What is a Settlement Agreement for Car Accidents?
A settlement agreement is a contract between you and the insurance company for the settlement of any and all claims you have against the at-fault person, and the settlement agreement will state that you voluntarily agree to accept the settlement amount offered by the insurance company in exchange for the rights to pursue a claim for additional money. It’s important to understand that every settlement agreement contains a general release of liability. The purpose of the general release, which the at-fault driver also signs, is to release the at-fault driver from any potential future liability based on the same facts or allegations as the crash.
When it comes to a settlement agreement, you are agreeing to the specific dollar amount that is being offered to you in full , final, and complete satisfaction of your claim against the at-fault driver. Because you are signing a release of liability, if the settlement offer is accepted, you cannot come back later with some other allegation or medical treatment and ask for more money from the insurance company for the same claim and the same accident.
So, the general rule that people need to understand is… if the insurance company and the at-fault driver have offered to settle your claim by taking away the liability risk for the at-fault driver and by making a fair settlement offer based on the injuries and damages you have, then signing the release is the right thing to do in the vast majority of situations.
Key Provisions of Car Accident Settlement Agreement
A car accident settlement agreement is a contract that outlines all the relevant terms and conditions of settling an auto accident claim with the at-fault party. It should clearly state each party’s level of liability, the amount of compensation exchanged, and the terms of the release. These are the essential elements of a car accident settlement:
Liability: When you sign your release, it should acknowledge that you have settled on your claims against the other driver (and any other parties you may have sued). You should also state in the release that the other driver is liable for the accident and responsible for your damages (except for those you are willing to settle for less). Both settlement agreements and releases are similar in that they include the settlement terms but also state who is liable.
Compensation: A settlement agreement should always state whether the check covered by the agreement includes reimbursement for past and future medical expenses, lost wages, pain and suffering, inconvenience, and property damage. Many people know that insurance companies are in the business of making money, and as a result, they will do whatever it takes to save money on a payout. An example of this is a settlement agreement that includes compensation for a fraction of the total damages and clearly states that the amount is final as to the property damage and pain and suffering.
Release: The release portion of the agreement will state that by signing the agreement, you will never sue the other driver for negligence under any circumstances. If you do, you essentially void the agreement. The other driver is paying you money to release your claim against them. Additionally, it’s common for release agreements to clear out any liability for other defendants or potential defendants, such as another insurance company. If you are compensated for the other driver’s negligence, the release will often be broad enough that it will prevent you from recovering for the accident if it turns out that the other driver was employed by, or acting behalf of, the other entity.
Sample Clauses for Car Accident Settlements
Here is some sample language of what is generally in these agreements, and what they mean:
23. Confidentiality
The parties agree that the settlement reached will be kept confidential and not disclosed to the outside world. The language in this clause will probably look something like this: "The parties agree that the terms of this Settlement Agreement and Release shall be maintained in strict confidence and shall not be revealed or disclosed to any third party except by way of public record, such as for a court case."
The point here is that neither driver nor insurance companies want information about how much was paid out of their pockets to judge and jury members. They need to maintain publicly the façade that "not a red cent" was paid out in the case.
24. Mutual Release
A mutual release is where each party waives claims against the other. Meaning, that the driver and the insurance company for the accident do not sue each other over the fact that they settled. Generally this language would read something like this: "That Driver does hereby waive, fully, finally, and forever release and discharge all claims against Releasees relating to the matters set forth herein."
25. In the Court of Appeals, Fourth Appellate District of Texas
Some of these agreements are so bad that the appeal courts do not want to deal with interpreting them. So, they will say about half of these agreements are not enforceable anyway, and they just throw them out. You do not want to spend years getting it all finalized only to have a court throw it out on appeal. Generally, you will see somewhere in these agreements note the following: "This Settlement Agreement supersedes all prior oral or written agreements, understandings or negotiations between the parties relating to its subject matter. The only exception to this 5 is that the defendant insurance company’s insurer, shall only pay X amount."
26. Attorney Fees for the Injury Lawyer
Even after my client has settled their case, I will be entitled to receive my money for helping them. Generally, the fee will be calculated based on a contingency rate and the following language will appear in settlement releases: "Driver agrees to pay Bailey & Galyen either 1/3 or 40% of the total settlement amount as their fees for the work accomplished."
27. The Boring Stuff
This is pretty much just legalese meant to keep lawyers in business, but it is good to know where you stand just in case you end up in court over this agreement. There could be language in there that explicitly states that you will be required to go to the courts of (insert city here) to settle disputes that arise from the use and interpretation of the agreement.
