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How Does A Personal Injury Lawsuit Work?

By July 27, 2022August 17th, 2022No Comments

After being injured in an accident resulting from someone else’s negligence, individuals generally have the right to use the state’s civil court system as they seek compensation for the expenses and impacts of their injury by filing a personal injury lawsuit. Here is a look at the claims process and how a personal injury lawsuit works.

How the Personal Injury Claims Process Begins

The personal injury claims process is the legal process used to seek compensation for the expenses and impacts of the injury sustained in the accident as a result of the careless or reckless actions of another person. This process usually begins when the injured party seeks assistance from a personal injury attorney.

The attorney will investigate the claim to establish the source of liability (legal responsibility) and associated insurance resources that can provide compensation.

The liability insurance policy held by the at-fault party pays nearly all personal injury claims: an auto liability policy in a car accident claim, a homeowner’s policy for dog bite claims and premises liability claims occurring at a residence, or a business liability policy for accidents that resulted from a defective commercial or public property feature or a defective product sold to a consumer.

Once the injured party has reached maximum medical improvement, their attorney will also establish a value for the claim. Maximum medical improvement is when a doctor determines that the injury has stabilized and expects no further treatment will improve the claimant’s condition.

This is usually the best time to value the claim as there is an accurate accounting of the expenses and a better opportunity to determine if there are permanent disabilities that will impair the claimant’s ability to earn an income in the future.

Some of the factors that go into establishing a claim’s value include how much compensation is available for the claim through insurance, the severity of the injury suffered, the amount of income the claimant earned before the accident, the actual expenses incurred in the treatment of the injury, the psychological impacts the claimant encountered from the accident, and the medical treatment of the injury.

After establishing the claim’s value, the claimant’s attorney will send a demand to the at-fault party’s insurance provider for the claim’s full value. The insurance provider will assign a claims adjuster to analyze the claim and determine the amount of compensation owed to the claimant if any. The claims adjuster can either accept the demand and pay the total value of the claim, deny the claim and let the claimant know the reason for the denial, or offer to settle the claim out of court for less than its value.

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“I Cannot Afford an Attorney” The Needless Reason Many Claims Stall

There are many reasons why a personal injury claimant decides not to hire an attorney to help them with their claim, including the belief that they can navigate the process on their own or that it is too much of a hassle. However, one of the most common reasons for not hiring an attorney is because the claimant does not believe they can afford one.

This argument is understandable, as claimants usually face high out-of-pocket medical expenses and lost wages due to the injury. However, the worry is needless, thanks to the billing method that most personal injury lawyers use.

Personal injury attorneys use a contingent fee billing method, also known as a contingency fee. This means they do not require payment upfront to begin working on your case, nor do they bill you for your services by the hour. You never have to worry about your claim stalling because you have not kept current on your bills for your attorney’s services, and if you do not have a positive resolution to your claim, you do not have to pay for your attorney’s services.

Here is how the contingent fee works:

  • When you begin working with your attorney, you will sign a legal contract with them, known as a contingent fee agreement. This agreement will detail the services your attorney will provide, the expenses you are responsible for, and the percentage of your award that will pay your attorney for their services after your claim.
  • Once there is a positive outcome to the claim, either through a negotiated settlement or a court award, your attorney will receive your compensation for you and deposit the funds into a trust account. From the trust, your attorney will deduct the fees for their services and satisfy any medical liens placed against the amount by health care providers or group health insurers.
  • You will meet with your attorney to finalize the case, and you will receive the remaining proceeds from your settlement or award.

In addition to the contingent fee, personal injury attorneys also ensure that anyone who needs their assistance has access by providing free case evaluations. This is when you can meet an attorney, talk about your case, and obtain answers to your legal questions and more information about the process without obligation.

When Can I File a Lawsuit (and When Must

I File It)?

If the at-fault party’s insurance provider fails to compensate the claim by accepting the demand or making a settlement offer that provides fair compensation, you can file a lawsuit.

