The attorney may have several possible goals in your claim. They include, if you are bringing the
claim, compensating you and/or your business for the injuries done you and protecting you
and/or your business from further problems. If you are defending against the claim you will
want also want compensation for the time and effort spent in defending the lawsuit and
protection against further problems.
Why settle?
Some people say, “I don’t want to settle! I want my day in court!”
No you don’t.
“Yes I do! I want justice, and I want everyone to see what that person (business) did to
me!”
Not realistic.
The purpose of the civil justice system is to compensate you. In other words, you get
money. If getting money is your idea of justice, then you’ll be quite satisfied with this system,
but if your idea of justice is something else, you will be disappointed, not only with the limited
goal of the justice system, but also with the cost, duration and effort required to reach that goal.
You will not get paid what you deserve simply because you asked for money. The nature and
extent of your losses have to be proved. This means that there will be two investigations, one by
your attorney and another by the other side’s attorney.
No matter how angry you are now, you will actually get past the anger at some point in
the future, and that point will come prior to the case being ripe for settlement negotiations. The
cost, duration and effort to make a settlement presentation will convince you that you won’t want
to endure the cost, duration and effort of getting a day in court. Trials are expensive! There are
fees to be paid to the court, the witnesses, the sheriffs, the jurors, the court reporters, the exhibit
preparation companies, and on and on.
There are laws in many places that just about require you to settle under some
circumstances. For example, some laws state that, if the other side offers you a certain amount
and you reject it, you have to pay all of the other side’s costs if a jury doesn’t give you more
money than what was offered you. Since nobody can predict what a jury will do (remember the
O.J.Simpson trial?), you have no realistic choice other than to accept an offer that is anywhere in
the “ballpark.”
Kaufman Law Group, PLLC
8000 Towers Crescent Drive
Suite 1350
Vienna, VA 22182
703.764.9080
703.764-0014 (fax)
What is necessary to make a settlement?
A settlement can occur when liability and the nature and extent of the injuries and losses
are reasonably clear. As to each of these aspects of the claim, the attorney has to present proper
evidence to the insurance company. Equally important, the attorney must give the adjuster a
comprehensive analysis in writing, concluding with a reasonable demand for payment of money
to the victim. Kenneth Phillips refers to this as the “settlement presentation.”
What do I have to sign?
The victim has to sign a release or waiver of his or her right to receive any further money or
other remedies, or to proceed through the courts. The release or waiver will bind the victim’s
spouse and heirs too. If a case was filed in court, then the victim and his attorney must sign
something in the proper format that will end the case. If a court judgment was rendered, then the
victim and his attorney must sign something that releases the judgment. All of this paperwork is
technical and must be prepared by an attorney.
How is settlement different for victims who are minors?
A minor cannot sign a release or waiver of his or her right to receive any further money or other
remedies, or to proceed through the courts. Insurance companies don’t want to be sued by the
minor when he or she becomes an adult. In most jurisdictions, there are procedures for getting
the approval of a judge, which will bind the minor, the parents, the attorney for the minor, the
defendant and the insurance company. Children’s settlements are frequently set up as “structured
settlements,” which provide for periodic, future payments.
Taxation of settlements
The victim does not have to pay taxes on his net share of the settlement, except for that portion
of the money that (a) compensates him or her for loss of income, and (b) constitutes punitive
damages. For example, if the victim settled for $112,000.00, and $12,000.00 of the settlement
was intended to compensate her for lost wages, and if the victim’s attorney received one-third of
the settlement as a fee, then the victim would have to pay taxes on $9,000.00 (i.e., $12,000.00
less $3,000.00 for the attorney). If the victim’s effective tax rate is one-third, then $3,000.00 (i.e.,
one-third of $9,000.00) would be owed as taxes.
When the victim invests the settlement proceeds, she must pay taxes on gains from the
investment (i.e., the gains are included in her gross income). The only way to avoid paying taxes
on the gains is to enter into a structured settlement.
Kaufman Law Group, PLLC
8000 Towers Crescent Drive
Suite 1350
Vienna, VA 22182
703.764.9080
703.764-0014 (fax)
