Glossary: Out-of-Court Settlement

William Mattar Glossary
Posted: July 17, 2022

Out-of-Court Settlement:

An out-of-court settlement can include settlements that are made before the injured person has to file a lawsuit. These sorts of settlements are ideal when the insurance company for the at-fault party realizes that a fair and equitable pre-suit settlement makes more sense because it reduces the risk and lowers the overall cost, especially considering that the insurance company will not have to pay defense costs for its insured. Importantly, an out-of-court settlement must fully compensate the injured person for past and future pain and suffering because once the claim is settled it cannot be reopened at a later date.

How Out-of-Court Settlements Work  

Negotiation is the simplest alternative dispute resolution option. It involves direct negotiations between the car accident victim and the liable driver’s insurance company. The car accident victim can also retain a lawyer for the negotiations.  

Here is a step-by-step overview of how the negotiations process works:  

  1. One Party Makes an Offer 

Negotiations usually begin when the car accident victim makes a settlement “demand” to the liable driver’s insurer. In response, the insurer may make an offer. Notably, many insurers make low offers hoping to settle the dispute without incurring heavy losses. Car accident victims are thus normally advised to consult lawyers before accepting any low offers.  

  1. The Other Party Makes a Counter-Demand 

The car accident victim can refuse the offer and adhere to the original settlement demand or make a counter-demand. This usually turns into an ongoing back-and-forth process as both parties try to reach a compromise.  

  1. Commence a Lawsuit

If the parties disagree as to the appropriate settlement figures, they may reach an impasse, in which case the injured person may decide to file a lawsuit.   


Out-of-court settlements can be a quick and effective way to recover damages for pain and suffering before the injured person has to file a lawsuit, but only when the settlement figure fairly compensates the injured person.  If you are looking for an experienced attorney to help you negotiate with the insurance company for the at-fault motorist, feel free to contact us and we’ll be happy to review the circumstances of your case 

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