How is Money Distributed After Settling a Personal Injury Case?
Florida Personal Injury Lawyer Explains How Money is Distributed After Settling a Personal Injury Case
The American Bar Association (ABA) writes that “[r]elatively few lawsuits every go through the full range of procedures and all the way to trial.” In fact, the American Judges Association estimates that roughly 97% of civil cases settle or are resolved without a trial. 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. But while settling a case means that your claim has been resolved and cannot (except in exceptionally rare circumstances) be re-opened, that is not the end of the process. Several individuals or businesses from the time of your injury until you get your check in hand need to be compensated. Our personal injury lawyer at The Law Offices of Prosper Shaked in Florida explain this process so you know what to expect. If you have any questions, please do not hesitate to ask our knowledgeable team.
Agreeing to Settle Your Case
Whether you are at a mediation, in front of the court in a settlement conference, or your attorney has been negotiating back-and-forth with the other party’s lawyer or insurance adjuster, you have decided to settle your case. This is a great decision because it gives you control over the outcome and limits a lot of risks that you may face during a public trial.
But now what happens?
After you have agreed to settle your matter, the attorneys will circulate a document that serves as a release of liability, often just called a “release” or sometimes called a “release and indemnification agreement.” This document requires both parties to sign, and you to 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 is a document that tells the court the action has been discontinued based on an agreement between the parties.
Distributing Settlement Proceeds 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 get deposited in your lawyer’s escrow or client account, and then the proceeds will have to be distributed to several entities. This includes the following:
Addressing Any Medical Liens
Some types of insurance carriers are allowed to impose liens on your recovery based on the compensation that 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 they often have to 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 that it paid to you. This lien must be reimbursed, but oftentimes an experienced personal injury lawyer can negotiate with the WC carrier to reduce the percentage of the lien.
- 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 it is possible that a health insurance carrier will agree to take less compensation by reducing a percentage of the lien.
- Medical Provider Liens – If your auto or health insurance did not fully cover your medical expenses, you will likely owe the unpaid balance to your treating medical providers. Additionally, you may have treated with 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 the reduction of the medical bill balances.
Paying Taxes to the IRS
Generally, personal injury settlements are tax free. This means that an individual does not have to pay taxes for physical injury, agony, and the pain and suffering caused by the actual physical harm. Lost wages due to the physical injuries are also not taxed.
However, certain aspects of the settlement may be taxed by Florida or the IRS. 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, punitive damages are almost always taxed by the IRS. This includes any interest accrued on the punitive damages.
- Lost wages – In some instances the IRS may seek taxes for lost wages but related to physical pain and suffering.
- Emotional distress – If you have claimed emotional distress that was not caused by your physical injury, you may owe taxes.
Costs and Disbursements
It costs money to litigate a case. While some lawyers may ask for money upfront, most successful lawyers like ours at The Law Offices of Prosper Shaked 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. This means 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 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 for 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.
After liens and the costs and disbursements are paid from the total amount of your settlement, verdict, or arbitration award, there are counsel fees. 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 that there is no financial risk to pay lawyer fees if there is no recovery.
Our experienced lawyers at The Law Offices of Prosper Shaked accepts personal injury cases on a contingency fee basis for a just and fair percentage.
Your Final Check
Once the costs and disbursements, liens, and counsel fees are paid, the remaining sum is your amount. If you have received punitive damages or other taxable damages, your lawyer may assist you with setting up a tax payment at the time of receiving your check. In other instances, you may be able to wait until your next tax return to pay with the advise of your accountant.
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 in you and your family, as you have gone from being wrongfully injured due to the negligent or intentional actions of another, to now 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 The Law Offices of Prosper Shaked in Miami, FL can help protect your rights to compensation under the law. Unlike some firms, we offer 1) FREE case evaluations, 2) pay the upfront costs and disbursements of litigation which are only reimbursed if we recover compensation for you, and 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.