Personal Injury Settlements: Things You Should Know

January 17 2023

If you have been in an accident and are considering pursuing a claim against the person responsible for your injuries, you may be anticipating a courtroom trial. In reality, most lawsuits arising from accidents are resolved through settlement negotiations.

Settlements offer several advantages over proceeding to a trial. They result from a negotiation process, usually with the assistance of experienced legal counsel, after both parties have gathered all of the necessary evidence to allow them to assess the strength of their case. Below are answers to some commonly asked questions about accident claim settlements.

Why should I settle instead of going to court?

While in certain circumstances it may be necessary to proceed to trial, most claims are resolved by way of settlement negotiations as opposed to proceeding to a trial and receiving a judgment from the Court.  There are a number of reasons for this, including:

  • The length of time it takes to get to trial – in cases involving serious injuries it often takes 5 to 10 years after the accident before a case gets to trial. There can then be further delays waiting on a decision from the judge and a potential appeal of that decision;
  • Uncertain and unpredictable outcomes at trial compared to negotiated settlements;
  • Financial stress – while there may be benefits available to you in the initial period following an accident, they often last for a short period of time and usually do not cover all of your expenses as you proceed through the lawsuit towards a trial;
  • The trial process itself is adversarial in nature and can be stressful.

In general, delays inherent in the litigation process and the court system can make it very costly in terms of time, money, and stress to pursue your claim to the end of the trial process.  By contrast, a fairly negotiated injury settlement can bring your case to a certain resolution in a shorter period of time, minimizing financial and other stressors and allowing you to have closure and move forward with your life.

How does settlement take place?

Settlement negotiations are usually conducted with the assistance of a lawyer. An experienced personal injury lawyer will be familiar with the information that should be gathered to properly assess your claim so that you can enter negotiations with a good understanding of the strength of your case and the position of the other party or parties.

Settlement discussions often start with a written proposal made by one party setting out the terms on which they would be prepared to resolve the dispute. There is then commonly a series of counter proposals. If the parties are unable to resolve the claim on their own, Mediations or Judicial Dispute Resolutions – where a Mediator or a Judge hears legal arguments from the parties outside of a formal courtroom setting – may also be used to assist the parties. These processes help the parties to narrow any issues in dispute and identify what is most important to them. In some circumstances they also allow the parties to obtain an informal opinion from an independent third party about the value of the claim. More often than not these processes lead to a resolution that reflects the specific concerns and meets the needs of all parties.

What factors can affect the negotiation process?

While most claims are resolved by way of a settlement, some injury settlements are more straightforward than others. This is usually a function of the particular circumstances of the accident and the claim. Some of the factors that may affect how quickly you can reach a settlement include the following:

  • Clarity of the evidence related to the circumstances of your accident – who was at fault, were there witnesses, is there conflicting evidence;
  • Severity of your injuries – if you have suffered grave or long-term injuries, assessment of your medical condition will usually require evidence from several experts which can’t be obtained until your injuries have plateaued (healed to the point where no further improvement in your condition is expected);
  • Complexity of your medical history – if you had pre-existing medical problems, there may be questions about the extent to which your current condition is related to the accident as opposed to those pre-existing conditions;
  • Size of your claim – typically, the more money at stake, the more careful the parties will be as they move through the legal process.

When will I receive my settlement money?

The terms of the settlement will usually identify the timing for payout of the funds that have been agreed to. In some cases, the settlement funds could be in your hands within weeks after a deal is reached, especially if the amount is relatively modest. For larger settlements, coordination of the payout may take longer to process.

Will I get my money all at once or in installments?

A settlement paid out all at once is known as a lump sum settlement. A settlement paid out over time is called a structured settlement.

Most of the time settlement money is paid out as a lump sum. There are, however, circumstances where the injured party may choose to receive their funds in installments. Structured settlements are often used in larger settlements, especially if the injured person is a minor (under 18 years of age in Alberta) or has difficulty managing their financial affairs. This is because they can provide financial certainty and protect those individuals from being taken advantage of. Since the settlement money under a structured settlement is paid out in fixed amounts on a predetermined schedule, it is akin to having a regular income. More information about structured settlements can be found in our post here.

Will I have to pay tax on my settlement money?

Damage settlements can be significant and can cause people to worry about the impact of paying taxes on such a large amount. In Canada, personal injury damage settlements typically do not have to be claimed for taxation purposes; they are considered tax-exempt by Canada Revenue Agency.

If you place your settlement funds in any sort of income or interest earning investment, however, the interest accrued on those investments will likely be taxed as income. As such, it is important to get advice from a financial planning professional who can explain your options and take steps to ensure your investment strategy does not end up costing you more than it should.

What deductions will be made from my settlement funds?

There will typically be some deductions taken off from the agreed upon injury settlement amount before you receive your settlement funds.

Because seriously injured individuals are usually unable to pay legal fees on an hourly rate basis, most personal injury lawyers work for clients on a contingency fee basis. A contingency fee means that your lawyer will not charge you for their legal services as the claim proceeds. Instead, they will take a percentage of the settlement amount that you receive once your claim is resolved as payment for their services. The percentage fee will be agreed upon by you and your lawyer ahead of time in a written contingency fee agreement.  These legal fees will be deducted from the settlement money before you are paid out for your claim.

If proceeding on a contingency fee basis, your lawyer will typically pay any upfront costs to obtain the evidence necessary to prove your claim. These costs are called disbursements and include things like fees for medical and other expert reports and other third-party costs that are incurred to effectively present your claim. These disbursements are generally paid as part of a settlement agreement over and above what you are entitled to receive as compensation for your claim and will go to your lawyer as reimbursement for the expenses that have been paid out on your behalf.

Many lawyers, including our firm, have a policy where they only charge legal fees and disbursements if they successfully resolve your case. This helps to prevent situations where an injured person doesn’t pursue a legitimate claim out of fear they may lose and be stuck with having to pay legal fees and expenses.

The amount of legal fees and disbursements, as well as any other applicable deductions from the total settlement amount, should be taken into consideration during settlement negotiations and your lawyer should go through these deductions with you before you finalize the settlement so you know the net amount that you will receive from the settlement.

Is there a time limit on how long it will take my case to settle?

Every case is different, and a settlement will only occur if the parties are able to come to an agreement on the value of the claim. In pursuing a claim it is important to remember that most personal injury claims are subject to a two-year limitation period. If a settlement can’t be reached, a Statement of Claim must be filed with the Court by  the two-year anniversary of the accident otherwise, with very few exceptions, you will lose your right to pursue your claim.

In addition to the negotiating expertise that a lawyer can offer, retaining a lawyer early to represent you in injury settlement negotiations means that the lawyer will ensure that any critical limitation dates are met and that your claim will be ready to move forward towards a trial if settlement negotiations are unsuccessful.  It is also important to note that with a contingency fee arrangement, your lawyer will be paid the same whether they handle your claim from the start or take over after you have been unsuccessful in your efforts to reach a settlement with the at fault party.  As such, it often makes sense to retain a lawyer sooner rather than later.

If you have been in an accident and would like to explore options for how to resolve your claim, or if you have been talking with adjusters but feel like your discussions are not advancing, feel free to CONTACT our experienced personal injury lawyers at CAM LLP.