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How Are Personal Injury Settlements Paid Out?

on  Personal Injury

Did you know that the majority of personal injury cases never go to trial? That’s right! According to the American Bar Association and the American Judges Association, only 3 percent of all civil cases go to trial. The other 97 percent of injury cases get settled out of court. This is particularly true of personal injury matters involving car accidents, slip and falls, trucking wrecks, dog bites, and other types of serious bodily harm cases. 

If you suffer an injury in an accident in Florida, you’re likely not headed to court. Instead, your case will get settled long before you ever step foot in a courtroom. When your case settles, how will you receive your money? Will you have to pay other parties first? How are personal injury settlements paid out?

At Prosper Shaked Accident Injury Attorneys, PA, our Florida personal injury lawyers can help you understand the settlement process, how you get paid, and the details of what comes next after you agree to a settlement. 

Agreeing to Settle Your Case

Agreeing to settle your case is a monumental decision. It may have come through mediation, in a settlement conference, or through back-and-forth negotiations with the other party’s insurance adjuster or attorney. No matter how your case settles, you likely feel relieved that this ordeal is over. You’ve made it through and avoided the risks associated with a public trial. 

But now what happens?

After you agree to settle your matter, the attorneys will circulate a document that serves as a release of liability, often called a “release” or sometimes called a “release and indemnification agreement.”  Both parties must sign this document. 

Signing it means that you agree to resolve the case and indemnify (or cover) the defendant for all expenses that could arise in the future.  This includes if your injuries worsen and you need new treatment or if an insurance company requests a lien reimbursement from you. In both situations, you cannot pass the bill to the defendant. This is why it is very important to carefully consult with an experienced personal injury lawyer before you agree to settle your case.

If your lawsuit was formally commenced, the attorneys will also circulate a stipulation of discontinuance.  This document tells the court the action has been discontinued based on an agreement between the parties.

How Settlement Payments Work

Now that you’ve settled your case, you must understand how settlement payments work. The insurance company typically pays your personal injury settlement through a check in one of two ways:

  • Lump Sum: This is like getting all your settlement money at once.
  • Structured Settlement: This means you get the money in smaller portions over time, in structured payments.

Most of the time, personal injury settlements in Florida are paid in one lump sum. But sometimes, the insurance company may offer you a structured settlement. If you get one of those structured settlement offers, speak to your lawyer immediately. Structured settlements often help the insurance companies more than they help you. For most accident victims, a lump sum is the better deal. 

How Do You Get Your Personal Injury Settlement Money in Florida?

After these steps have been taken, the defendant or the defendant’s insurance carrier will issue a settlement check.  This usually takes a few weeks, but it sometimes can be shorter.  The check will be deposited in your lawyer’s escrow or client account. 

Before you receive your funds, the proceeds must be distributed to several entities first. 

Paying Any Medical Liens

Some insurance carriers are allowed to impose liens on your recovery based on the compensation they paid for your medical bills, lost wages, rehabilitation costs, or other expenses related to the subject accident.  These are sometimes called “collateral sources” and often must be reimbursed.

Some examples include the following:

  • Workers’ compensation carriers – if you were injured in a workplace accident but were entitled to commence a personal injury action against a third party, your workers’ compensation carrier may have a lien on any medical bills or lost wages paid to you. This lien must be reimbursed, but often, an experienced personal injury lawyer can negotiate with the WC carrier to reduce the lien percentage.
  • Health insurance carriers – Almost all health insurance plans will seek reimbursement from a personal injury claim, especially ERISA or pooling health plans. These liens must be repaid, but again, a health insurance carrier may agree to take less compensation by reducing a percentage of the lien.
  • Medical Provider Liens – If your auto or health insurance does not fully cover your medical expenses, you will likely owe your treating medical providers the unpaid balance. Additionally, you may have been treated by medical providers who did not accept your health or auto insurance. These medical providers likely treated you under a letter of protection.  It is up to your attorney to best negotiate the reduction of the medical bill balances.

Paying Taxes to the IRS

Wait! Do you have to pay taxes on your personal injury settlements?

