Personal Injury Settlement FAQ

A personal injury demand letter is a formal written document sent to the at-fault party or, more commonly, their insurance company, requesting compensation for your injuries and damages. It's typically the first formal step in settlement negotiations and serves several critical purposes in the claims process.

First, a demand letter formally notifies the defendant that you're pursuing a claim and establishes you as a serious claimant who has prepared their case. Second, it presents your version of the facts, including a detailed account of how the accident occurred and the legal basis for why the defendant is liable for your injuries. Third, it comprehensively documents your injuries, the medical treatment you've received, your prognosis, and all the damages you've suffered—both economic and non-economic. Fourth, it articulates a specific settlement demand amount, giving the insurance company a concrete number to respond to. Fifth, it typically provides a deadline for response and implies that legal action will follow if the claim isn't resolved satisfactorily.

A well-crafted demand letter can facilitate settlement without the need for costly litigation, as it provides the insurance company with all the information needed to evaluate your claim and make a settlement decision. Under California law, sending a demand letter is not legally required before filing a personal injury lawsuit—except in medical malpractice cases, where Code of Civil Procedure Section 364 requires 90 days' notice before filing. However, demand letters are standard practice in the industry and often lead to faster, more efficient resolution of claims.

Calculating a fair settlement amount requires comprehensively evaluating all categories of damages and understanding how California law and insurance industry practices value injury claims. This process combines objective calculation of economic losses with more subjective assessment of non-economic damages.

Start by totaling your economic damages, which are the quantifiable financial losses. Add up all past medical expenses including hospital bills, physician charges, physical therapy, medications, and medical equipment. Calculate future medical costs based on your prognosis and any life care plan developed for serious injuries. Determine lost wages from documentation of time missed from work. If you have permanent limitations, assess loss of earning capacity with help from vocational experts if needed. Include property damage costs and all out-of-pocket expenses caused by the injury.

For non-economic damages such as pain and suffering, emotional distress, and loss of enjoyment of life, calculation methods vary. The multiplier method multiplies your economic damages by a factor typically ranging from 1.5 to 5 (or higher for severe, permanent injuries), with the multiplier depending on injury severity, recovery length, and life impact. The per diem approach assigns a daily dollar value to your pain and suffering, then multiplies by the number of days affected. Consider factors like whether injuries are permanent, whether you have visible scarring or disfigurement, your age, and how injuries affect your daily activities.

Research comparable verdicts and settlements in your California county to understand local valuation patterns. Account for comparative negligence—if you share fault, your recovery is reduced proportionally. Subtract liens that must be repaid. A fair settlement fully compensates your losses while avoiding the uncertainty, expense, and delay of trial.

Deciding whether to reject a settlement offer and file a lawsuit is one of the most significant decisions in your personal injury case, requiring careful analysis of multiple factors. There's no universal answer—the right choice depends on your specific circumstances, risk tolerance, and goals.

Consider filing suit when the insurance company's offer is unreasonably low and doesn't come close to fairly compensating your documented damages. Filing may also be appropriate when negotiations have genuinely stalled and the insurer won't make meaningful movement despite your strong case, when you need formal discovery tools (depositions, document requests) to obtain evidence in the defendant's control, when the statute of limitations is approaching and you must file to preserve your right to sue, when liability is strongly in your favor and a jury trial could yield significantly higher compensation, or when the insurer is acting in bad faith by denying clearly valid claims or engaging in unreasonable delay tactics.

However, consider accepting a reasonable settlement if the offer reasonably approximates your claim's fair value given litigation risks, if liability is questionable or you bear significant comparative fault that a jury might assess harshly, if the defendant has limited insurance coverage and few assets making a larger judgment potentially uncollectible, if you need compensation quickly due to medical bills or financial pressures, or if you want to avoid the emotional stress, time commitment, and uncertainty inherent in litigation.

Filing suit doesn't preclude settlement—most cases settle during litigation. But California Code of Civil Procedure Section 998 creates strategic implications for settlement offers, as parties who reject offers and then fail to do better at trial may face cost-shifting penalties.

Insurance companies use systematic, often computerized processes to evaluate California personal injury claims. Understanding their methodology helps you prepare a claim that addresses their evaluation criteria and anticipates their concerns.

Liability assessment is the first major factor. Adjusters analyze all available evidence to determine who was at fault, including police reports, witness statements, photographs, and physical evidence. They assess whether California's comparative negligence rules might reduce your recovery—if you were partially at fault, your damages are reduced proportionally. They look for evidence supporting or contradicting each party's account of how the accident occurred.

Damages evaluation involves detailed scrutiny of your claimed losses. Adjusters review medical records to verify that your injuries are consistent with the accident mechanism—they're looking for documentation that your injuries actually resulted from this incident. They assess whether your treatment was reasonable and medically necessary, or whether it was excessive or unrelated. They calculate economic damages based on the documentation you provide, verifying amounts and questioning unsupported claims. For non-economic damages, they evaluate injury severity, duration, and impact on your life.

