Car Accident Settlement Basics

By Ty McDuffey, J.D. | Legally reviewed by Katrina Wilson, Esq. | Last reviewed July 25, 2023

Imagine you were in a bad car accident with a distracted motorist several weeks ago. Now, you aren't sure what to do. Your injuries are pretty severe and aren't getting much better. You used to play tennis every single day after work, but now your neck and back are hurting more than you'd like to admit. Even sitting at work for long periods of time is painful.

The other driver's insurance company isn't offering you what you want. So, you did what you thought you had to do. You filed a personal injury lawsuit. But you wonder if that was the best idea. You've heard about settling a personal injury claim out of court. Maybe that is the best option for your situation?

Learn about car accident settlement basics and personal injury cases in this article.

What Does “Settlement" Mean?

Settling your car accident claim means resolving your dispute and not going to trial. Most car accident cases don't end up in a full civil trial. Most often, auto accident cases end up settling. The parties come to an agreement that works for everyone involved. Why? A jury trial offers no guarantee of a successful outcome for accident victims. Juries can be unpredictable. But your personal injury settlement amount, once accepted, is not.

What Is a Demand Letter?

Imagine your automobile accident injuries are being undervalued by the opposing party's insurance company. In this case, you can have your personal injury lawyer write a “demand letter" to the insurer. This document gives you the opportunity to:

Explain the incident
Describe your injuries and damages
Request a payment amount to settle the claim without any further litigation or court appearances

A demand letter will put all the issues and facts into perspective. It will lay out your case and any evidence in your favor, including medical records and other relevant information.

A skilled attorney may even demand higher payment than what is expected, so that both sides have room to negotiate. The insurance company may need you to get an independent medical evaluation to substantiate your injury claim.

Settlement Negotiations

After both sides have reviewed the demand letter and responded to it, the case may move to a settlement negotiation phase. There will likely be back-and-forth negotiations between the parties in an attempt to come to an agreement.

If these talks break down, you may be able to agree to mediation or to alternative dispute resolution (ADR). Mediators are typically licensed attorneys or retired judges who help both parties come to a resolution. If your negotiations are successful, you can collect from the insurer or the at-fault driver. If you are not able to come to a resolution, your case will proceed through court.

What Is the Insurance Claims Process After a Motor Vehicle Accident?

After a car accident, you can file an insurance claim to receive compensation for your medical expenses, pain and suffering, and other damages. Here's a brief overview of the liability insurance claims process:

Notify your insurance company: After the car crash, contact your insurance company. Provide them with basic details such as the date, time, location, and involved parties.
Speak with an insurance adjuster: Typically, two insurance coverage adjusters will be assigned to your case. A property damage adjuster will assess the damage to your vehicle, set up body shop repairs, a rental car if needed, etc. There also will be a bodily injury adjuster. This adjuster will review your bodily injury claim and determine what settlement amount is appropriate based on your medical reports, police records, photographs of the accident scene, and statements from witnesses. While it is ok to speak to a property damage adjuster, it is not recommended to speak with a bodily injury adjuster or give a recorded statement without an attorney present.
Submit your medical records and medical expenses: The claims adjuster will need documentation of your medical treatment and expenses to evaluate your claim. This includes records of doctors' visits, diagnostic tests, prescriptions, and any other medical expenses.
Establish liability: To receive compensation, you must prove that the other party was at fault. This may involve providing evidence of their negligence, such as distracted driving or speeding.
Determine settlement value: The adjuster will calculate a settlement offer based on the information provided, including the severity of your injuries, the extent of your medical bills, and any other factors that may affect your claim.
Negotiate a settlement: If the initial settlement offer is too low, you can negotiate with the adjuster to reach a more reasonable amount.
Accept or reject the offer: Once you receive a satisfactory settlement offer, you can accept it and sign a release form, which releases the at-fault party from further liability. There are two types of releases: general (or full) releases and limited liability releases. The general release releases the insurance company and any other insurance companies you may have a claim against from any further liability. (In a no-fault state, you also release your insurance company from further liability.) A limited liability release allows you to release just the insurance company you have settled with while keeping your claims open against other insurance companies, including your own. If you cannot reach a settlement agreement, you may need to file a lawsuit.

What About No-Fault States?

In some states, the insurance system operates under a no-fault model. In these states, each driver's insurance company pays its own policyholder's medical expenses and lost wages, regardless of who caused the accident. This means that you would file a claim with your own insurance company rather than the at-fault driver's insurer.

Personal Injury Protection (PIP) Coverage

In no-fault states, drivers must carry Personal Injury Protection (PIP) insurance. PIP insurance covers medical expenses and lost wages for the policyholder, regardless of fault. Once the PIP coverage limits are reached, you may need to seek extra compensation from the at-fault driver's insurance or through a personal injury lawsuit.

Wrongful Death Claims

If a loved one has died as a result of a motor vehicle accident, you may be able to file a wrongful death claim on their behalf. A wrongful death claim seeks compensation for the financial and emotional losses experienced by you and other surviving family members. You may be able to recover funeral and burial expenses, lost income, and money for the loss of their companionship.

Non-Economic Damages: Pain and Suffering

Besides medical expenses and lost wages, a car accident attorney can help you recover compensation for non-economic damages, such as pain and suffering. These damages are more subjective, but they may include physical pain, emotional distress, and loss of enjoyment of life.

To determine the value of your pain and suffering, auto insurance companies and juries will consider the severity and duration of your injuries, the impact on your daily life, and the permanence of any disabilities or disfigurements.