The Insurance Company Offered Me a Settlement After My Car Wreck. Should I Take It?

The Insurance Company Offered Me a Settlement After My Car Wreck. Should I Take It?

Receiving a settlement offer after an Alabama car wreck can initially sound like good news.  The insurance company has accepted that it is willing to pay money. You may have medical bills piling up, you may have missed work, and you may simply want to put the wreck behind you.

But a settlement offer presents a much more important question than whether the amount sounds good today: Do you know enough about your injuries, your damages, your insurance coverage, and the claims you may be giving up to determine whether the settlement is reasonable?

Sometimes an early settlement offer may fairly compensate an injured person. Sometimes it may not.

The problem is that once you sign a release and accept a settlement, you generally cannot come back months later and ask for more money simply because your injuries turned out to be worse than you expected.  That makes the timing and terms of a settlement important.

Why Is the Insurance Company Offering Me a Settlement?

Insurance companies settle claims for many reasons.  A settlement can avoid the expense and uncertainty of litigation. If liability is reasonably clear and the insurer knows its insured caused the wreck, resolving the claim may make sense for both sides.

The mere fact that an insurance company makes an offer therefore does not mean the offer is unfair, but it also does not mean the amount represents the full value of your claim.

An insurance adjuster evaluates the claim from the insurance company’s perspective. Before accepting an offer, you should evaluate it from yours, and that requires understanding both what you are receiving and what you are giving up.

What Am I Giving Up When I Accept a Car Wreck Settlement?

Usually, the insurance company will require you to sign a release before it pays the settlement.  That document may be more important than the settlement check.

Alabama Code § 12-21-109 provides that written releases must be given effect according to their terms and the intentions of the parties. Alabama courts have repeatedly enforced unambiguous releases according to their language.

The Alabama Supreme Court’s decision in Boggan v. Waste Away Group, Inc. illustrates the danger.  Here, the plaintiff signed a release after an accident. His injuries later turned out to be more serious than he had understood when he signed it; the release, however, covered both known and unknown injuries.  The Alabama Supreme Court enforced the release.

The Court explained that, absent fraud, an unambiguous release supported by consideration will generally be enforced according to its terms. The Court specifically declined to create an exception merely because injuries unknown when the release was signed later became apparent.

That creates a practical rule worth remembering:

A settlement should generally be evaluated based not only on what you know today, but also on whether you have enough medical information to reasonably understand what the wreck may cost you tomorrow.

Should I Settle Before I Finish Medical Treatment?

That depends upon the circumstances, but this is one of the most important questions to ask before settling.

Suppose you were injured in a wreck three weeks ago. You have been diagnosed with a back injury and are attending physical therapy.  The insurance company offers you $15,000.

That might initially seem like a substantial amount, but what happens if physical therapy fails?

What if an MRI later reveals a significant disc injury?

What if you need injections?

What if your doctor ultimately recommends surgery?

What if permanent restrictions prevent you from returning to the same work?

The settlement you accepted before learning those things generally does not reopen simply because your medical condition becomes worse than expected.

This does not mean every injured person must wait until every symptom has disappeared before considering settlement. It means that medical uncertainty itself should be considered when evaluating whether it is an appropriate time to settle.

What Damages Should I Consider Before Accepting a Settlement?

A settlement should not necessarily be evaluated by comparing the offer only to your current medical bills.  Depending upon the facts of the case, an Alabama personal-injury claim may involve several different categories of damages.

Those can include past medical expenses, future medical expenses supported by the evidence, lost earnings, impaired earning capacity or disability where established, physical pain and suffering, mental anguish, and property damage. Alabama cases recognize these different components of personal-injury damages.

Consider someone who has:

$18,000 in medical expenses,

$4,000 in lost wages,

continuing back pain,

a doctor’s recommendation for additional treatment,

and work restrictions that may affect future employment.

A $50,000 settlement should not automatically be considered reasonable simply because it exceeds the person’s current medical bills.  The claim needs to be evaluated as a whole.

What About Future Medical Treatment?

Future medical expenses can be a proper element of damages in an Alabama personal-injury case when adequately supported by the evidence. The Alabama Supreme Court has long recognized that principle.

This becomes especially important when settlement discussions occur while treatment is still ongoing.  Ask:

Has my doctor released me?

Do I need additional testing?

Have injections been recommended?

Is surgery possible?

Will I need medication or follow-up treatment?

Do I have a permanent impairment?

Will I have permanent restrictions?

The greater the uncertainty about future medical care, the more difficult it may be to intelligently evaluate a final settlement.

