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Should You Take The First Car Accident Settlement Offer?


Car accidents can impact just about every facet of your daily life. Not only are you often dealing with physical injuries, aches, and pains, but you’re also facing the hassle of having to have your vehicle repaired or replaced—which means fitting in repair shop appointments, doctor visits, and other obligations around the daily responsibilities you already have.

With these pressures in mind, it can be tempting to accept the first settlement offer the at-fault driver (or their insurance company) makes. You may want nothing more than to put this accident behind you, and receiving funds to help pay your expenses can seem like the best first step. However, accepting the first offer is rarely in a plaintiff’s best interest, and there are many reasons why. Below, we discuss what goes into a settlement offer, along with the steps you can take if you’re not happy with the first (or second, or third) offer that has been extended.

Should You Accept the First Settlement Offer?

In almost all cases, the answer is a resounding no. Insurance companies have a vested interest in settling claims for as little as possible—and they also know that accident victims who are facing mounting medical bills, transportation difficulties, or unpaid time off work may feel financial pressure to resolve the case quickly.

However, the settlement check comes with a catch—you’ll also be required to sign a document releasing the defendant or at-fault party from any wrongdoing. This means that you can’t go back and request a higher offer if you discover the amount you’ve accepted isn’t enough to fully compensate you—and often, it can take weeks, months, or even years to assess exactly how much a claim may be worth.

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Initial Settlement Offers May Not Contemplate Your Needs

It can be tough to assess the long-term impact of your injuries during the days and weeks after your accident. You may need physical therapy or other follow-up medical treatments and procedures that you weren’t anticipating when you first evaluated your injuries. Accepting the first settlement offer that’s made often won’t be enough to make you whole over the long term.

What’s more, you may not yet know the cost of your other losses. If you’ve had to spend time off work while recuperating from your injuries or meeting with an insurance adjuster, you’re entitled to recover damages for any lost wages. And if your injuries prevent you from performing all the tasks you once did, this can also factor in the total value of your claim.

Multiple Offers Are the Norm

When you’re facing financial pressure, turning down “sure thing” money can seem risky. But the odds that a defendant or insurance company will make only one offer—and then simply refuse to negotiate until the case goes to trial—are almost zero. Even if the insurance company claims that an offer is going to expire if it’s not quickly accepted, there’s likely a second offer close on its heels.

Before ever discussing your claim, the insurance company likely has a range in mind as to how much it plans to offer, and it’s going to start the negotiation process at the lowest end of this range so it has plenty of wiggle room. Rejecting this offer can force the insurance company to begin negotiating toward the middle or top of its range.

Making a Counter-Offer

After receiving your first offer, you’re free to make a counter-offer. This can be presented as part of a demand letter, or a detailed letter to the at-fault driver that describes what happened, how you were injured, and what categories of compensation you’re requesting. This can often launch a back-and-forth process whereby you and the at-fault party exchange letters (and settlement offers) to try to reach an agreement.

Your car accident attorney can work with you to craft the demand letter, calculate your damages, and determine how much you should request. Once you’ve received a response, your attorney can assess where it fits into your calculated damages and whether it makes sense to accept, make another counter-offer, or pursue legal options like a civil lawsuit.

Why—and When—Should You Settle?

There are some situations in which settling your claim makes good sense. In other cases, it’s worth holding out until you receive a higher settlement offer—or, sometimes, even filing a lawsuit and going to trial.

Risks of Early Settlement

There are risks that come from settling a claim too early (and what constitutes “too early” can vary from case to case). But a couple of the potential pitfalls of an early settlement include:

  • Inability to know or accurately calculate your true losses before discovery has taken place
  • Waiver of the ability to seek future damages

By settling too early, you may later discover uncompensated damages that could have increased the value of your claim.

Benefits of Settlement

Despite the risks of settling too early, settling does offer some distinct benefits—for both sides.

  • Settling helps avoid the uncertainty of a trial. Even with a strong case, going before a judge or jury can be like rolling the dice. On one side, a plaintiff may reject a reasonable offer on the eve of trial, only to lose before the jury—giving up any chance of financial recovery. On the other side, a defendant may refuse to agree to a settlement, lose at trial, and then be on the hook for a far larger amount. Settling provides certainty and finality that can be helpful for both plaintiffs and defendants.
  • Settling helps conserve resources. Preparing for trial can be expensive; settling can help keep more money in both parties’ pockets by minimizing legal fees. Most auto accident attorneys are paid on a contingency fee basis, which means that they keep an agreed-upon percentage of the total amount recovered. However, certain fees and trial-related expenses may be billed separately from the contingency fee, so avoiding trial can help you avoid these expenses as well.
  • Settling gives you more flexibility and autonomy. When your claim is put before a trial court, it’s governed by the rules of trial procedure. The jury will receive specific instructions on what evidence it can consider and how to value your claim. But during the settlement process, you can negotiate whatever terms you like (so long as they’re not expressly prohibited by your state’s laws) and write them into your agreement.

Often, settling a claim before trial (or even before a lawsuit is filed) can present a win-win situation for the plaintiff and defendant, particularly in contested or highly detailed cases that will consume a lot of legal resources.

But if you can’t reach an agreement—don’t worry. Not every case will result in a settlement, and walking away from negotiations can sometimes help spur a higher offer. An experienced auto accident attorney can work with you to evaluate your claim, gather evidence, and negotiate with the at-fault parties to ensure that you’re adequately compensated for your damages.

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What Happens After You Settle?

If you’ve made the decision to accept a settlement offer, a few things will happen. First, you’ll be asked to sign a settlement agreement. This agreement will usually require you to waive any further claims against the defendant for injuries or damages stemming from the accident; in exchange for this waiver, you (or your attorney) will receive a check for the settlement amount.

After your attorney deducts their legal fees, the remainder of the settlement will be passed along to you—free and clear and ready to be spent, deposited, or invested. In some situations, there may be one or more liens placed on your settlement funds.

For example, if you’ve racked up hefty health insurance bills, your insurance provider may have placed a lien on a portion of your settlement to help secure partial repayment of its expenditures. If you still have a loan on the vehicle that was involved in the accident, and the vehicle was totaled, you’ll usually need to pay off the loan before the remainder of the funds can be released to you. And if you were injured while on the job and your workers’ compensation insurance policy paid any portion of your damages, it’s likely to want its “cut” before you can receive the rest of the settlement. Your attorney can negotiate with the lien-holders to settle any outstanding claims so that the lien(s) can be released.

If settlement occurs before you’ve filed a lawsuit, the transaction should end at that point. But if the plaintiff has already filed a civil lawsuit against the defendant, a settlement agreement will include a provision requiring the plaintiff to dismiss the lawsuit within a certain period of time. If the plaintiff doesn’t dismiss, the defendant may be able to move for dismissal and provide a copy of the settlement agreement in support.