Non-Disclosure Agreements (NDAs) In Personal Injury Settlements

At some point, a personal injury claim might involve the signing of a non-disclosure agreement (NDA), which might require all parties involved in a personal injury settlement to keep the agreement confidential. In this article, we'll discuss:

• How do NDAs work in the context of a personal injury settlement?
• Why would a company or individual want an NDA in a personal injury case, and why would an injured claimant sign one?
• What happens if you violate an NDA after you reach a personal injury settlement?

What Are Non-Disclosure Agreements?

A nondisclosure agreement or "NDA" is used in a lot of different kinds of legal claims and business transactions. It's basically a legal contract (or a clause in a contract) in which both parties:

• promise to keep the terms (and perhaps even the existence) of an agreement confidential, and/or
• agree not to disclose information learned in a transaction

In the context of some personal injury cases, it's easy to understand why a person who has paid money to settle a high profile claim would want to keep the existence and terms of the settlement (and the existence of the very dispute or situation itself) confidential. Anything to avoid damage to reputation or career.

But what about settlements of more run-of-the-mill legal disputes, like car accidents or slip-and fall incidents?

Why Have an NDA in a Personal Injury Settlement?

From the perspective of the injured plaintiff, an NDA may be desired for various reasons. For example, an NDA prevents the details of the person's injuries from becoming a matter of public record, and most people do not want the world to know the specifics of their medical treatment.

Additionally, because there is usually value to the wrongdoer defendant in having the injured plaintiff agree to keep the terms of a personal injury settlement confidential, this often translates into a bigger settlement.

Insurance Companies May Prefer NDAs

Where the wrongdoer defendant is concerned, an NDA may be thought of as a necessity. In the typical personal injury settlement, the proceeds are being paid by an insurance company that defends many similar types of claims on an ongoing basis, and the conventional wisdom is that public knowledge of the existence and terms of other settlement agreements would have a detrimental effect on the number of claims filed—as well as on the claimants' settlement demands.

The concern is particularly great when there is a highly-publicized incident that would likely give rise to a flood of claims if the public learned of the multi-million dollar amount paid to settle a given case.

What Does an NDA Look Like?

A well-drafted personal injury settlement NDA will usually:

• state that the existence and terms of the settlement are to be held in strict confidence by the parties
• make clear that the injured plaintiff is permitted to disclose the terms to their attorney, accountant, spouse, and others who have a legitimate need to know, and
• declare that if either party breaks the NDA, they can be made to pay an agreed-upon amount (sometimes known as "liquidated damages") to the other party; whatever the particulars, there's typically some kind of penalty "baked in" to the NDA, which is triggered when its terms are violated.

Some NDAs also include a provision giving the parties a "script" to recite in response to questions about how the case was resolved (especially if it's a high-profile matter).

For example, the NDA might state that when an inquiry is made, the parties are only permitted to answer that the matter has been amicably resolved to their mutual satisfaction, and that the terms of that resolution are confidential. The benefit of such a provision is that it avoids arguments about whether a party has in fact disclosed confidential settlement terms in violation of the NDA. If the parties stick to the script, there's usually no legal gray area around what can and cannot be said.

What Happens if You Break an NDA In a Personal Injury Case?

Penalty provisions contained in NDAs often state that if the confidentiality agreement is violated, the violating party (the injured person in a personal injury settlement agreement) must either:

• return the entire settlement amount, or
• pay "liquidated damages," as touched on above.

NDAs typically also provide that the violating party's failure to pay the required penalty will subject them to financial responsibility for the costs and attorney's fees incurred by the insurance company in recovering this money in further legal proceedings.

How to Protect Yourself

While the consequences of violating an NDA in a personal injury case can be quite severe, there are some things you can do to protect yourself from liability and to soften the blow if a breach occurs.

Adding the NDA Should Boost the Settlement

If the insurance company is insisting on an NDA as part of the settlement, your attorney should attempt to negotiate additional consideration for including such a clause in your agreement. For example, if you are settling the case for $50,000, your attorney might seek an extra $5,000 for the NDA.

Keep the Liquidated Damages/Penalty Amount Reasonable

Your attorney should try to limit the agreed-upon damages for violation of the NDA to a number that does not greatly exceed the extra compensation paid for the NDA as part of the settlement—so if you agreed to the NDA in exchange for an additional $5,000, perhaps the liquidated damages clause would dictate a $7,500 penalty for violation. Under no circumstances should your attorney agree that violation of the NDA be penalized by return of the full settlement amount.

Get Help With Your Personal Injury Case

Before you can consider signing an NDA as part of a personal injury case, you need to be in a position to be offered a fair settlement by the at-fault party. Getting to that point takes a lot of work. It means:

• proving that the other side is responsible for your injuries
• establishing the nature and extent of your harm ("damages" in the language of the law) through records, documentation, and other evidence, and
• fighting for the best result against the other side, their insurance company, and perhaps their lawyer.

All of this means putting your personal injury case in the hands of a skilled attorney is often necessary. Once a satisfactory settlement agreement is reached, your lawyer will help you figure out whether it makes sense for you to sign an NDA, and if it does, whether there's an opportunity to boost your settlement amount in exchange for agreeing to sign.

Learn more about finding the right personal injury lawyer for you and your case. You can also use the tools on this page to connect with an injury lawyer in your area.