The vast majority of auto accident injury cases resolve before they ever see a courtroom. One common way of resolving a lawsuit outside of court is through the settlement process. Read on for more information about the settlement process below.
Not Everyone May File a Third-party Lawsuit After a Florida Auto Accident
Florida is one of about ten states that requires all drivers who register their vehicle in the state to purchase a personal injury protection (PIP) policy.
Florida requires a minimum of $10,000 in this type of coverage that will provide coverage of medical treatment, a portion of wage loss due to injury, and funeral benefits for drivers and their family members, regardless of who was at fault in the accident.
Only those whose expenses exceed the limits of their policy or whose injuries are deemed serious enough to pass the state’s serious injury threshold can file a car accident claim against liable parties after an auto accident.
Injuries passing this threshold include those that result in:
- Significant and permanent loss of an important bodily function.
- Permanent injury within a reasonable degree of medical probability, other than scarring or disfigurement.
- Significant and permanent scarring and disfigurement.
On the other hand, PIP policies are no more willing to pay benefits than third-party insurers. You will want a car accident lawyer to help you with your PIP claim as well as any claims against the insurance company of a liable party.
Big Changes on the Horizon?
The Florida Senate has approved a bill to do away with the personal injury protection requirement in Florida and, instead, require drivers to obtain a bodily injury policy that would provide the car accident claims process as an option for more drivers and their passengers after suffering an injury.
The measure is now before the state House of Representatives, which has worked this session on advancing a similar bill. If a bill can pass both the Senate and the House, the Governor may not oppose the measure.
What Is the Settlement Process?
Once your attorney has determined the liable parties and available insurance resources in your case, he or she will determine the value of your case. Your case’s value is determined through a formula as described below, and is a complete look at the expenses and impacts of your injury to date, as well as with consideration provided to likely future expenses and impacts you will incur from your injury.
A demand letter to the at-fault party’s insurance provider will communicate this value.
When the at-fault party’s insurance carrier receives the demand letter, there are three potential outcomes:
- The insurance provider agrees to the demand and issues payment for the full value of the claim.
- The insurance provider denies payment of the claim, at which point you may file a car accident lawsuit.
- The insurance provider offers to settle the claim for an amount that is less than the value, at which point settlement negotiations begin.
It is common for the initial offer by the insurance company to be substantially lower than the actual value of the case, which is why there is a period of negotiations. At some point, you and your attorney may determine that it is time to file your lawsuit in court. Be advised that this action does not take away the ability of the insurance company to work out a settlement agreement with you. Instead, it is often a motivating factor for them to settle, as litigation is expensive and time-consuming.
How Is a Case Valued?
A case is valued based on the expenses you incurred due to your injury—which are referred to as your economic damage claim—and the impacts that your injury has had on your life, which is known as your non-economic damage claim. To determine the value of your case, your attorney will usually combine the expenses incurred from the injury you experienced in your auto accident, the projected expenses the accident will cause in the future, and non-economic factors like pain and suffering.
When Does a Settlement Occur?
A settlement can only occur when both sides agree to the provisions put forth in the agreement. Settlement agreements not only contain the amount of compensation that the defendant owes the claimant, it can also include other provisions such as how and when to provide statements about the settlement to the media.
Settlements can occur any time between when the at-fault party’s insurance provider receives the demand package until after litigation has begun but before a decision on the case is reached. Often, the defense will not offer the fairest settlement amount until just before the trial begins.
What Are the Benefits of a Settlement?
In addition to avoiding the exorbitant expenses associated with taking a case to trial, settling a case out of court offers these benefits:
- Control over the outcome. Litigation leaves the result of the case to the discretion of a judge or jury. Settlement agreements occur when both the claimant and the defendant (usually the insurance provider for the at-fault party) indicate that they are satisfied with the outcome.
- A faster resolution. Depending on scheduling burdens with the court and other factors, taking a case to litigation can take a long time. However, after a settlement, a claimant can see his or her compensation made available within weeks.
- Less stress. When a case settles out of court, you can avoid the uncertain outcome of litigation, along with the months of waiting on court scheduling, the potential of the defendant appealing the verdict, and the worry of whether the jury completely understands the extent of your injuries are aspects of litigation.
What Are the Disadvantages of a Settlement versus Litigation?
While both the settlement process and litigation are viable methods of obtaining compensation for your injuries after an auto accident, litigation does have some advantages over litigation.
- Guaranteed resolution. If settlement negotiations fail, the only other way to pursue compensation is through litigation. If you win a verdict, the court will order the defendant to pay.
- Award amount. If your case goes to court, your attorney may seek the full value of the case on your behalf. This can mean significantly more than you would have obtained through settlement negotiations, particularly if the insurance provider was refusing to pay at all or was only interested in making settlement offers that were unacceptably lower than the case’s value.
What Is the Average Florida Auto Accident Settlement?
Auto accident settlements are based on the unique expenses, impacts, and details of specific cases. Because of this, no average Florida auto accident settlement exists. However, several factors can affect how much you might receive.
Those factors include:
- How much insurance the at-fault party has. Insurance is the primary means of paying settlements and awards. While it is possible to sue an uninsured person and even to obtain a judgment in your favor, it would be difficult to collect your compensation, as most uninsured people cannot afford to pay injury expenses out-of-pocket. This is why your attorney will carefully review your case to determine all sources of liability and all available insurance resources.
- The severity of your injury. More severe injuries often require more extensive medical treatment and carry a higher risk of quality-of-life impacts such as pain and suffering or permanent disability. More severe injuries generally result in a higher multiplier when valuing a case, which results in a higher overall case value.
- The clarity of liability. Some accidents are solely caused by a single driver. In other accidents, there is liability resulting from the actions of multiple parties. In Florida, you may file a car accident claim against other liable parties even if you partially caused the accident.
- Where you are in your career. Many of the damage categories relate to job loss, loss of future earning capacity, and the impact of permanent disability on an individual’s ability to work. Because of this, cases involving individuals in the middle of a successful career may bring more compensation than cases involving a young person with no work experience or an older person who is no longer earning an income.
Is My Auto Accident Settlement Taxable?
According to the Internal Revenue Service (IRS), auto accident settlements are generally not taxable, as they are not considered income.
However, here are some exceptions:
- If you deduct your medical expenses from your tax burden and then later receive a damage award that includes medical expenses, you must pay back the amount that you deducted.
- If you receive punitive damages with an auto accident award, that portion of the damages will likely be subject to tax. The reason for this is that punitive damages are not awarded as compensation for injury but punish the defendant for particularly reckless behavior. The IRS only exempts compensation for your injury from income tax.
Can I Try to Settle With the Insurance Company on My Own?
It is not unusual for an insurance company to contact a third-party claimant early after the accident and offer a ridiculously low settlement. Many accident victims feel tempted to accept the offer in favor of a quick resolution and payment of the immediate expenses.
However, it is impossible to fully ascertain the expenses and impacts you will incur from an injury early on. Because of this, lowball settlements not only result in compensation that can’t pay for the costs of the injury, but also prohibit you from going back and asking for more money.
Make sure you hire a lawyer to review any settlement offer you receive, negotiate with the insurance company, and handle the rest of your legal claim.