What is a Structured Settlement?

If you have been injured due to someone else’s negligence in Florida, chances are you have either filed a claim with the responsible party’s insurance carrier or, if the responsible party’s insurer refused to take your claim seriously, or a personal injury lawsuit against the driver that injured you.  There will come a point in every personal injury claim or lawsuit where the issue of settlement, or resolution, of your claim against the person or entity whose negligence was responsible for your injuries, may come up.  It may be early on in the process and may consist of informal settlement negotiations between you or your attorney and the claims adjuster from the insurance company, or it may be at a formal mediation with a mediator late in the case right before you are scheduled to go to trial. However, and although it is fairly rare, sometimes the issue of a structured settlement will come up in the course of settlement negotiations with the other side’s insurer.  Upon first being informed by your attorney that the insurer’s representative has raised the issue of a structured settlement, you may blink once or twice and then look at your attorney in confusion, wondering what on Earth the insurer’s representative is talking about.  A structured settlement?  What is that?

What Is a Structured Settlement and How Often Are They Used in the Settlement of Personal Injury Actions?

A structured settlement is a financial arrangement pursuant to which the insurer for the tortfeasor (the person or entity whose negligence resulted in your injuries) makes arrangements for the personal injury victim to receive a series of periodic payments for a specified amount over a specified period of time. They are much less common in personal injury claim/lawsuit settlements than a simple lump sum payment by the negligent party’s insurer to the injured party.

Structured settlements can be very useful and absolutely have their place in many personal injury settlement scenarios.  They are very good in circumstances where a personal injury claimant is looking for long-term security, but may not be in a position to invest the proceeds of a personal injury settlement himself or herself or to find a competent financial professional to assist in doing so.

However, caution needs to be advocated when considering any settlement offer from an insurer that is trying to convince you that a structured settlement is a better way to resolve your personal injury lawsuit than a lump sum payment.  Insurers will often try to take advantage of unsophisticated personal injury claimants by trying to save a few bucks by using a structured settlement in order to avoid paying the claimant the full value of his or her claim.

How Do Insurance Companies Use (or Abuse) Structured Settlements to Try to Settle Cases for Less Than They are Worth?

Sometimes insurance companies will use structured settlements as a means to try to lowball a settlement offer by telling an injured person they are getting more through a structured settlement than the person would otherwise get through a normal lawsuit or settlement negotiation.  Say your personal injury claim is most likely worth $150,000, but the insurance company is only willing to offer $100,000 in a lump sum payment.  In an effort to entice you to execute a settlement agreement that will end up costing it less than $150,000, the insurance company may offer you a proposal under which you receive monthly payments from a life insurer of $3,000 per month for the next five years.  Although this equates to $180,000 in total payments,  this may not be as good a deal as the insurer is trying to tell you it is.  For example, it may only be costing the insurance company $95,000 to purchase the annuity that will fund your structured settlement, so you could potentially be leaving money on the table by agreeing to the insurer’s structured settlement proposal rather than insisting on a lump sum payment to settle your personal injury claim.

What this proposal for a structured settlement from the insurer also ignores is that a dollar today is not worth the same as a dollar tomorrow or in five years.  Therefore, just because the structured settlement the insurer is offering you results in you receiving more in nominal dollars does not mean that you would be better off accepting this proposal.  Instead, an apples-to-apples  comparison may reflect that the structured settlement that you are being offered is really not that great a deal.  You may be able to do much better by insisting upon a lump sum payment and investing that money through a qualified professional.  This is one reason it is important that your attorney having the proposed structured settlement reviewed by an industry professional is such a key step in assisting you in evaluating whether a structured settlement is right for you or not in settling your personal injury claim.

Contact Schwed, Adams & McGinley

At Schwed, Adams & McGinley, our experienced personal injury attorneys have more than 150 years of representing the victims of all sorts of motor vehicle accidents and other personal injury scenarios in Florida.  We are keenly aware of how some insurers try to utilize structured settlements to save the insurer money when they are not right for the victim or are just trying to shortchange a victim of someone else’s negligence.  Structured settlements can be a great tool to ensure financial security for a victim injured by someone else’s negligence, but every situation is different, however, and structured settlements are not right for every person or every personal injury claim.  Therefore, we will always vet a structured settlement proposal with our own trusted experts in order to ensure that an insurer for the party that injured our client is not attempting to save a few dollars at our client’s expense. Therefore, if you, a family member, or a loved one have been injured by someone else’s negligence in Florida, contact the experienced personal injury attorneys at Schwed, Adams & McGinley, P.A today at 877-694-6079 or contact@schwedlawfirm.com for a free consultation.