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Informal Settlements VS Formal Lawsuits In A Personal Injury Case

Law Articles

There are two types of Lawsuits when dealing with personal injury cases. The first is a formal lawsuit and the second is an informal settlement. It is important to understand the difference between each of these types of settlements and when it is better to use one form of settlement over the other.

What is a Formal Lawsuit?

A formal lawsuit is when an individual files a formal complaint in a civil court of law. This can be filed against an individual, a business, or even a government agency. Both parties present their case in a court of law, and a judge hears the evidence. The judge is the arbitrator of the damages.

What is an Informal Settlement?

An informal settlement is when two parties avoid the courtroom and negotiate among themselves to determine a settlement. This is most often accomplished through an attorney and an insurance company. The parties come up with a written agreement and they forgo any further action.

When is an Informal Settlement the Best Choice?

Anywhere from 95 to 96% of personal injury cases are settled before they get to court. The overriding reason for that statistic is cost. A plaintiff will hire an attorney and pay them a percentage of the settlement amount.

A defendant, on the other hand, will be paying his attorney an hourly rate. The defendant will also have costs for depositions and expert witnesses. Most of the defendant's costs are paid up front, while the plaintiff's costs are paid after settlement. This makes it extremely attractive for both parties to settle the case before going to trial.

During an informal settlement, the attorney will contact the insurance company of the other party and they will negotiate a mutually agreed upon settlement. It is beneficial to all parties to settle a personal injury case. Settling the case leads to a much faster and cheaper pay-out for the plaintiff. It keeps the names of the parties out of the newspaper, and it is done quickly and quietly. Taking the case to court is a long drawn out process that can become expensive and messy.

When is a Formal Lawsuit the Best Choice?

There are a number of reasons to file a formal lawsuit. One of them is because the plaintiff wants the defendant to the get media attention that a lawsuit might draw.

It is often the case that one of the requirements of settling a personal injury case is that no parties can discuss the terms of the settlement, or who was at fault. If a defendant wants public repercussions for the party that wronged them, it is best to not settle, but rather take the case to court.

Another reason a plaintiff might go to the expense of a lawsuit is that the parties may not be able to reach an agreement. Since it is normally an insurance company that will handle a personal injury case, it will be left up to the attorney to handle the negotiations.

After the attorney has filed a claim with the insurance and requested a settlement amount, the insurance company will submit a counter offer. If the two parties cannot come to an agreement and the attorney feels that the case is strong enough, he may recommend that the case proceed to court.

In both instances, an informal settlement or a formal lawsuit, the plaintiff can be compensated for both monetary damages and punitive damages. Although the reward amount can be much greater if the case goes to trial, it is not always the case.

Even something that looks to be cut and dry can turn out poorly. Given that an informal settlement is cheaper and quicker, the plaintiff will, more often than not, find it to their advantage to avoid the courtroom and settle the case through an informal settlement. For more information, contact experienced personal injury lawyers.


28 May 2015