If you’ve been involved in a car accident and you're completely free of fault -- you’ve got two witnesses who say the other driver ran a red light, for example -- don’t be surprised if the other driver’s car insurance company tries to get you to accept a quick settlement.
It may be tempting to accept a settlement early on. After all, that way you can avoid the time and expense of filing a car accident lawsuit and getting a lawyer involved. But remember that if you do accept a settlement, you will need to sign a "release" form that waives your right to sue or bring any additional claim over the accident. This form is so named because it "releases" the responsible party -- the at-fault driver and his or her insurer -- from any liability associated with the accident.
There are also situations in which your own insurer will ask you to sign a release before authorizing payment for vehicle repairs.
There are several reasons why taking a quick settlement or signing a release may not be in your best interest. This article offers a few issues to keep in mind.
The most obvious concern is whether the car accident settlement will actually cover all of your losses ("damages") associated with the accident. It may not take long to determine how much it will cost for repairs to your vehicle, but other damages can be more difficult to calculate. For instance, what sort of medical bills will you have? Does the settlement cover lost wages? What about emotional distress or pain and suffering?
An insurance company may try to settle quickly, before you have a chance to fully comprehend the scope of these damages. Those recurrent headaches may seem minor, but they may be an indicator of more significant neurological damage than you or your doctor originally suspected. If you signed a release before your condition was fully understood, you could be stuck with mounting medical bills and lost wages as you have to seek additional treatment. At the bare minimum, a good rule of thumb is this: Don’t sign any kind of release until your doctor has informed you that your course of medical treatment is complete, or you've reached "maximum medical improvement" (MMI).
It may not seem obvious at first, but signing this release could get you in trouble with your own insurer. This concern is best understood as a hypothetical. Let’s say that your vehicle was hit by a driver who is 100% at fault, and you suffer $20,000 in losses between medical bills and vehicle damage. The other driver has a state minimum coverage policy worth only $12,500, and his insurer is ready and willing to settle for that amount.
You may think this sounds like a fair deal, since it’s all you can get out of the insurer, and what are the odds you can really collect much money from the driver directly? Besides, your own insurance policy probably includes uninsured/underinsured motorist (UIM) coverage, so your insurer should cover the difference.
Without going into too much depth on the doctrine of subrogation, your insurer can pay out UIM benefits, and then pursue a remedy against the other driver. But by signing the release, you have waived your rights -- and by extension, those of your insurer -- against the other driver. Because this leaves your insurer holding the bag, most insurance policies (and some state laws) require that you get your insurer’s permission before signing off on a release. If you sign a release without permission in such a situation, the insurer may not be required to pay out UIM coverage, leaving you with no relief for the difference.
Ultimately, whether signing a release is a good idea will depend on the circumstances of your case. If there is minimal vehicle damage and injury -- and all your damages are known and accounted for -- and the settlement amount exceeds those damages with a little extra thrown in, then taking the settlement and signing the release may be the right thing to do. Consulting an experienced personal injury attorney may be a good idea. An attorney can help evaluate the settlement offer based on the specifics of the situation and help determine whether your rights would be adequately protected should you accept the deal.