After filing a personal injury claim for a vehicle crash, slip and fall accident or other kind of injury accident, you’ve no doubt had to go through several weeks or months of negotiation and waiting for the process to unfold. Once the lawsuit or settlement is resolved, injured victims have many questions about how personal injury claims are paid out.
Step One: Settlement Release Forms
Once a settlement award amount has been agreed to, or once a jury or judge has issued a verdict in a civil trial, the Court will issue an Order of Settlement. The Order of Settlement will dictate what paperwork is needed and the deadline by which it must be completed and signed. Generally, the timeframe required is 30-60 days. One of the most important parts of the Order of Settlement is the Settlement Release form. This document will outline the terms of the settlement offer which typically include:
- No admittance of fault. Even though the at-fault party may be paying the settlement, they are not legally admitting fault.
- Privacy. The terms of a settlement agreement are almost never made publicly available.
- Release of further liability and claims. Once the settlement release form is signed, you can no longer file a claim against the defendant or the insurance company for further compensation related to the incident or accident.
If you have not yet consulted with an attorney, do not sign a Settlement Release form without doing so. Once you agree to an amount and accept the terms of a settlement, you cannot go back for aditional compensation if you later realize the amount was not enough. By signing, you are releasing any other claims against the defendant and usually any other defendant related to the incident. In other words, once you settle you can never reopen the case or try to file a claim for additional compensation. If you are married, your spouse may be required to sign the release as well.
Step Two: Paying Liens and Settlement Expenses from a Personal Injury Settlement Check
Once the settlement release form is signed, the insurance company will begin their process for writing and issuing the check. Sometimes this involves several divisions within the insurance company and a legal review before the check is actually sent. Typically, the insurance company makes the check out to you and your attorney and mails it to your attorney’s office.
Once the check is received, your attorney will deposit the check in an escrow account and then disburse the funds accordingly. While you should already have a payment agreement set-up for your particular case, the attorney will pay any liens so that you are not sued and other fees that were part of your case. Examples of liens and fees include:
- Healthcare liens for unpaid medical bills
- Unpaid child support
- Attorney fees
- Expenses related to your case, such as expert witnesses, filing fees, accident reconstruction and other expenses related to building evidence in your case
Step Three: Net Settlement Amount Sent to You
Once all liens and expenses have been paid, the remainder of the settlement will be paid to you, which can come in the form of a structured settlement or a lump sum payment. The payment structure will be determined in the settlement agreement and cannot be changed once agreed upon. Just as it sounds, structured settlements are paid in regular intervals while a lump sum is paid all at once.
Depending on the circumstances of your case, the timeline from agreeing to a settlement to receiving your check can be as little as a month but can take several months, especially if liens need to be negotiated.
Is Your Personal Injury Settlement Taxable?
Generally, the settlement from a personal injury lawsuit is not taxable at the federal or state level. The IRS excludes compensation received as a result of personal physical injuries or illness from the taxpayer's gross income. Regardless of whether or not you came to a settlement through negotiation or if the award was part of a trial verdict, the award is not taxable.
Exceptions to this may include any compensation you receive from punitive damages. Additionally, its possible you receive interest on a settlement award once received. The interest amount may be taxable. Always consultant an accountant or tax professional regarding implications of a personal injury settlement on your tax burden.
Should You Accept the Settlement?
Before you can figure out if a settlement offer is fair, you need to know how much your injuries are worth. An offer may seem like a lot of money until you realize that this amount won’t even begin to cover your medical expenses, lost wages, and other potential losses. Make sure you are considering your future medical needs and the lost income from not being able to work or maybe even return to your former job. You deserve to be fairly compensated for your losses.
Brandon J. Broderick is Here for You 24/7
At Brandon J. Broderick, Attorney at Law, we believe in exceptional client care, empathy, and results. That’s what makes us one of the highest rated personal injury law firms in the area. With offices across New Jersey, New York, and Connecticut, we’ve got you covered. If you need help getting full and fair compensation for your injuries after an accident, contact us today for a free consultation.