What is a “settlement”?
In law, a “settlement” is an agreement reached by two or more parties to a lawsuit. Many personal injury and similar torts cases are resolved by settlements.
A typical settlement in a personal injury case includes an agreement by the defendant to pay the plaintiff a certain amount of money in exchange for the plaintiff’s agreement to dismiss the court case. However, a settlement does not have to resolve the entire case in order to be valid. For instance, a plaintiff may settle with one defendant but not another, or a plaintiff and defendant may settle some of the plaintiff’s claims, but not others.
In many personal injury cases, a defendant might make a settlement offer fairly early in the process. Occasionally, a defendant will make a settlement offer even before a lawsuit is filed, although defendants who do this are usually responding to a settlement demand that was made by the plaintiff. Whether or not a particular case will settle, when it will settle, and for how much it will settle depends on the facts of that case. However, some cases tend to settle more quickly than others.
For example, suppose that the plaintiff was standing on a sidewalk one day when the defendant’s speeding car ran a red light, jumped the curb and ran into the plaintiff. The accident caused severe brain and spinal cord injuries to the plaintiff, whose medical bills totaled $250,000. Suppose that the defendant’s auto insurance policy covers up to $50,000 in medical expenses for anyone injured in an accident with the defendant.
In this case, because the defendant’s responsibility for the accident is clear and the policy limits are significantly lower than the cost of the plaintiff’s medical bills, the insurance company may make an early settlement offer of $50,000, which is the amount the policy will pay for the plaintiff’s injuries. The plaintiff will have to discuss the offer with his attorney in order to decide whether or not he should take the money or proceed with the lawsuit.
On the other hand, some cases never see the defendant make a settlement offer. Defendants may choose not to make a settlement offer, or not to accept a plaintiff’s settlement demand, if they believe that they are not responsible for the plaintiff’s injuries or that the plaintiff cannot prove their responsibility in court.
Like mediation and arbitration, settlements are often encouraged by courts because they help the parties avoid the time and expense involved in a trial. Some courts will require parties to have a settlement conference or a similar formal meeting in which they try to settle as much of the dispute as possible before going to court. Even if the parties cannot agree on every issue, the settlement conference helps the parties narrow down what it is they’re really arguing about in court, which helps save time, energy and money during the trial itself.
Once an agreement about the amount of a settlement is reached, the parties to the agreement usually enter a written contract stating the terms of the settlement. The settlement contract is then presented to the court, which enters an order to dismiss the case (or do whatever else the parties agreed upon) in exchange for the settlement payment. Once the settlement is made part of a court order, a party that does not hold up his or her end of the bargain may be found in contempt of court and fined or jailed.
