Author: Christopher B. Cloude, Claims Consultant
Before we can talk about what a personal injury settlement involves, we must first look at what makes a successful personal injury case that leads to a settlement.
In order to have a personal injury case for which you can make a recovery, there are three basic elements that must be present:
1. Liability 2. Damages 3. A source of recovery
Liability is when a person or entity (corporation, association, etc.) is negligent (1) and has caused another person to suffer injuries and losses. The person that is negligent is often referred to as the defendant and the person that suffered the injury is referred to as the plaintiff. For example, a driver runs through a red light and their vehicle collides with another person's vehicle. The defendant driver is liable for the plaintiff's damages because they were negligent in failing to observe the red light.
Damages are the injuries and losses the plaintiff has suffered, often including medical bills, lost time from work, inconvenience, physical injuries, and pain and suffering.
A source of recovery may be the defendant's insurance carrier, the defendant themselves or the plaintiff's insurance carrier. You may be asking "why would the plaintiff's insurance carrier have to pay if the defendant is liable?" In Virginia, all motor vehicle insurance policies include "uninsured motorist bodily injury" coverage. This is to protect motorists from those situations when a defendant may not have an active automobile insurance policy. Another example of when the plaintiff's insurance policy would be a source of recovery is when the identification of the defendant is not known. An example would be when the defendant flees the scene of a crash. In these cases the defendant is referred to as "John Doe", and the injured person's auto insurance (or the auto insurance on the vehicle they are in) is the source of recovery. (2)
Now that we know the elements of the personal injury case, let's take a look at a personal injury settlement.
The purpose of a personal injury settlement is to obtain funds for the injured person to compensate for their injuries and other losses. From the defendant's and the insurance company's perspective, the purpose of the settlement is to secure a total release of the defendant and the insurance company from any further financial responsibility to the plaintiff arising out of the incident that caused the plaintiff's damages. The primary purpose of insurance is to protect the insured. The insurance carrier will not provide a settlement to a plaintiff unless a release is signed by the plaintiff (and usually notarized). The signed release is the legal document that forever resolves the case.
The majority of personal injury settlements are one-time lump sum payments. The lump sum represents payment for medical bills, lost time from work and the plaintiff's inconvenience and pain and suffering. Once a release is signed by the plaintiff and payment is made on behalf of the defendant, by the defendant, or by the plaintiff's insurance carrier, the plaintiff's claims are considered settled and forever resolved. For that reason, the case should not be settled until the full extent of the plaintiff's injuries and losses are known. Once the case is settled, if the plaintiff has some additional medical expenses or losses, the plaintiff cannot come back in a week, a month, a year, or ever, to recover for those additional losses. As it says in most releases, the settlement is a full and final settlement of all the plaintiff's losses - known or unknown, past or future - as a result of the accident.
About the Author: Chris Cloude is a claims consultant in the Fredericksburg personal injury law firm Allen & Allen. A former insurance adjuster, Chris works under the supervision of Attorney Edward Allen to assist clients in settling their personal injury claims.
(1) For a further explanation of what "negligence" means, see previous blog article "What is Negligence? - A Primer in Virginia Law", by R. Clayton Allen, Esquire, posted Sept. 22, 2009.
(2) For more information on "uninsured motorist" coverage, see previous blog article "Auto Insurance - The Coverages You Should Have BEFORE You Are Involved In An Accident", by P. Christopher Guedri, Esquire, posted May 26, 2009.