Generally personal injury settlements are generally tax-free.  This means you do not have to pay taxes for physical injury, agony, and the pain and suffering caused by physical harm. Lost wages due to physical injuries are also not taxed.

However, Florida or the IRS may tax certain aspects of the settlement.  This includes the following:

  • Punitive damages – This is a rare type of damages meant to punish the defendant and deter others from similar conduct. Although rare and only awarded in egregious cases of gross negligence or wanton disregard, the IRS almost always tax punitive damages.  This includes any interest accrued on the punitive damages. 
  • Lost wages – Sometimes, the IRS may seek taxes for lost wages unrelated to physical pain and suffering. 
  • Emotional distress – You may owe taxes if you have claimed emotional distress not caused by your physical injury.

Paying Your Case’s Costs and Fees

It costs money to litigate a case.  While some lawyers may ask for money upfront, most successful lawyers like ours at Prosper Shaked Accident Injury Attorneys PA will pay the upfront costs and disbursements of your action for you. These costs and disbursements are only reimbursed if a recovery is made for the client.  If no recovery is made, the law firm takes a loss on these costs and disbursements as a cost of doing business.

There are a lot of different costs and disbursements in a Florida personal injury case that would need to be paid from a settlement, including the following:

  • Court costs like filing fees, request for judicial intervention, motion fees, jury demand, and other court-imposed fees
  • Expert costs, including affidavits/affirmations in support or opposition to motions, for testimony at trial, or for assistance in handling a case, such as proving damages, liability, or other issues in a case
  • Medical record copying fees
  • Postage fees
  • Cost to serve defendants with the summons/complaint or non-parties with subpoenas
  • Printing costs and copying fees of court papers or pleadings
  • Travel expenses for lawyers, staff, or experts
  • Police report records, investigations, or other documents
  • Witness subpoena fees, and
  • Other costs or disbursements from your case.

Paying Your Attorney

There are counsel fees after liens, and the costs and disbursements are paid from the total amount of your settlement, verdict, or arbitration award.  Unlike other types of lawyers, most personal injury lawyers accept cases on a “contingency fee agreement” (Rule 4-1.5 [f] of the Florida Rules of Professional Conduct).  This type of agreement means that the lawyer only receives a percentage of your total recovery, verdict, or award and only after it is recovered for you.  This means there is no financial risk to pay lawyer fees if there is no recovery.

Our experienced lawyers at Prosper Shaked Accident Injury Attorneys PA accept personal injury cases on a contingency fee basis for a just and fair percentage. We do this because it allows every injured accident victim the opportunity to seek justice – not just those who can afford to pay upfront. When we win your case or help you settle, our fees are deducted from the final amount of your award. 

Your Final Check

Once the costs, disbursements, liens, and counsel fees are paid, your remaining sum is your amount.  If you have received punitive or other taxable damages, your lawyer may assist you with setting up a tax payment when you receive your check.  

Generally, most clients do not have to pay taxes for most personal injury settlements in Florida, and the remaining check is yours in full.  This is an extremely important milestone for you and your family, as you have gone from being wrongfully injured to receiving the justice you deserve under Florida law.

Ask Our Florida Personal Injury Lawyer for Help With Your Case

If you or a loved one were seriously injured in Florida, or if a loved one was wrongfully killed, learn how Prosper Shaked Accident Injury Attorneys PA in Florida can help protect your rights to compensation under the law.  

Unlike some firms, we offer: 

  1. FREE case evaluations.
  2. We pay the upfront costs and disbursements of litigation, which are only reimbursed if we recover compensation for you.
  3. Accept personal injury cases on a contingency fee agreement, meaning we only get paid a percentage of what we recover for you and only after we recover it for you.

This means there is no upfront cost or financial risk to hire our experienced personal injury lawyer in Florida.  Schedule your free case evaluation by dialing (305) 694-2676. We are here for you and your family when it may feel like no one else is. Please give us a call. There are no obligations to hear what we can do for you. You can also fill out our confidential contact form, and we’ll call you right back! 
We want to hear your story and help you through this difficult time. Contact us today!