How does a settlement work?
If both sides can agree on how much your case should settle for—and that means YOU have to agree too, the following steps happen to complete the case:
What a Settlement Means for Your Case
- A written settlement agreement and “release of claims” is negotiated between the two sides and signed by the plaintiff, i.e., you. This typically includes the amount of money, the identities of everyone who is included by the “release,” and what happens with side claims by insurers and government entities who may claim a piece of the settlement. (This is called “subrogation;” see our video on this.)
- Sometimes the settlement agreement includes a provision requiring the settling plaintiff to keep secret certain aspects of the case. We are very cautious about provisions like this, because we think they are often bad for our clients and bad for the justice system. In fact, we have an extensive discussion about secret settlements on another page of our website here.
- Your attorney will give you a “settlement statement” that shows all the disbursements from the gross amount of the settlement. (That check is always deposited in the law firm’s “trust account,” and checks for net proceeds are written from that account.) The settlement statement shows the total attorney fees following whatever formula was set out in the retainer agreement, whether the fees are divided with any other law firms, the total amount of the law firm’s out-of-pocket expenses prosecuting the case, and any side payments that must be made to doctors, insurers or government agencies to satisfy piggyback claims. The statement will show how your net proceeds are calculated after those deductions.
- Side negotiations sometimes take place between your attorney and any other third parties claiming a piece of your settlement, to try to reduce their claims to a more manageable number. When government agencies like Medicaid and Medicare are involved, the law firm often has to hire a specialist to work out the final amount owed to the government.
- In some lawsuits, especially when a child has been hurt, the settlement may include not only a lump sum payable now but also future payments on a fixed schedule over a period of years. These are called annuities or structured settlements. Our law firm works with you and annuity specialists to show you the pros and cons of this type of settlement.
- Once you agree to all aspects of the settlement, and all third-party claims have been fully negotiated, we disburse to you the net proceeds shown in the settlement statement.
- If a child’s claim is at issue, a court may want to look over and approve the settlement numbers. If the only claimants are adults, the courts typically don’t get involved.