How to Draft an Effective Settlement Agreement
Once a settlement amount has been agreed upon, the next step is to prepare a settlement agreement which sets forth all of the terms of your settlement. A settlement agreement is a document stating what parties to a dispute have agreed to do in order to settle the case. This is most commonly used in car accident cases so that the responsible party can not come back and sue you for additional damages after you have settled with their insurance carrier. These settlement agreements and releases contain terms and conditions that both the plaintiff and defendant must comply with.
Key components of settlement agreements that you should ensure are included are:
· Identification of the parties.
· Recitals, or background facts concerning the parties to the settlement agreement – this includes the date of the agreement.
· Specific agreement about what is being done to resolve the dispute between the parties – these are typically recitals such as the settlement agreement may say "It is understood and agreed to by the parties hereto that the defendant shall pay the plaintiff, part of the sum due and owing to the plaintiff on and as described herein, the total of which is set forth in recitals 1-6 in exchange for an agreed upon release of liability relating to the car accident claim."
· Terms and conditions covering the respective parties rights and obligations – this means setting forth the specific actions that the parties have agreed to do regarding the settlement such as the plaintiff will sign a release of all claims against the defendant in connection of the subject car accident in consideration for payment of the settlement amount established.
· Details concerning payment of the underlying claim and how that will affect any set offs of any liens – these details cover things such as how and when the payment of the settlement funds will be made, whether all payments will be made at once or in installments, etc.
· Signatures of all parties and their attorneys.
When negotiating the terms of any settlement agreement for a car accident case, you should consider several things which include:
We remind all readers to please always consult with an experienced and trusted lawyer prior to entering into a settlement agreement for an automobile accident claim.
Laws and Related Considerations
Legal considerations for creating a car accident settlement agreement can vary by state, and it’s crucial to be aware of these differences. These variations may influence the specific information that needs to be included in the agreement or how disputes related to the agreement are handled.
For example, some states require that car accident settlement agreements be executed in the presence of a notary public. In these states, settlement agreements may be more difficult to enforce if the agreement was not created properly. Settlement agreements in other states may need to go through court approval before becoming legally binding. In this instance, you could find yourself negotiating with a judge in order to get the judge to approve your settlement agreement. Other states may require that the injured party is represented by a lawyer prior to the execution of the settlement agreement. If your case is handled by an experienced lawyer , the lawyer will know and understand all the applicable rules for your individual state and make sure that the settlement agreement is valid and enforceable under the law.
If either party fails to abide by the terms of the settlement agreement, the other party could sue the non-abiding party (or plaintiff). In some states, the abused party may be able to recover payment through court costing an additional amount of money. In some states, you may have to re-negotiate or commence a new lawsuit in order to collect on the settlement agreement. It’s generally advisable to consult an experienced personal injury lawyer when drafting a settlement agreement. An experienced lawyer will be able to ensure that any settlement agreement drafted is clear, concise, and expertly tailored to your specific needs.
When to Consult a Lawyer
There are numerous reasons to seek legal guidance and perhaps even representation by an experienced personal injury lawyer. When it comes to settlement agreements for car accidents, the stakes are high when signing any sort of contract that may impact your rights and benefits.
Specific circumstances as to why the help from a legal professional is important, include the following:
If you have been in a car accident of any kind, regardless if you are at fault or the other party is completely responsible, getting help from a skilled lawyer is always in your best interest, especially regarding settlement agreements.
Settling Your Accident: Common Mistakes
Common Pitfalls in Your Settlement Agreement: How to Avoid Mistakes
If you want to obtain a fair settlement, you must first understand your case well enough to reject or at least negotiate against a low-ball offer. If your car accident attorney doesn’t have your back in this way, it’s time to find a new one. If he or she does, however, then you need to ensure you aren’t making common mistakes before signing off on your settlement agreement.
Not reading the fine print. Good lawyers will point out essential points in the settlement agreement so that you sign off only on what you’re willing to accept. If you’re going to have to continue treatment after the agreement is made, you need to know when you’ll be paid – if you’re going to be paid. Once you sign an insurance settlement agreement, you’re bound by it , including any inadequately redacted or accidental provisions, so don’t just go by the fact that your attorney has approved it.
Thinking that if you sign the agreement, you’ll be compensated immediately and in full. Insurance companies don’t always cut their checks as quickly as they should, so you may have to call them out on that inappropriate behavior. No matter how long it takes to receive a check, however, that insurance company is still bound to pay you in full once you sign.
Agreeing to a waiver. These waivers try to indemnify insurance providers and make you completely and directly responsible for anything the insurance provider pays. It’s a pretty bad idea to sign one, because just about the only thing you can count on from an insurance provider is that it will do whatever it can to avoid paying the claim.