What If I Have Lost Wages?

Time missed from work can also be part of the damages analysis, but sometimes the larger issue is not the wages already lost-it is what the injury may do to the person’s ability to work in the future.

An office employee who misses two weeks because of a fractured wrist presents a different economic-loss question from a construction worker who suffers a permanent back injury and can no longer perform heavy labor.

The Alabama Supreme Court has recognized loss of earnings and, where supported by appropriate evidence, impairment of earning capacity as compensable elements of personal-injury damages.  That means an injured person’s occupation, physical job requirements, education, work history, restrictions, and ability to return to employment can matter when evaluating a serious car-wreck claim.

How Much Are Pain and Suffering Worth?

There is no fixed Alabama formula that says a broken bone is worth a certain amount or that pain and suffering equals some multiple of the medical bills.

The Alabama Supreme Court has recognized that there is no fixed monetary standard for physical pain and mental anguish. The amount depends upon the evidence and, if the case is tried, the judgment of the factfinder.   That is one reason advertisements promising that a case is worth “three times the medical bills” or some other predetermined formula should be treated cautiously.

Two people can incur similar medical expenses while experiencing very different injuries and long-term consequences.

Does the Amount of Insurance Available Matter?

Absolutely.

The value of the damages and the amount that can realistically be recovered are related but different questions.  Suppose your damages reasonably exceed $100,000, but the person who caused the wreck has only $25,000 in bodily-injury liability coverage.

A $25,000 policy-limits offer does not necessarily mean the insurance company believes your entire claim is worth only $25,000.  It may simply mean that the liability insurer is offering everything available under that policy.

That should lead to another question:

Is there additional insurance?

Potential sources might include another applicable liability policy or uninsured/underinsured motorist coverage.  This is one reason a policy-limits settlement should not automatically end the investigation into available insurance.

Be Especially Careful If You May Have an Underinsured Motorist Claim

This is one of the most important Alabama-specific issues in this article.

Suppose the driver who injured you has $25,000 in liability insurance.  That insurance company offers its entire $25,000 limit in exchange for releasing its driver, but your injuries are worth substantially more.  You discover that your own automobile policy includes underinsured motorist coverage.

Do not assume that you can simply accept the $25,000, sign the release, and then pursue your UIM carrier afterward.

Alabama has a specific procedure designed to protect both the injured insured and the UIM carrier’s rights.

In Lambert v. State Farm Mutual Automobile Insurance Co., the Alabama Supreme Court established guidelines governing settlements with an underinsured tortfeasor when UIM benefits may also be sought. Among other things, the insured should notify the UIM carrier of the proposed settlement and proposed release, inform the carrier that UIM benefits will be sought, and allow the carrier a reasonable opportunity to investigate and respond before releasing the at-fault driver.

If the UIM carrier wants to preserve the rights protected by the Lambert procedure, it may make what lawyers commonly call a Lambert advance—advancing an amount equal to the tortfeasor’s settlement offer before the tortfeasor is released. The Alabama Supreme Court has subsequently explained that this payment functions as a substitute for the tortfeasor’s liability limits.

Failing to properly protect a UIM claim before settling can create serious problems. Alabama decisions following Lambert have enforced the notice requirement where an insured settled without giving the UIM carrier an adequate opportunity to protect its rights.

For a more detailed explanation, see our articles:

What Is Uninsured and Underinsured Motorist Coverage in Alabama?

and

What If the Driver Who Hit Me Doesn’t Have Enough Insurance to Pay My Damages?

Is the Settlement Offer the Amount I Will Actually Receive?

Not necessarily.  There is an important difference between the gross settlement and the net amount the injured person ultimately receives.

Depending upon the case, money may have to be paid from a settlement to satisfy medical liens, statutory reimbursement rights, subrogation interests, litigation expenses, or attorney fees.

For example, Alabama law gives qualifying hospitals a statutory lien for reasonable charges under certain circumstances, and the lien can attach to settlements arising from the injury. Ala. Code § 35-11-370.

Alabama Medicaid also has statutory subrogation rights when it has paid medical expenses for injuries caused by another party.

Other reimbursement issues may arise depending upon who paid the medical expenses, so the right question is not always: “How much did the insurance company offer?”

It may also be: “After all valid claims against the settlement are resolved, how much will I actually receive?”

What If Workers’ Compensation Paid My Medical Bills?

A car wreck that occurs while someone is working can involve both workers’ compensation and a claim against the negligent driver.  That creates another layer of settlement issues.

