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What happens when my personal injury case settles?

Lots of clients want to know about what the last steps are in a personal injury case when the parties reach an agreement. What happens upon settlement? Does the money magically appear in my bank account? When will I receive my settlement funds? Are the settlement funds taxable? Do I have to go to Court to close my file? Is there any other work required of me for my case once the case has settled?

These are all great questions.

With this edition of the Toronto Injury Lawyer Blog, we hope to answer those “late in the case” questions, and more.

Let’s pretend for a moment that after many years of hard fought litigation; and after many arguments between the lawyers on both sides that everyone seems to agree on a deal in order to get the case settled.

The agreement takes place outside of Court, perhaps moments before trial, or perhaps at mediation or in an exchange of emails between the parties.

What will then take place is an exchange of documents between the lawyers which provide clear terms with respect to the terms of the settlement.

Those documents can take form in something called “Minutes of Settlement“. Or, they can take place through a simple letter or email detailing what has been agreed upon. The purpose of this is to confirm the terms of the deal, so that there are no misunderstandings between the parties.

Your personal injury lawyer will ask that you sign these Minutes of Settlement in the event they are prepared.

Your personal injury lawyer will also ask that you sign a “Direction to Settle” or an “Authorization to Settle” or some other document which directs the lawyer to get the case settled on the terms which have been discussed between you and your lawyer. This is a document between you and your personal injury lawyer whereby the client gives a written direction to his/her lawyer to settle the case, and on what terms the case will settle for. These Directions To Settle will generally state how much the case will settle for; along with how much money the client will expect to receive after payment of legal fees, HST, disbursements and any other costs associated with the case.  This documents clearly states that the client directs the lawyer to settle for “X”, and that the client will receive “X” upon settlement after all expenses are paid.linkedin-2-300x300

Once that document is signed, the Defendant will require that the Plaintiff sign a Release. This is standard. Anyone who settles his/her case outside of Court will have to sign such. Release. It’s a legal document which states that the case has settled for “X” amount of dollars; and that the Plaintiff will not sue the Defendant again arising from that specific incident. It may also contain other verbiage indicating that the Defendant does not admit liability for the incident (yet they are prepared to pay a sum to the Plaintiff); there might be a confidentiality provision; there will be provisions relating to any crossclaims; there will be provisions relating to consequences for the Plaintiff attempting to re-open or re-litigate the case and any other things that the Defendant is seeking to protect in the Release.

Sometimes Defendants will try to slip things into Releases which shouldn’t be there in the first place. We sometimes see that sort of thing, particularly with long term disability insurers. They may seek carve out provisions such that a claimant cannot make any claim on any policy of insurance which they carry for a period of 5 years. They may also seek wording such that the Plaintiff will agree to never ever make any further claim agains that insurer for the rest of their lives (even if the case is unrelated to the case which was litigated). Sometimes these items are negotiated beforehand. Other times, they are not.

A Plaintiff does not have to automatically sign a Release which has been presented to them. If a Plaintiff disagrees with some terms or verbiage, they can make changes and it’s up to a Defendant to accept or deny them.

In the event that the parties are not able to agree to the terms or the verbiage contained in a Release, they can apply jointly to the Court to have a Judge assist, or they can agree to get it dealt with by way of private arbitration. You rarely see this sort of thing in personal injury cases, but it’s an option. Keep in mind that by doing so, it adds to the cost of the case, and delays the case coming to a close which both sides generally don’t want to see.

Once the legal closing documents have been exchanged, it’s then up to the insurance company to cut the settlement cheque.

Some insurers are faster than others at cutting cheques. Some insurers don’t cut cheques. They wire the money into the Plaintiff lawyer’s trust account. Sometimes the transfer of funds happens quickly. Other times, it does not. Some cheques get lost in the mail (it’s true). Some cheques get lost going from the insurer to the Defendant lawyer’s office.  Sometimes, the cheque cutting person at the insurer (let’s call her Marjorie) gets COVID and can’t come in to work and nobody else at the insurer knows how to do Marjorie’s job so there is nobody to cut the cheque and thus the Plaintiff has to wait an extra week to get his/her funds. These things really do happen. There is no malice or ill intent behind it. It’s just life.

Once the lawyer has received the settlement funds, those settlement funds are deposited into the lawyer’s trust account. The lawyer has to hold on to the funds until they have cleared. Once the settlement funds have cleared, they are then released to the client. But effective January 2024, there another step for the Plaintiff to do.

To claim their settlement funds, the Plaintiff must attend at their lawyer’s office with photo ID to collect their funds. If the Plaintiff cannot attend at his/her lawyer’s office, they must have their identification authenticated. This can be done by way of a third party application. But, this needs to be done.


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