Who Pays the Settlement in a Lawsuit?

Categories: Injury Blog


After a serious injury and accident, you have two ways that you can receive a compensation for your injuries:

  • an offered and accepted settlement through negotiations or
  • a civil lawsuit award from a judge or jury.

When filing a lawsuit, you may wonder who pays for any settlement. The factors listed below should help you understand how the settlement process works, and ultimately who pays.

What is a Settlement?

A settlement is reached out of court, either before or after a lawsuit is filed. A judgment is typically awarded by a judge or jury, in a court of law. An offer for a settlement could be provided by a defendant before the official lawsuit is filed, such as after the receipt of a demand letter.

A settlement might also be offered after a lawsuit is filed. While trial is still in progress, the defendant may offer a financial settlement before the case is given to the jury. This typically happens when the defense starts to get nervous about their chances of winning, and wants to lessen the financial impact of a loss. Other times, the jury is already deliberating, but both parties agree to a settlement value before the jury actually hands over their verdict.

Once the settlement is reached and both parties agree, the plaintiff relinquishes his or her option for potential claims in the future by signing a “release.”. Therefore, a settlement should never be accepted unless an attorney is representing the injured person and can help them understand all possible future ramifications of any proposed settlement.

An attorney can ensure that all costs are factored into the settlement and that the victim receives fair compensation.

Who Pays the Settlement?

After both sides agree to a settlement amount, the next step is payment. While the insurance company might agree to settle, realize that the amount of the settlement will not exceed the available policy limits. Therefore, even if the value of your case (injuries, pain and suffering, medical bills) far exceed the policy limits available, you are limited by what those policy limits are. I have had several cases over the years where my client’s case is worth in excess of $100,000.00, but the available policy limits are $50,000.00. THIS IS WHY IT IS CRITICAL IF YOU OWN A CAR TO PURCHASE UNINSURED/UNDERINSURED MOTORIST COVERAGE.

The responsible parties are established during the initial claim phase. These parties may include:

  • A Second Insurance Company – A second insurance company may pay for the remaining damages, especially if the business or individual has more than one policy.
  • Private Party – A private party may have to pay the remaining balance using personal assets, such as selling their home, business, or taking out a loan to cover the judgment debt.
  • Third Party Defendant – Some cases involve more than one type of defendant. For example, product liability claims may include the manufacturer, retailer, and distributor. Each of these companies will have insurance policies, which will divvy up the amount of settlement based on each party’s assigned responsibility in the injury case.

When Insurance is Not Enough

Obviously, you cannot squeeze what is not there. When someone has no personal assets or anything of cash value, it is hard to recover a judgment.

When additional collection methods are needed, your attorney will examine all options and help you collect on your unpaid settlement balance to ensure you receive full compensation.

Speak with an Injury Attorney

If you or a loved one was seriously injured in an accident, you have the right to seek compensation. Speak with an attorney to explore your options and get started on the claim process. Attorney Jeffrey H. Penneys, Esq. can assist you with your case. Call him on his cell at 215-771-0430, toll-free at 1-800-465-8795, or office direct at 215-987-3550. You can also request a meeting online.