Settlement negotiations can continue even after you file a lawsuit. In fact, filing a suit often encourages the insurance provider to take negotiations more seriously, as they know they will end up in court if they do not.

Every state has a deadline to file a lawsuit. Known as the statute of limitations, this deadline is generally between 1-4 years after the date on which the accident occurred, depending on each state’s unique laws. For example, in California, the statute of limitations on personal injury claims is usually two years from the date of the injury.

You must file your personal injury lawsuit before the statute of limitations expires. Failing to do so can result in the loss of your right to seek compensation for your injury.

Without the court process available to them, most personal injury claimants can’t obtain compensation, as an insurance provider will never offer a settlement if they know there are no legal ramifications if they do not pay. One of a personal injury attorney’s important tasks is managing the timeline of their client’s claim to preserve their right to go to court.

Why Most Claims Settle out of Court?

Even when you file suit, a settlement is the most likely outcome of a personal injury claim. An estimated 95 percent of personal injury lawsuits are settled outside of court, while a judge or jury will determine only around one in 20 cases.

The main reason for a high settlement rate is to avoid the expense and time of litigation. Many insurance providers also prefer to settle claims because it allows them to have some control over how the claim settles and avoid the publicity of a trial.

The Discovery Process

Once you file suit, your attorney will continue to entertain settlement offers and negotiate with the claims adjuster on your behalf. However, at this point, the case will also enter the discovery process.

Discovery is the period in a legal claim in which each side must share their evidence with the other. Your attorney can obtain answers to questions from the at-fault party or witnesses through a deposition, which is a type of out-of-court sworn testimony, and request to see documentation and evidence that can help prove your claim.

Discovery is a busy time in a case, as both sides often file motions with the court to get the judge to toss out evidence, admit evidence, or even dismiss the case based on the evidence discovered. Additionally, the court will encourage both sides to work together to resolve the matter, and order mediation. Finally, the court will set a trial date if these efforts do not result in a settlement.


Even if your claim is unsettled when your trial date rolls around, be aware that settlement offers can be made at any point before the court decides on the matter. Your attorney will provide several litigation services, including preparing and delivering opening and closing remarks, examining witnesses on the stand, and presenting evidence most personal injury trials last several days.

One downside to litigation in a personal injury claim is that, unlike a final settlement agreement that removes all right of the claimant to make future claims against the at-fault party, the at-fault party’s insurance provider can appeal a court award. If this happens, the claimant’s attorney will assist them in the appeals process. Additionally, suppose the insurance company or the at-fault party fails to pay the amount ordered by the judgment. In that case, the claimant’s attorney can help them to pursue collection actions against the at-fault party.

Collecting Your Settlement or Award

It can take several weeks after a settlement agreement or judgment for a personal injury claimant to receive their settlement or award.

In cases involving settlements, the insurance provider will require you to sign a release to obtain the funds. This release prevents you from seeking additional compensation in the future from the at-fault party or their insurance provider for expenses related to the injury incurred in the accident that was the focus of the settlement.

As noted, once the insurer processes the payment, it will send a check directly to your attorney, and they will be paid and will satisfy any liens before releasing the funds to you. A medical lien is a claim placed on pending personal injury settlements or claims that asserts the right of health care providers and group health insurers who have provided services to the claimant to obtain some of the settlement proceeds as payment for those services. The attorney can often negotiate and reduce these liens, allowing their client to receive a larger share of the award.

The Tax Implications of Receiving a Personal Injury Settlement or Award

For the most part, the Internal Revenue Service (IRS) does not consider the proceeds of a personal injury settlement or court award income and does not tax it.

However, there are a couple of tax implications to be aware of:

  • If you deducted medical expenses for your accident injury in one tax year and receive a settlement or award compensating those expenses the following year, you must list the deduction you took as income the second year to repay what you deducted.
  • If you received punitive damages in your court award, the IRS may tax them. Punitive damages do not compensate for the injury but punish an at-fault party for particularly reckless behavior. Because this compensation does not compensate for the injury, the IRS considers it income.

If an accident injured you and need more information about the personal injury claims process, contact a personal injury attorney.

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