What’s the Difference Between Personal Injury Lawsuits and Informal Settlements?

Imagine for a moment that you are invited to a holiday party. You don’t know the hosts, but since they are “friends of friends,” you happily accept. Everything is going great, too—that is, until their dog charges in from the next room and bites your child. The puncture is deep, requiring an immediate trip to the ER, followed by specialist visits, and, of course, medical bills. Thankfully, the hosts covered everything, and the matter was closed with several hundred apologies. But as history proves, not every personal injury matter is as amicable. When that happens, injured parties are left to decide whether to pursue a formal personal injury lawsuit or seek an informal settlement.

If you or a family member has been the victim of a personal injury, whether it was a dog bite, a slip-and-fall accident, a car accident, medical malpractice, or any other injury, these two options are very clear to us as attorneys. But as the victim, knowing the difference can be confusing—especially if you’ve never been through a legal matter before. Understanding the differences can help you decide how to pursue compensation for the injury.

Personal Injury Lawsuit or Informal Settlement: Which Should You Choose?

We see and hear about personal injury matters all the time. Our friends and neighbors talk about them at work or in passing. We see the in-your-face advertisements on television. We watch them unfold on the news or in newspapers. And yet, many people don’t ever imagine something like that disrupting their life.

A major collision between two vehicles on the highway? That can never happen to my loved ones or me.

A prescription gone awry at the pharmacy? That only happens in movies.

Angry dogs allowed to roam freely? Not in our backyard.

The reality is something far different. There are an estimated 300,000 to 400,000 formal personal injury cases filed across the United States each year, and that doesn’t even include the countless would-be cases that are settled out of court. And that’s the point of this blog post. There are two paths you can take when you suffer an injury and need compensation: Personal Injury Lawsuits and Informal Settlements.

What Are Personal Injury Lawsuits?

Let’s say, for the sake of argument, that the hosts above didn’t feel like they or their dog were in the wrong. For instance, maybe they feel you or your child provoked the dog. Maybe they had signs out that said, “Do not pet the dog,” and you or your child ignored them. In this situation, tensions can quickly rise as both sides argue about who is really at fault. The next thing you know, you’re filing a personal injury lawsuit.

A formal personal injury lawsuit is filed in court against another party. These cases are heard in court before a judge and both parties. The evidence is presented, and a judge makes a ruling.

You usually have a limited time to file the suit after the event. Once the statute of limitations has expired, you lose the right to file the lawsuit and receive compensation. These time periods can be found on sites for each county, state, district, or circuit where the injury occurred, as they vary across jurisdictions.

Formal personal injury lawsuits are generally your best course of action when …

• Neither party can reach a mutual agreement.
• There is a dispute over who was at fault.
• The other party refuses to accept responsibility.
• Multiple parties may be responsible for your injuries.
• The insurance company denies your claim or refuses to offer fair compensation.
• Your injuries are severe enough for long-term consequences.
• You’re worried about preserving your rights.

What Are Informal Settlements?

The good news is that only roughly 5% of personal injury lawsuits go to trial. This is where informal settlements really come in handy. When negotiations between the two parties take place outside of court, they are regarded as an informal settlement. In many cases, the injured person negotiates directly with the at-fault party or their insurance company. In other situations, the injured party may choose to hire a personal injury attorney to negotiate on their behalf to reach a mutually acceptable agreement. Once both parties agree to the terms, they sign a written settlement agreement. If a lawsuit has already been filed, the case can be dismissed.

If no lawsuit was filed, the settlement simply resolves the matter without any court proceedings.

One important note: “informal” doesn’t mean the agreement should be casual or unwritten. They are almost always documented in a legally binding written release or settlement agreement that everyone agrees to.

Informal settlements are generally your best course of action when:

• All parties agree and wish to right a wrong without court involvement.
• Liability is relatively clear, and there is little dispute over the facts.
• You don’t feel that you need to sue the other party.
• The insurance company offers fair compensation for your injuries and losses.
• You want to avoid the time, expense, and uncertainty of a lawsuit.
• You would like the outcome to wrap up quickly.

How Are Damages Determined in a Personal Injury Matter?

Now that we’ve answered the question of what the difference is between personal injury lawsuits and informal settlements, it’s time to get to the most important aspect of your case: fair compensation. You can be compensated for your damages, whether you choose an informal settlement or a formal personal injury lawsuit. Here is a breakdown of what that may look like, depending on the facts of the case:

Compensatory damages — These are designed to make you “whole” and pay the expenses of the personal injury. These are divided into two categories: economic and non-economic damages. Economic damages include measurable financial losses from medical expenses, rehabilitation costs, lost wages, etc. Non-economic damages compensate you for losses that are harder to calculate, such as pain and suffering, emotional distress, disfigurement, loss of enjoyment of life, and, in some cases, loss of companionship.

Punitive damages — Financial awards are awarded in limited cases to punish a defendant for particularly reckless, malicious, or fraudulent behavior.

According to several published reports, hiring an attorney for these types of cases can increase settlement amounts by over 200% compared with self-representation. They will help you by gathering the evidence, calculating damages, assessing liability, helping you understand insurance coverage, and researching similar cases.

An Attorney’s Role in Personal Injury Lawsuits and Informal Settlements

Attorney-assisted cases can help those injured or wronged through negotiation, mediation, and arbitration.

Let’s explore these types of assistance in the last half of today’s blog post.

Negotiation: This process generally begins with an initial demand letter that outlines the case, liability, and monetary demands. This will continue with counteroffers from the defendant and ongoing negotiations toward an agreement.

Mediation: Sometimes, when negotiations hit a wall, mediation can be used.  A mediator, or a neutral third party, will facilitate continued negotiations, also toward the goal of the parties’ agreement on a resolution and settlement.

Arbitration: Also conducted by a neutral third party, this process is much like a court case, where the arbitrator serves as both judge and jury. Binding arbitration rulings can be final and less likely to be challenged on appeal. A non-binding arbitration can then move on to a trial if either party doesn’t accept the arbitrator’s decision.

Regardless of whether you push your legal matter to trial or find a way to let cooler heads prevail, the reality is that the wheels of justice often move slowly. Furthermore, most legal matters can become complicated, especially if you are dealing with a case involving multiple insurance carriers and more than one potential at-fault party. As a result, legal counsel is often very helpful in obtaining fair compensation for your damages and injuries.

Lawsuits that ultimately end up in court tend to last longer but can offer larger compensation to the plaintiff as the trade-off for all that extra time. This is especially true if you have a knowledgeable attorney in your corner. Informal settlements resolve much more quickly, but often at a smaller payout. That said, if time is money, the informal settlement won’t drag on and will be resolved with compensation and a resolution for the injured person.

Call Keys Law Offices Today!

A personal injury accident can disrupt your life in an instant, leaving you with stress, injuries, and unanswered questions about what comes next. At Keys Law Offices, we believe no one should proceed with a legal matter without proper representation. As a result, we are determined to support individuals and families struggling with such issues by offering them advice and representation in their personal injury lawsuits and informal settlements. With deep knowledge of how these cases are handled, our firm will strive to get to the bottom of the case, develop a strong claim, and seek the financial compensation our clients deserve.

Assistance is always available at Keys Law Offices, and help is only a phone call away.