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4 Technicalities that Can Cost You in a Personal Injury Claim

An overwhelming number of personal injury claims are settled before trial, including those that are resolved just before, on, or during trial. Oftentimes juries can be unpredictable so if a reasonable offer is made, most plaintiffs will accept them. This is preferable to facing the uncertainties of a trial, or experiencing the anxiety of having to testify. Insurance companies are also responsible in most of these cases for paying on a claim. They will do anything to not lose thousands of dollars in a case it could have settled for much less.

If you are the plaintiff and have accepted an offer and a settlement amount is either pending or has been distributed, there are certain technicalities that can cost you the entire settlement or any portion of it that might have been prevented. If you live in the Pasadena area and were injured in an accident, contact a personal injury attorney like Andrew Ritholz to discuss your claim and the issues than can affect your settlement.

Most Common Technicalities that Can Affect Your Settlement

1. You failed to file your claim in court before the statute of limitations passed.

California limits the time to two years in which a person injured by the negligent or wrongful conduct of another person or entity must file a claim in the proper court or lose the right to litigate under Code of Civil Procedure § 335.1. If you accepted a settlement with the time limit approaching, most insurers will allow it to run without jeopardizing the settlement but it is always a good idea to confirm this in writing.

Remember, there are situations where a settlement offer was made and the plaintiff wanted time to consider it and was unaware of the pending statutory time limit or thought it was inapplicable. In this case, your failure to file can prevent or bar you from accepting that offer or any further right to settle or litigate the claim.

2. You ignored or failed to negotiate with a lien-holder.

In many personal injury actions, a plaintiff’s medical expenses are paid by various insurers. Sometimes, lost wages are also paid to the injured party such as in workers’ compensation matters. If you had no health insurance or it was limited, your physician or other health care provider might have agreed to put off collection until you receive your settlement or the case resolved at trial. Other medical care providers or insurers have a statutory right to reimbursement of the expenses or benefits paid.

These individuals and entities have certain lien rights that are either statutory or contractual. A lien is a right by that entity to reimbursement from your injury claim.

Statutory Liens

Statutory liens, or liens created by law, may be asserted by these entities:

  • Medi-Cal and Medicare
  • Workers’ compensation
  • Hospital—emergency and ongoing services provided as a result of the negligent or wrongful conduct of another (Civil Code Section 3045.1-3045.6)

If you fail to disclose that you have a personal injury claim to a statutory lien holder such as Medicare or Medi-Cal, you risk losing your right to future health benefits as well as criminal prosecution.

In a work-related injury where workers’ compensation benefits were paid to and you also have a claim against a manufacturer for a defective product or against some other party for your injuries, the insurer has a right to a percentage of its lien paid out of your third party claim or lawsuit.

Contractual Liens

Contractual liens are created by a written agreement you have with your doctor or healthcare provider to delay expenses for examinations, chiropractic treatments, physical therapy, counseling or diagnostics until you settle or resolve your injury case. Another contractual lien is one with your own auto liability that is outlined in the language of your policy where you agree to reimburse it for medical payments in a car accident claim.

Payment of Liens

By law, statutory liens must be paid before your settlement proceeds are distributed. They may assert 100% of the payments but often take about one-third of what it paid. Your attorney can certainly negotiate with them for a smaller percentage in matters where your settlement was low. This is typically because of liability issues or limited insurance liability limits, among other reasons. This applies to the contractual lien-holders as well as far as negotiating the amount they are asserting.

3. You violated a confidentiality clause

In some cases, a defendant will want a promise from you to not publicly disclose the terms of a settlement. Usually, it is a company that fears possible penalties from a government agency. It may also desire to protect its brand or reputation. Cases like these may concern allegations of discrimination or violation of a law. There are some federal and state laws that do not allow confidentiality clauses in certain cases. If you violate a provision in a valid confidentiality clause, then you may jeopardize the settlement. The company may sue you for whatever it paid out in settlement to you.

4. Your settlement or a portion of it is taxable

Most personal injury awards or settlements are not taxable if paid for personal physical injuries or physical sickness. An award even for lost wages and medical expenses is not taxable so long as it is attributable to a physical injury under Internal Revenue Code Section 104(a)(2). However, there are exceptions to this rule.

Circumstances where your settlement or a portion of it is taxable include:

  • Any part of the settlement intended to be an interest payment such as interest on the judgment
  • Punitive damages
  • Settlement for lost income only
  • Where there is no relation between the award for emotional injury and a physical injury—i.e., you suffered only emotional trauma and economic loss with no physical injury ( i.e., invasion of privacy, defamation, breach of contract, wrongful termination, discrimination, sexual harassment)

In many cases, your attorney can specifically word the settlement agreement so as to minimize or eliminate the taxable consequences.

Contact a Pasadena Personal Injury Attorney

Andrew Ritholz has personally handled thousands of settlements in personal injury and other claims. He can advise you and structure your settlement agreement so that you can avoid or minimize any tax liability you may face as well as discuss other ways that your potential settlement may be jeopardized or reduced by the issues discussed above. Contact him today!

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