Insurance companies use sophisticated claims software and databases that compare your claim to thousands of similar cases based on injury type, treatment, geographic location, and other factors. They examine your medical history for pre-existing conditions that might explain some of your symptoms. They evaluate your credibility through recorded statements, medical records, and increasingly, social media searches. Red flags that may reduce their valuation include gaps in medical treatment, inconsistencies between your statements and records, prior claims or lawsuits, and evidence of pre-existing conditions. Understanding this process helps you present a well-documented, credible claim.

An effective California personal injury demand letter should include several essential components, presented in a professional, organized format that makes it easy for the insurance adjuster to evaluate your claim. A well-structured demand letter demonstrates that you're serious, prepared, and ready to litigate if necessary.

Begin with identifying information: your name and contact information, the claim or policy number if assigned, the date and location of the incident, and the insured party's name. Follow with a clear, detailed liability section explaining how the accident occurred, why the defendant was negligent or otherwise at fault, and the legal basis for their responsibility. Cite relevant California law such as Civil Code Section 1714 establishing general negligence liability, or specific statutes applicable to your situation.

Document your injuries thoroughly. Describe the initial diagnosis, all treatment received chronologically, your current symptoms and limitations, and your prognosis based on your treating physician's opinions. Be specific about how injuries affect your daily life. List all economic damages with precise figures and identify supporting documentation: itemized medical expenses including both paid amounts and outstanding balances, projected future medical costs, lost wages with verification from your employer, lost earning capacity if applicable, property damage, and other out-of-pocket expenses like transportation to medical appointments.

Address non-economic damages by describing the physical pain you've experienced, emotional distress, anxiety, depression, loss of enjoyment of activities, impact on relationships, and any other ways the injury has diminished your quality of life. Include your specific demand amount and explain the factual basis supporting that figure. Set a reasonable deadline for response—typically 30 days. Attach copies of key supporting documents. Close professionally, indicating willingness to negotiate but readiness to pursue legal action if necessary.

Yes, you can negotiate your own personal injury settlement in California without hiring an attorney—this is called proceeding "pro se" or "pro per." Whether this is advisable depends on your specific situation, the complexity of your case, and your comfort level with negotiation and legal concepts.

Self-representation works best when your injuries are relatively minor with complete recovery expected (soft tissue injuries that resolve within weeks or months), liability is clear and undisputed (rear-end collisions where the other driver is obviously at fault), damages are straightforward to calculate and document, the insurance company is acting reasonably and in good faith, and you have time and inclination to learn about the claims process. Benefits of handling your own claim include keeping 100% of your settlement without paying attorney fees (which typically range from 33% to 40% of the recovery), maintaining direct control over all decisions, and potentially faster resolution for simple, straightforward cases.

However, significant risks exist. You may undervalue your claim due to inexperience with how similar cases settle. You might make statements to the insurance company that inadvertently harm your case. You could miss important deadlines or fail to comply with procedural requirements. You might not recognize when your injuries are more serious than they initially appeared. You'll be negotiating against experienced insurance adjusters who handle claims daily. Studies suggest that represented claimants often receive higher net settlements (even after attorney fees are deducted) than unrepresented claimants, particularly in cases involving serious injuries, disputed liability, or complex legal issues.

If you choose self-representation, document everything meticulously, research the value of similar cases, never accept the first offer, get all settlement agreements in writing, and be willing to consult an attorney if the case becomes complex or the insurer acts unreasonably.

After you accept a personal injury settlement in California, several important steps must occur before you actually receive your money. Understanding this process helps you know what to expect and avoid surprises that could affect your net recovery.

First, you'll sign a release agreement—a comprehensive legal document releasing the defendant and their insurance company from any and all claims arising from the incident. Read this document extremely carefully because it's typically final and all-encompassing. Once you sign a release and cash the settlement check, you generally cannot pursue additional compensation from the defendant for this incident, even if your injuries worsen or you discover new damages later. If you have any questions about the release language, consult an attorney before signing.

After receiving the signed release, the insurance company will issue a settlement check. Under California Insurance Code Section 790.03 and related fair claims practices regulations, insurers must process settlements within a reasonable time—typically within 30 days of receiving all required documentation. If you're represented by an attorney, the check is made payable to both you and your attorney and deposited in their client trust account for proper distribution.

Before you receive your share, several obligations must be satisfied. Medical liens from hospitals, health insurance companies, Medicare, Medi-Cal, and individual healthcare providers must be paid or negotiated to reduced amounts. If you received workers' compensation benefits related to the injury, their lien must be resolved. Attorney fees and litigation costs are deducted per your fee agreement. Your attorney will provide a detailed settlement statement showing all distributions. Regarding taxes, settlements for physical injuries are generally not taxable income under IRC Section 104, but portions allocated to punitive damages or interest are taxable.

