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:
- 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
- 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
- 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:
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.
But, this shouldn’t come as a surprise at the end of your case like it does for clients at a lot of PI firms. Good law firms should keep you in the loop about the economics of your case. You should never be surprised at the end.
What can clients do to protect themselves?
- Work with law firms that talk openly about the difference between the total settlement and the amount you actually get. One way to know is if they use big numbers in their advertising as a marketing ploy.
- Ask the law firm how they keep their clients in the loop on charges and fees that will be taken from your settlement throughout the case. If they have a process for doing this regularly, that’s a good sign. But be aware that most firms don’t.
- Don’t assume that the expenses associated with your case aren’t going to reduce your cut of the settlement. Make sure you don’t get more medical treatment than you need, make sure you negotiate your lawyers fees, and don’t get an advance on your settlement with high interest.
Written ByMaly Ohrenschall
VP of Customer Experience
About the author
Maly is a seasoned professional with over 15 years of experience in the insurance sector, specializing in multi-line claims and customer service for personal injury cases. As the leader of Mighty’s Client Experience team, she leverages her extensive background to ensure clients involved in auto accidents receive the highest level of care and support. Maly’s expertise plays a crucial role in delivering exceptional service and fostering long-lasting client relationships.
About the reviewer