# What is a settlement?

> A settlement resolves a claim for an agreed payment, usually in exchange for giving up the right to sue. How settlements work in car accident claims.

Canonical page: https://accidentclaimfacts.com/glossary/settlement/  
Last reviewed: October 29, 2026 by the Accident Claim Facts editorial team  
General information, not legal advice. Talk to a licensed attorney in your state.

## Quick answer

A settlement is an agreement that resolves a claim for an agreed payment. The injured person signs a release giving up the right to sue over the same crash, and the insurer or defendant pays. If a lawsuit was filed, it is dismissed.

## In a car accident claim

Few claims reach a verdict: in a federal study of state courts, only about 4% of tort cases were decided by a trial (2005 data). Talks usually start after a demand letter, move through offers and counteroffers, and sometimes finish at mediation. A settlement can happen before a lawsuit is filed, during it, or even during trial.

Under the ABA model ethics rules, the client decides whether to settle, not the lawyer. What you say in settlement talks is also treated differently from other evidence: under the federal rules of evidence, offers to settle, and statements made during settlement talks, generally cannot be used to prove or disprove the claim or its amount.

Before money is paid out, [liens](https://accidentclaimfacts.com/money/medical-liens-and-subrogation/) from health plans, hospitals or Medicare are usually resolved. The guides to [settlement negotiation](https://accidentclaimfacts.com/claim-process/settlement-negotiation/) and [whether settlements are taxable](https://accidentclaimfacts.com/money/are-settlements-taxable/) cover the steps and the tax rules.

## Example

> **Example:** After a rear-end crash, the injured driver's lawyer sends a demand letter with medical records. The adjuster makes an offer, the two sides trade counteroffers for several weeks, and they agree on a figure. The injured driver signs a release, the insurer pays, and the claim is closed.

## Related terms

- [Release](https://accidentclaimfacts.com/glossary/release/)
- [Structured settlement](https://accidentclaimfacts.com/glossary/structured-settlement/)
- [Demand letter](https://accidentclaimfacts.com/glossary/demand-letter/)
- [Closing statement](https://accidentclaimfacts.com/glossary/closing-statement/)

## FAQ

### Can a settlement be reopened later?

Usually not. A signed release normally covers all injuries from the crash, including ones not known when it was signed. That is why many people wait until their treatment is finished, or their doctors can describe future care, before settling.

### Is a settlement an admission of fault?

Not in itself. Under the federal rules of evidence, and similar state rules, settlement offers generally cannot be used in court to prove fault.

## Sources

- [Cornell Law School, Legal Information Institute, Settlement](https://www.law.cornell.edu/wex/settlement) — settlement ends the dispute and the related lawsuit
- [United States Courts, Glossary of legal terms](https://www.uscourts.gov/glossary) — settlement defined as resolving a dispute without a trial
- [American Bar Association, Model Rules of Professional Conduct, Rule 1.2(a)](https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_2_scope_of_representation_allocation_of_authority_between_client_lawyer/), checked October 29, 2026
- [Cornell LII, Federal Rules of Evidence, Rule 408](https://www.law.cornell.edu/rules/fre/rule_408), checked October 29, 2026
- [BJS, Tort Bench and Jury Trials in State Courts, 2005 (NCJ 228129)](https://bjs.ojp.gov/redirect-legacy/content/pub/pdf/tbjtsc05.pdf), checked November 1, 2009