Personal injury settlement negotiations in California vary dramatically in duration, ranging from a few weeks for the simplest cases to many months or even years for complex disputes. Understanding the factors that affect timing helps you set realistic expectations and plan accordingly.

Before negotiations can meaningfully begin, you need to complete your medical treatment or at least reach maximum medical improvement—the point where your condition has stabilized. This pre-negotiation preparation phase typically takes one to six months after MMI as you gather complete medical records, calculate all damages, and prepare a comprehensive demand letter. Once you send your demand letter, the insurance company usually has 30 to 45 days to investigate and respond with an initial offer or position.

The negotiation phase itself involves exchanging offers and counteroffers, which may happen over weeks or months depending on how far apart the parties are and how willing each is to move. Simple cases with clear liability—such as rear-end collisions with documented soft tissue injuries, reasonable medical treatment, and a cooperative insurance company—might settle within two to three months of sending a demand letter.

Complex cases take much longer. Factors that extend negotiations include disputes over liability or allegations of significant comparative fault on your part, disagreements about injury causation or whether treatment was necessary, high-value claims that require insurance companies to conduct thorough investigation, multiple defendants or insurance policies with coordination issues, and uncooperative insurers using delay tactics. These cases may take six to twelve months or longer even before filing suit. If litigation becomes necessary, add another one to three years for discovery, motions, and trial preparation. Many cases settle during litigation, often after depositions reveal case strengths or at mediation.

Mediation is a form of alternative dispute resolution (ADR) where a neutral third party—called a mediator—facilitates settlement negotiations between you and the defendant or their insurance company. Unlike a judge or arbitrator, the mediator doesn't decide your case or impose a resolution. Instead, they help both sides communicate more effectively, identify areas of common ground, understand each other's perspectives, and work toward a mutually acceptable settlement.

In California, mediation is widely used in personal injury cases and is often required by courts as a prerequisite to trial under local court rules. Mediators in personal injury cases are typically retired judges or experienced attorneys with extensive knowledge of claims evaluation and settlement dynamics.

Mediation offers several significant advantages. Confidentiality is protected—unlike court proceedings which are public, mediation discussions cannot be used as evidence in later proceedings under California Evidence Code Section 1119. You maintain control over the outcome because you can accept or reject any proposed settlement; nothing is imposed on you. Mediation allows flexibility in crafting creative solutions that a court couldn't order. It's typically much less expensive than trial. It usually provides faster resolution than waiting for a trial date. And in situations involving ongoing relationships, mediation preserves relationships better than adversarial litigation.

Mediation is particularly valuable when both parties genuinely want to settle but can't bridge the gap in direct negotiations, when emotions are running high and a neutral facilitator can help, when you want a reality check on your case's strengths and weaknesses from an experienced neutral, or when the court requires mediation before allowing your case to proceed to trial. You can mediate at any stage—before filing suit, during discovery, or even on the eve of trial. Success rates are high, with studies showing most cases that go to mediation reach settlement.

A structured settlement is a financial arrangement where instead of receiving your entire settlement as a single lump sum payment, you receive a series of periodic payments over time. These payments can be structured in many ways—monthly income, annual payments, deferred lump sums at specific future dates, or combinations of these approaches. The payments are typically funded through an annuity purchased from a highly-rated insurance company by the defendant's insurer as part of the settlement.

The most significant advantage of structured settlements involves taxes. Under Internal Revenue Code Section 104(a)(2), compensation for physical injuries is tax-free, but this applies only to the original settlement amount—if you receive a lump sum and invest it, the investment earnings are taxable. With a structured settlement, however, the entire payment stream including all growth and interest remains completely tax-free. Over decades, this tax advantage can result in significantly more total dollars received.

Structured settlements are most appropriate for large settlements where managing a substantial sum of money is a concern, cases involving minors where funds need to be preserved until adulthood, individuals with diminished capacity who might be vulnerable to financial exploitation, people who recognize they might spend a lump sum too quickly, cases involving long-term medical care or living expense needs that periodic payments can match, and situations where a guaranteed income stream provides more security than depending on investment performance.

Disadvantages include inflexibility—once structured, the payment schedule generally cannot be changed regardless of changed circumstances. You cannot access large sums for emergencies without selling payment rights at a significant discount to factoring companies. If you're a disciplined investor, you might achieve better total returns managing money yourself despite the tax disadvantage. California Insurance Code Section 10134 et seq. regulates the sale of structured settlement payment rights, requiring court approval of transfers. Carefully evaluate your personal situation, financial discipline, and long-term needs before choosing between lump sum and structured settlement options.