Understanding Structured Settlements in Catastrophic Injury Cases

Catastrophic injury cases often result in substantial settlements intended to compensate the injured party for everything from medical bills to lost wages and long-term care. When a personal injury claim results in a substantial settlement, one of the most important questions may be how that compensation should be received.

For some injury victims, a structured settlement can provide a way to receive compensation through periodic payments rather than receiving the entire settlement as one lump sum. At Lipsig, Freund & Wisell, our attorneys help injured New Yorkers understand the legal and financial issues that can arise when resolving a catastrophic injury claim.

What is a Structured Settlement?

A structured settlement is an agreement under which an injured person receives settlement compensation through scheduled payments over time. Depending on the agreement, payments may be made monthly, annually, or according to another predetermined schedule.

A structured settlement can provide more than a payment schedule. It can become part of a long-term financial plan for someone whose injury may require continuing medical care, rehabilitation, assistive equipment, or personal assistance.

Why Can Structured Settlements Be Important in Catastrophic Injury Cases?

Catastrophic injuries often create expenses that do not end when a lawsuit settles. An injured person may need treatment and support for decades. A large settlement received all at once can also be difficult to manage, particularly when the compensation is intended to provide financial support for the remainder of an injured person’s life.

A structured settlement can provide predictable payments that are designed around the injured person’s anticipated needs. Depending on the agreement, the payment schedule can be structured to provide regular income or larger payments at times.

Consider some of the expenses that may continue after a catastrophic injury:

• Medical treatment, rehabilitation, and prescription medications
• Home modifications, transportation, and assistive equipment
• Lost income and diminished future earning ability
• In-home care and other long-term support

The right structure depends heavily on the individual circumstances of the injured person. A settlement intended to cover decades of future expenses should not be treated as though it were simply a short-term financial recovery.

Can a Structured Settlement Be Changed Later?

This is an important issue to consider before a settlement is finalized. A structured settlement is designed around agreed-upon payment rights. Once those rights are established, changing the arrangement may not be simple.

The IRS also imposes a 40% excise tax on certain structured settlement factoring transactions, meaning transactions in which structured settlement payment rights are transferred for consideration.

For that reason, an injured person should carefully consider the proposed payment schedule before agreeing to a structured settlement. A settlement may need to account for immediate expenses as well as future medical and personal needs.

How Can a Lawyer Help With a Structured Settlement?

The value of a catastrophic injury settlement is not determined solely by the amount offered by an insurance company. The timing and structure of the payments can also matter.

Insurance companies may attempt to resolve serious injury claims for less than the injured person’s future needs require. Our attorneys can negotiate with insurers regarding the value of a claim and the terms of a settlement. If the insurance company refuses to make a fair offer, litigation may be necessary.

A structured settlement may ultimately be appropriate for one catastrophic injury victim but not another. Let’s talk about whether a structured settlement is the right fit for you or your loved one. Call our New York City office today at (212) 285-3300 to arrange a free consultation.