After an accident or injury, there are usually two ways to get compensation from those who are at fault: be offered and accept a settlement outside of court, or go through with a civil lawsuit in order to collect damages.

While a civil lawsuit might ultimately net a successful plaintiff more money than settlement would, the vast majority of personal injury cases settle well before trial, and often before a lawsuit is even filed. There are many reasons for this.

Understanding Settlement

Settlement occurs when an insurer or a defendant makes an offer of payment to an injured person.

1. The offer of settlement may be made before any lawsuit has ever been filed, after a potential claim arises.
2. It may be made after a case has gone to trial and a trial has begun, as long as no final verdict has come back.
3. Some settlements are made once a jury is deliberating, since one or both parties might become nervous as the jury debates their fate and decide that they prefer the sure thing of a settlement.

Once a settlement agreement is reached, the plaintiff must relinquish all potential claims against the defendant arising out of the accident or incident. The plaintiff does this by signing a full liability release. For example, in a car accident case, the car insurer may offer the plaintiff $50,000 to settle the case. The plaintiff, to receive that $50,000, would have to agree not to sue as a result of the car accident.

Settlement and Insurance Companies

Settlements are almost always offered when insurance companies are involved in a case, which happens in the vast majority of personal injury cases.

The fact that so many personal injury cases do involve insurance companies goes a long way towards explaining why so many cases settle; insurers have the money to pay out claims, expect to pay out some claims, and are risk averse and don’t want to end up with no control over costs when they have to go to trial, pay legal fees and deal with a jury.

Why Do Most Cases Settle?

The fact that so many cases settle, especially when insurance companies are involved, naturally leads to the question of why? There are many reasons, including:

1. Settlement allows a defendant to control risks and avoid legal costs.

If the defendant knows he is going to be held responsible, he might not want the case to get in front of a sympathetic jury that could award large pain and suffering or punitive damage awards for the plaintiff. Instead, the defendant or insurer may prefer a settlement where it has control over how much to offer.

2. Settlement can allow a defendant to keep the cases out of the public eye or out of the paper.

This is especially important for larger companies with a public profile. For example, if a company produces a defective product and only a few people are injured by it, the company may want to try to arrange a quiet out-of-court settlement and avoid major publicity that might accompany a trial. When a settlement agreement is drafted, it gives a company (or any defendant for that matter) the opportunity to negotiate terms of that agreement that work for everyone. This can include a requirement of confidentiality.

3. Settlement allows a plaintiff to avoid a protracted trial.

Trials can extend for months, or even for years if there are appeals. A plaintiff who needs income and has medical expenses may not want to wait that long to get financial relief. A plaintiff also may not feel up to going through a long trial, putting on a case, presenting evidence and doing everything else necessary to win a legal battle.

4. Settlement allows a plaintiff a guaranteed victory.

When a case is taken to court, there is always a chance (however small) that the plaintiff will lose the case and receive nothing.

What if Settlement Attempts Fail?

If the case can’t be settled out of court, then a trial will be necessary (unless the claim is dropped). Learn more about what happens when settlement doesn’t work.

Source: http://www.alllaw.com/articles/nolo/personal-injury/how-case-settled.html