How To: Why injured people only get part of their settlement and what they can do about it

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If you ask an injured person who just got their settlement what the most surprising part of their experience is, they’ll likely answer they couldn’t believe how much of their settlement was paid to everyone but them! 

Here’s the hard truth: the number you see on the billboard where a lawyer says “we won our client $2,000,000 dollars” leads most reasonable people to believe that’s what the injured person got. But, alas, it’s usually not even close. Not only because only .01% of cases settle for anything close to that number, but even that large number is often referred to as the total settlement or gross settlement. That’s the amount the defendant, which is usually the insurance company, pays out at the end of a case. 

But, that total settlement isn't just for the person injured. It also goes to pay for all of the help and services the injured person got on the road to that settlement. It’s used to pay doctors for medical treatment, financiers if they had advanced you money, health insurance providers if they covered medical expenses, costs associated with your case, and of course, your lawyer’s fee. 

Only after all of those other parties are paid do you get your money. You get what’s left, which is often referred to as the net settlement. 

Why Don’t More PI Lawyers Tell Their Client They Only Are Getting Part of the Settlement?

PI Lawyers and paralegals often don’t discuss the differences between the total settlement you get and the actual amount you take home nearly enough. That’s not a coincidence. The PI lawyer is incentivized to hide this information for as long as possible throughout the case. There are a few reasons this can be true:

1. The lawyer is scared that if the client realizes how little they’re going to get at the end of the case, they won’t continue to pursue it
2. The lawyer is afraid that if the client understands that the various expenses and costs related to their case are coming out of what they’ll get, the client will question them more and be a nuisance
3. The lawyer doesn’t want the client negotiating their fees

How do I know how much of my settlement I am going to get?

At the end of each case, a lawyer asks their client to sign a settlement statement. The settlement statement is essentially a receipt which shows the total settlement and how much in fees and costs are paid to medical providers, the hospital, health insurer, lawyer, and more. At the bottom, they show what’s left to pay the client. Here is an example Settlement Statement from a real case, with information redacted to protect privacy:

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There’s no easy formula to predict how much a client will take home from the total settlement, but there are some rules of thumb. One is 1/3 , 1/3 ,1/3 which is a back-of-the napkin estimation showing that the lawyer gets 1/3 , all the medical providers together get 1/3 , and the client gets 1/3. 

This shouldn't come as a surprise at the end of your case like it does for clients at a lot of PI firms. The economics of your case — what you'll actually take home after medical providers, lienholders, and lawyer fees — should be transparent throughout, not revealed only when you sign the settlement statement.

What can clients do to protect themselves?

• Consider whether you need a law firm at all. Mighty's AI handles your claim without taking a percentage of your settlement — meaning you keep 100% of what's left after lienholders are paid. No lawyer fee comes out of your share at all. For most accident claims, this is all you need.
• If your case does need a lawyer (serious injuries, disputed liability, multiple parties, an insurer refusing to engage), Mighty's marketplace surfaces a vetted lawyer paid only on the increase to your existing offer — not 33%-40% of the entire settlement.
• If you do go to a traditional law firm directly, work with one that talks openly about the difference between the total settlement and what you actually take home. Be wary of firms using big numbers in advertising as a marketing ploy.
• Don't assume the expenses associated with your case aren't going to reduce your cut. Avoid getting more medical treatment than you need, negotiate the lawyer's contingency rate (it's possible — most lawyers will negotiate especially if you wait until you have an offer in hand), and avoid high-interest settlement advances.