If workers’ compensation has paid medical expenses or disability benefits and the injured worker later recovers money from a responsible third party, Alabama’s workers’ compensation subrogation and reimbursement rules may affect the settlement.

That does not mean the worker cannot pursue both claims, it means the interaction between them should be evaluated before the third-party case is settled.

Recommended Reading: Can I Have Both a Workers Compensation Claim and a Personal Injury Claim?

Will I Have to Pay Workers Compensation Back If I Settle a Related Personal Injury Claim?

Can I Settle a Personal Injury Claim Without Telling Workers Compensation?

What If Several People Were Injured in the Same Wreck?

Available insurance can become particularly important when several people are making claims against the same policy.

Automobile liability policies ordinarily contain both per-person and per-accident limits.  That means a serious wreck involving several injured occupants may create competition for a limited pool of insurance proceeds.  A settlement decision in a multi-claimant case therefore may require evaluating not only the injured person’s damages but also the available coverage and the other claims being asserted against it.

Should I Accept the First Settlement Offer?

There is no sound rule that says: Never accept the first offer. 

There is also no sound rule that says: The insurance company’s offer must be reasonable because an adjuster calculated it.

The meaningful question is whether the offer reasonably accounts for the facts of the particular claim.  Before deciding, you should know enough to answer questions such as:

• What injuries did the wreck cause?
• Has my medical condition stabilized enough to understand my prognosis?
• Will I need future treatment?
• Have I lost wages?
• Has the injury affected my future ability to work?
• What insurance coverage is available?
• Do I have a potential UM/UIM claim?
• Are there medical liens or reimbursement claims?
• Is workers’ compensation involved?
• What exactly does the proposed release say?
• What will I actually receive after legitimate deductions from the settlement?

If you cannot answer those questions, you may not yet have enough information to intelligently evaluate the offer.

Can I Accept the Settlement and Reopen My Claim Later?

Usually, you should assume that a final settlement accompanied by a properly drafted release is intended to end the released claim permanently.  That is precisely why Boggan matters.

An injured person should not sign a release believing that the case can simply be reopened if additional medical problems develop later. Alabama law generally gives an unambiguous written release effect according to its terms.

There can be legal disputes involving fraud, ambiguity, mistake, the scope of the release, or which parties and claims were actually released, but those are not substitutes for carefully evaluating the settlement before signing it.

What Should I Do Before Signing a Release?

Read it.  And make sure you understand who is being released and which claims are being released.

That sounds elementary, but Alabama law makes the actual language important.

A release can affect claims against parties beyond the person whose insurance company wrote the check depending upon its terms. Alabama courts generally enforce an unambiguous release according to the intentions expressed within the document.

Alabama law also permits a pro tanto settlement, in which a claimant settles with one responsible party while preserving claims against another, when the settlement and release are structured accordingly.

So before signing, determine:

Who am I releasing?

What claims am I releasing?

Am I releasing known and unknown injuries?

Are there other potentially responsible parties?

Could I have a UM/UIM claim?

Are any claims specifically being preserved?

Those questions can matter far more than the title printed at the top of the document.

When Should I Talk to an Alabama Car Wreck Lawyer About a Settlement Offer?

You do not necessarily need a lawyer simply because an insurance company has offered you money.  A minor wreck involving a resolved injury, clear liability, limited medical expenses, no lost income, no future treatment, and adequate insurance may be relatively straightforward.

But the decision becomes more complicated when there are significant injuries, continuing medical treatment, disputed liability, permanent restrictions, lost earning capacity, insufficient liability insurance, UM/UIM coverage, multiple responsible parties, workers’ compensation involvement, or liens and reimbursement claims.

The Bottom Line

The important question is not simply whether the insurance company’s settlement offer sounds like a lot of money.

The better question is: Does the proposed settlement reasonably compensate me for the damages I can establish, considering my medical condition, future treatment, lost income, ability to work, available insurance, other potential claims, reimbursement obligations, and the legal rights I will give up by signing the release?

Sometimes the answer may be yes.  Sometimes it may be no, but that decision should be made with an understanding of the claim—not simply because an insurance adjuster says the offer expires soon.

If you have been injured in an Alabama car wreck and have received a settlement offer and you have questions about what to do — don’t hesitate to contact and speak with one of the experienced Alabama Car Wreck attorneys at Powell and Denny today for a free consultation. Appointments are available in person, or virtually via Zoom if more convenient.  Powell and Denny would appreciate the opportunity to help.  And remember, there is no fee unless you win.

Powell & Denny: We Work When You Can’t.

This article provides general information about Alabama law and is not legal advice concerning any particular case.