What is a "Settlement?"
You hear people discussing their settlements, but no one really tells you what that is. Wouldn't it be helpful to know what a Settlement really means? Here you go:
A settlement is the term used to wrap up in a legal way the end of some dispute. It is an agreement between two or more disputing persons to finalize the dispute. Usually the main terms of the settlement are agreed upon in writing. The written agreement is a new contract which can be enforced by the court. If the case is in Court, there is a popular method of coming to an agreed settlement called a Mediation. A Mediation is a formal settlement conference where all sides to the dispute discuss possible terms to settle the disputes. Although the Court can force attendance at a Mediation conference, the Court cannot force the disputing parties to settle. That is a voluntary thing.
Settlements are often complicated due to the need to payoff subrogation liens. These are claims against the settlement by health insurance companies, worker's compensation companies or medicaid or medicare for money they paid for doctor's bills and wages. These liens have to be paid out of the settlement. Insurance companies will ASK for 100% payback of all money they have paid. Most of the time they only get a fraction of their money. If the lien is an ERISA, or Medicaid lien, then 100% of the money may have to be paid to the ERISA carrier. An attorney who is on the ball can discuss ERISA and Medicaid issues with you so you can understand their claim.
In a personal injury case, for example, the person making the claim (plaintiff) agrees to sign off on a Release, in exchange for an agreed amount of money, paid at the closing of the deal. Once the Release is signed, and the money changes hands, the Plaintiff's claims are by law extinguished, cancelled, unenforceable in a Court of law. If a lawsuit has been filed with a Court, the attorneys send a written notice to the Court advising the case is over with, and the Court then closes the file. Usually the terms of a settlement say whether each side will bear the fees and court costs or whether one side will payoff the other side's fees and costs.
Claims for minors, and those who have a legal disability due to mental illness, for example, cannot be settled until the Court officially approves the terms of the settlement. If the Court has any questions, it can appoint experts to offer the court advice on whether the settlement is in the best interests of the child or other incompetent person. Even though no suit has been filed, minors claims for large amounts of money require court approval. In cases where that has not happened a "friendly suit" is filed. The court then goes through the terms of the settlement, and if it approves the tentative settlement, the minor's legal representative blessed with Court approval, signs the Release, the Defendant's pay the settlement amount and the case is dismissed.
At trial none of these liens are supposed to be discussed in the presence of the Jury. Rules of Evidence prohibit discussion of these liens or settlement offers with the jury. For example, if a lien is $50,000, then the Plaintiff's attorney should ask the Jury for a large enough Verdict to be sure there is money to pay off these liens. If the Jury learns about pending liens it results in a mistrial, and the case has to be submitted to a new jury. Because of the high cost of mistrials and other reasons, settlements are a good way to limit the uncertainty of litigation.
