Frequently Asked Questions - What is a Settlement Agreement?
A settlement agreement is a legally binding contract between you and the person and company that you have made a claim against or have a dispute with.
In a personal injury case, a settlement agreement, also called a mutual or general release is an agreement for a certain amount of money to settle your injury claim against the at-fault person and company.
If you were in an automobile accident at the fault of someone else’s negligence, the at fault driver’s or owner’s insurance company will try to negotiate a settlement for your injuries. Most auto accident claims, the insurance company will try to settle your claim before a lawsuit has been filed. but often, a lawsuit is filed because the insurance company’s not offering a fair settlement to the injured person (the Plaintiff). Settlement negotiations are completely voluntary and both parties can make settlement proposals and counter-settlement proposals until a settlement is reached. Even after a lawsuit is filed the insurance company may still make an offer to settle the claim before trial to avoid the risk of having to pay out more money for a jury awarded verdict and possible attorney’s fees and costs to the Plaintiff’s attorney. Also, there is risk to the Plaintiff if they go to trial that a jury does not awarding any money for their injury claim. The Plaintiff could end up owning the Defendant’s attorneys’ fees and costs.
If a lawsuit was filed in your case, Florida law requires the parties to go to Mediation before the trial date to try to resolve the case. A mediation is a settlement conference. All the involved parties, their attorneys, and insurance adjusters are present along with the mediator (who is also an attorney) to discuss the case and try to resolve the claim for a fair and reasonable amount before spending a lot of money on expert witnesses, doctors’ depositions and trial preparation.
Once an offer is accepted the insurance company will require you to sign a settlement agreement also known as a mutual release or general release. The settlement agreement will state that this will settle all your claims for the auto accident and relinquish all your rights. No further action can be taken against the at-fault driver, the vehicle owner, and their insurance company (Defendant). The settlement agreement will not state that the defendant is admitting guilt for your injuries, only that they are resolving the claim for a specific amount of money. We have had clients that sometimes get upset that the defendant is not admitting guilt for their negligence.
A settlement agreement must be carefully reviewed by your attorney as it could also release any other third-party claims you might have for your injuries from the auto accident. Most settlement agreements are written by the insurance company to protect them and their insured, not you. If you have a personal injury claim and there are multiple defendants involved, the settlement agreement must be specific as to what defendant is being released from the claim in order to pursue the claim against any other possible defendants involved.
For example, if you were in an auto accident, the at-fault driver – (defendant) may have only a small bodily injury insurance policy, which the insurance company agrees to pay out their policy limits. But you have “uninsured/underinsured motorist coverage” on your auto policy and will be making a claim against your insurance company for more money. The settlement agreement must only release the at-fault driver and owner of the vehicle at fault. Also, many settlement agreements have language protecting the insurance company from possible health insurance, Medicare, and Medicaid liens. This language will need to be carefully reviewed by your attorney to make sure it does not release your health insurance carrier, Medicare or Medicaid from paying future medical benefits.
Once a settlement agreement has been reached, it is challenging to change your mind and cancel it, even if the settlement paperwork has not yet been signed. In personal injury cases, this does happen very often, but if it does, the insurance carrier could file a Motion to Enforce Settlement, and a Judge would ultimately decide that the Settlement Agreement is valid unless there is some fraudulent misrepresentation by one of the parties or you could prove that you were lured or forced into accepting the settlement. This is very unusual.
A settlement agreement involving a minor child’s injury claim may require court approval according to Florida Statute §744.387. If the settlement is under $15,000, the parent/legal guardian can settle the minor child’s claim. If a lawsuit suit was filed and the case settles for under $15,000, the Judge may still require a Petition for Approval of Settlement be filed, and the Judge will usually approve the settlement and the funds will be disbursed to the parent/legal guardian.
In cases where the minor child’s claim settles for over $15,000, court approval is required. A Petition for Approval of Settlement must be filed. The Petition outlines the facts of the case and what caused the minor child’s injuries and the breakdown of the settlement, attorney’s fees and costs, medical bills to be paid out of the settlement, and what the minor child’s net recovery will be. The Judge may require that the funds be placed in a restricted account which can only be withdrawn by a court order or when the child reaches 18 years old.
A settlement agreement involving a Wrongful Death Claim will also need court approval, and the funds will be disbursed through the deceased's estate.
Some settlement agreements have a confidentiality clause. A confidentiality clause means you cannot discuss the settlement amount with anyone. This usually happens when the settlement is a large amount of money and the defendant is a corporation and a very well-known defendant, and they do not want the settlement to be leaked to the media. The confidential clause may state that if the settlement amount is leaked, the settlement agreement was violated, and the Defendant could require the settlement funds to be returned, and they could sue you for breach of contract.