10 Advantages And Disadvantages Of Personal Injury Settlements

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Personal injury cases are very common. In fact, personal injury is cited as the type of harm involved in over 92% of tort cases.

After being involved in an accident or injury, however, you might not want the added stress and drama that comes with a lengthy personal injury case. Reaching a settlement can expedite the process and can often give you the desired outcome much sooner.

When weighing the pros and cons of both scenarios, you might already have a few questions. When is the right time to accept a settlement? How much do you pay a lawyer in either circumstance? Are both settlements and judgments taxable?

To help you make the right decision, here are 10 advantages and disadvantages of personal injury settlements.

  1. Lawyer fees may be less expensive

If a case goes to trial, an attorney will often charge the client an hourly rate for his or her services. Depending on the firm, the attorney’s experience, the type of case, and the task being performed, hourly attorney fees can be very costly.

For settlements, attorneys often have a contingency fee agreement that awards them a certain percentage of the client’s total compensation.

Particularly if you are able to reach a settlement before the case goes to court, your lawyer may only be owed the lowest amount agreed upon for a settlement. A lawyer’s cut on a pre-trial settlement might be as low as 33%, for example, while his or her cut on a settlement that is reached during a trial might be as high as 40%.

  1. Settlements are less risky

With a settlement agreement in hand, you’re guaranteed at least a certain amount of money; and this may be after multiple rounds of negotiations to reach your desired number.

If you forego a settlement in pursuit of a trial, on the other hand, there is no guarantee that you will win your case or be fairly compensated. In fact, it’s believed that 90% of personal injury cases that go to trial end up losing.

Trials involve all sorts of deadlines and often hinge on elements such as records and evidence—line items you don’t typically have to worry about when both parties reach a settlement.

  1. Trials can take years and cause extreme stress

Personal injury lawsuits can easily take years to resolve, especially when the case involves severe injuries.

The longer a case drags on, the more stress it’s likely to bring you. Until you receive the official judgment on the case, you’ll be left wondering whether you’ll ever receive fair compensation for your injuries.

Reaching a settlement with the other party, on the other hand, may help you circumnavigate an exhausting legal process.

  1. Settlements are private

Trials can be messy. Understandably so, each side is fighting tooth-and-nail to prove the other side wrong. After a trial, all of this information—witness testimonies, evidence, and conversations—are made public.

If you don’t want a public trial, reaching a settlement agreement will allow you to keep all matters regarding the details of your case private.

  1. Defendants don’t need to admit liability

One of the potential downsides of a settlement agreement is that settlement is a “no-fault” process. This means that the person who would typically be the defendant in a trial is not required to admit liability.

If you’ve sustained severe injuries or believe you were wrongly injured due to carelessness, negligence, or bad intent, you may feel morally obligated to prove the other party’s guilt. Agreeing to a settlement eliminates the possibility of this outcome.

  1. Compensation from both judgments and settlements are typically non-taxable

When it comes to the topic of compensation, there is some confusion with regard to taxation. However, whether the case ends in an official judgment or a settlement does not actually impact the tax implications of the amount compensated.

Rather, the type of case has a greater impact on whether or not compensation is considered to be taxable income. In most judgments and settlements involving physical injuries, compensation is non-taxable.

  1. A settlement can be reached at any time

Some assume that settlements are only ever reached prior to a court trial. While this is often the case, the reality is that a settlement can be reached at almost any time—during a trial, while a jury is deliberating, or even after a trial in some cases.

With that said, it’s most ideal to agree to a settlement before you get entrenched in a court case, as you’ll likely save time, energy, and money on litigation costs.

  1. Settlements give you greater control over the outcome

When you let a case go to trial, you are leaving the outcome in the hands of a judge. Of course, you can provide records and evidence in an attempt to influence a decision; but with a trial, you agree to let the court determine the result of your case.

By reaching a settlement, on the other hand, you have more control over the outcome. You are even able to negotiate the terms of the agreement and the amount of compensation you will receive.

  1. There are certain times when a trial may deliver a better outcome

While parties who are clearly at fault may be willing to negotiate a settlement early on, this isn’t always the case. If the defendant truly believes he or she is innocent and not liable for your injuries, they might either make a lowball offer or forego a settlement entirely in hope of winning a trial.

At this point, it will be up to you and your attorney to convince the court of the defendant’s wrongdoing. If you are successful, you’ll likely receive greater compensation in a judgment than if you settled for the low amount that was initially offered to you.

  1. Know that the majority of personal injury cases are settled

If you’re uncertain as to whether you should pursue a settlement or watch the full legal process play out, keep in mind that most personal injury cases are settled.

According to one survey, only 4% of personal injury cases ever go to trial. This should give you confidence that your personal injury case won’t need to be a lengthy one and that you may very well be able to negotiate a fair settlement.

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