed forever.

Settlements will always involve consideration, something in exchange for something else. Predominantly it is a sum of money in exchange for the injured party to forego pursuing money from the negligent party. It can occur at different stages of a claim, and will require different steps, but it will always result in the conclusion of a case.

Before you, a friend, or loved one settles a claim, it is important to contact an attorney to seek advice. One should not be quick to rush to a decision. 

Premises Liability Cases

Motor vehicle accidents make up a large number of cases on the personal injury docket in Los Angeles. However, there are other common ways that plaintiffs can be injured. Unfortunately, people are sometimes hurt when they are a guest, or customer, on someone else's property.

Owners of property owe a duty to those individuals who enter onto their property. Owners must exercise ordinary care in the use, maintenance, and management of their property to avoid exposing people to unreasonable risks of harm. Unreasonable risks of harm could include: spills, broken stairs, ditches, banana peels, etc. These type of risks can occur naturally or artificially, meaning that it can be caused by untrimmed trees, or an employee neglecting his duties to clean. Either way owners can be held responsible for injuries.

If an owner does not exercise ordinary care, he or she may be liable if the harm caused by the lack of ordinary care is "foreseeable." For example, if an owner of a business does not repair a large hole located on the store's floor, and a customer falls in the hole and breaks his leg, the owner of the business would be held liable. It is "foreseeable" that a customer could fall into a large hole because it was not repaired. An example when negligence may not be found is when an extraordinary event caused the injury.

In the hypothetical above, it does not matter whether the owner was "actually" aware of the large hole. Owners can be held liable if they had "constructive knowledge." Constructive knowledge means that the owner should have been aware of the large hole because a reasonable prudent owner would have checked for large holes.

Although it is counter-intuitive, owners can be held liable for injuries to trespassers. Owners can also be held liable for injuries to guests even if the injuries were caused by a criminal. The plaintiff  in such a case would have to show that the risk of criminal harm was foreseeable, and that the owner failed to take steps to prevent the foreseeable risk of criminal harm. One example: a large sports team holds a game. During the game, two drunk rivals threaten one another. "I will stab you when the game is over," one of them says. Two employees of the sports team overhear the exchange and witness the banter. After the game, the shouter stabs the rival, because nothing was done by the sports team employees.

Injuries incurred on a property can cost thousands of dollars in medical bills, particularly if there are broken bones involved. It is wise to contact a personal injury attorney if you, or someone you know, has been injured as a result of the negligence of a landowner. Our office welcomes your calls and inquiries.

Collateral Source Rule Today

Hospital bills after an accident

For most people who are injured in an accident, fretting over the medical bills is the furthest thing from their minds. But eventually, it becomes something that the injured must confront. It is common knowledge that medical bills are expensive and that there are often ways to reduce the amounts actually paid on those bills. For example, private insurance companies and government entities such as Medi-Cal routinely pay less than a hospital originally billed; either as a result of a previously negotiated discount contract or because of legislation that dictates maximum payments for certain procedures. Furthermore, many medical providers, particularly larger charitable hospitals, often offer need based discounts to individuals in certain income brackets. As a result, the amounts a provider bills out often bear little relationship either to the amount they will ultimately collect or to the actual hard cost of providing the included services.

Because of this widely known discrepancy, there exists an extremely complex medical services market in which different categories of patients pay different rate levels under different circumstances with insurance providers, lien holders, medical financiers, and government entities muddying the waters even further. Thus it is that when many accident victims are faced with choices about how to receive medical services, sometimes under the added stress of an emergency setting, the first thought on most patient’s minds is how to avoid as much of the potential expense as possible. It is important to understand that some kinds of payment can impact the amount and sources of any later legal recovery to which you may be entitled as a result of your injury.

Unfortunately, the world of hospital economics has become so convoluted in the United States that the advice of a qualified personal injury attorney is now recommended right from the beginning, if possible even before medical services are rendered, though not to the exclusion of emergency treatment. While the legal landscape surrounding medical payment recoveries is rough and currently in flux, a basic understanding of some of the key concepts at work can help.

What is tort liability?

Whenever a person does something carelessly which leads to another person’s injury, the first person – known in legalize as the tortfeaser – may be legally responsible for the injury. Usually by way of paying for medical costs associated with the injury. This basic concept underpins all of personal injury law, but it is limited or modified by several corollary rules which can apply in different combinations in different settings and by obscure rules of court which dictate the procedural aspects of a personal injury trial or settlement.

The collateral source rule

With the rise in private insurance many years ago came a concordant rise in the number of injured people who did not have to pay their full medical bills out of pocket because those bills were paid by a health insurance provider. To avoid allowing the party responsible for the injury to benefit from the injured party’s prudent choice to obtain health insurance, courts developed the collateral source rule to ensure that the defendant – the person responsible for an injury or accident – paid the full amount of the injury, not just that part the injured person had to pay out of pocket. Without the collateral source rule a defendant would reap the ultimate benefit of an insurance policy paid for by someone else. Moreover, the health insurance provider had to bear the costs of the defendant’s negligence.

For example, let’s say that two people are involved in a car accident. Driver A ran a red light hitting Driver B and broke his leg. Driver B goes to the hospital and is treated for the break. The hospital bills Driver B incurs is $1000 for treatment. However, Driver B is covered by an insurance plan that pays 80% of the bill meaning that Driver B only has to pay $200 out of pocket. In court, Driver A might argue that he should only have to pay for the $200 that Driver B actually paid out of pocket, contending that this amount is the real value of the injury. The collateral source rule steps in to prevent this injustice by requiring Driver A to pay for the entire hospital bill, unless other circumstances exist, even though part of the bill was paid off by Driver B’s insurance provider.

In a similar way, gifts made to Driver B from other third parties like generous hospitals or kind hearted doctors will similarly not be deducted from the amount demanded of Driver A under the law.

Previously negotiated rate discounts

While the collateral source rule is still very much in effect today, its application has been somewhat limited by recent court decisions; particularly with respect to the discounted rates many insurance carriers negotiate with medical providers as part of their in-network coverage agreements. Under these agreements, an insurance company and a hospital, for example, might agree that any patient covered under a policy written by the insurance company, who seeks treatment at the hospital, will only be liable for 50% of the billed rates. In other words, if Driver B were to visit this in-network hospital he would be charged only $500, instead of the usual $1,000, for the same broken leg, with the insurance company paying $400 and Driver B left with an only $100 out of pocket expense.

In several recent cases, the parties have argued that this type of discount should be treated the same as the earlier collateral source example we gave and therefore that Driver A should still be liable for the full $1000 the hospital would “normally” charge. However, California courts have not seen things this way. Several courts have decided that because the negotiated discount was arranged prior to the injury in question, and is not specifically related to the provision of care to Driver B, neither Driver B nor anyone else would, ever have to pay the full $1000 and therefore that the real value of treatment was at most the $500 negotiated rate. In short, because Driver B’s insurance company had the foresight to negotiate a lower rate for patients it insured, Driver A now gets to pay less for causing the same injury.

What does all this mean?

While the details are complex and filled with legalize and healthcare economics math, the outcome has real consequences for everyday patients. The bottom line is that if you are injured in an accident, your best bet is to seek immediate legal help; we understand the law in regards to evaluating the real damages that you have incurred.

An experienced personal injury attorney can help you to understand specifically how the various laws are likely to impact your particular case which might impact your later legal strategy. Ultimately, a good attorney can help to make sure that you are fully compensated for your injury whatever the circumstance under which your medical bills are paid.