Personal Injury Settlement and Release in California

What is involved with a personal injury settlement and release in California? Statistics show that the vast majority of personal injury claims in California and throughout the U.S. get resolved by way of a settlement. This is finalized and memorialized in a written contract typically called a settlement agreement and / or a Release of Claims. The finality and scope of such an agreement usually depends upon the terms of the contract and the circumstances surrounding the execution of the agreement. I thought I would explore these issues and why it is crucial to have an attorney representing you if and when you decide to settle your claims for bodily harm.

What is the likelihood of an injury claim settling before trial?

According to national statistical averages, there is an approximate 95 percent chance of a personal injury claim resolving by way of settlement prior to trial. This is not to say that all claims will settle but, the vast majority to resolve. Some claims must proceed to trial if the parties are simply too far apart on their estimation of value and the likelihood of prevailing but, both plaintiff’s and defendants are usually represented by attorneys who have a fairly good idea of how to value cases and what is a reasonable settlement figure. This coupled with the costs of taking a case to trial and the potential adverse risk for the defendant in having a judge or jury award a much higher amount than what was offered or for the plaintiff to receive a much lower amount (or nothing) for their claims than what they demanded for resolution. This usually leads both sides towards a good “middle number” that reasonably takes into account the risks involved.

What is the process for settling a claim for bodily harm?

This depends upon the stage at which the case resolves, the age of the plaintiff(s), and several other factors but, the process normally happens as follows:

1. If No Lawsuit Has Been Filed: If there is no pending litigation and the settlement is reached prior to court proceedings, the procedure is for the insurance company or defendant (if self-insured) to prepare a Release or Settlement agreement, have the plaintiff execute the agreement and then issue a check for the gross amount to the plaintiff’s attorney or to the plaintiff themselves (if they are not represented by counsel). At that time, medical liens must be paid out of the proceeds or the injured party may face legal claims for payment at a later time. If the plaintiff is a minor, the release and settlement agreement is executed on their behalf by the plaintiff’s parent or legal guardian and, if the settlement is in excess of $5,000, the arrangement may need to be approved by a judge in what is called a “Minor’s Compromise Hearing” (see full discussion here). Upon disbursement of settlement funds, the attorney should provide a full, written accounting for payment of every penny of the gross amount. This will include payment of outstanding medical bills or other liens, costs, attorney’s fees and the net amount to be paid to the client.
2. If A Lawsuit Is Pending: If a legal action has been filed in court and is proceeding towards trial at the time of settlement, the parties will usually file a “Notice of Settlement” with the court to advise the judge that a resolution is pending. The defendant’s attorney will prepare a settlement agreement, which includes a release of all present and future claims, this will be signed by the plaintiff (or their parent or guardian in the case of a minor), and a contemporaneous exchange will be made for the signed settlement and release agreement plus a “Request for Dismissal” of the lawsuit, on the one hand, and a settlement check on the other hand. The “Request for Dismissal” is the formal document which dismisses the lawsuit usually “with prejudice” (meaning without the ability to re-file any subsequent actions). There are some occasions where settlement is reached as to just one of several defendants, in which case, a “Motion for Good Faith Settlement” may be required. A “Motion for Good Faith Settlement” requests that the judge approve a compromise between only one or more of several named defendants and the other non-settling parties have an opportunity to object to the approval, if they so desire. After settlement funds are paid, the same process occurs where the attorney (or party) should pay for any outstanding liens and the lawyer should provide a full, written account of how much was paid, to whom and what the net recovery is for the injured party.

Are agreements to settle an injury claim final and binding?

With rare exceptions, the answer is YES. Once a plaintiff claiming bodily harmed caused by negligence executes a release and accepts payment, the claims cannot be brought up again against the party being released. In fact, every standard release agreement for personal injury claims in California usually always includes an explicit waiver of California Civil Code 1542, which reads as follows:

“A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

By incorporating an explicit waiver of this provision into the settlement and release agreement, the party being released is requiring the settling party to waive off not only present claims that they know about but, any future claims that they may not even realize they have. For example, if a medical condition initially diagnosed as a “sprained” back is later revealed to have been a herniated disc requiring surgery, and a release was signed based upon a valuation for a “sprain”, the injured person would probably not be able to renege the agreement and re-assert the claim. Costs of MRIs, surgery, post-surgical physical therapy and the associated pain and suffering for all related conditions such as radiating nerve pain down extremities would be beyond compensation.

For an example of the typical California auto accident insurance claims release form, click here: Sample Release of Injury Claims in CA

Why does this make it critical to have the advice and assistance of a personal injury lawyer when negotiating and finalizing a settlement?

One of the oldest tricks in the insurance adjuster handbook is the “quick settlement” offer to the unrepresented and unsuspecting injured party. Insurance companies (unlike your attorney) are not interested in you making a full and complete evaluation of present and future medical expenses and a pain and suffering award commensurate with the full value of the medical condition. They would much rather dangle the carrot of, “Oh, we will pay your hospital bill and give you a couple of thousand dollars (or less) for your troubles.” Far too many persons fall for this trap, sign a release of present and future claims, accept what they don’t realize is a paltry sum and then find out later that their need for treatment is much more extensive than initially realized. Don’t be a victim twice! Retain a quality California personal injury lawyer to guide you through the claims settlement process!