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Glossary

What is a settlement?

An agreement to resolve a claim for an agreed payment, usually in exchange for giving up the right to sue.

Last reviewed By the Editorial team 1 min read

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. The document you sign when you settle. It usually ends your right to claim more for the same crash, so read it carefully. Glossary 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. A letter that lays out the facts, injuries and losses in a claim and asks the insurer to pay a stated amount. Glossary, move through offers and counteroffers, and sometimes finish at Mediation. A meeting led by a neutral mediator who helps both sides try to reach a settlement. Nothing is decided unless both agree. Glossary. 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 from health plans, hospitals or Medicare are usually resolved. The guides to settlement negotiation and whether settlements are taxable cover the steps and the tax rules.

Example#

Questions people ask

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

  1. Cornell Law School, Legal Information Institute, Settlement — settlement ends the dispute and the related lawsuit
  2. United States Courts, Glossary of legal terms — settlement defined as resolving a dispute without a trial
  3. American Bar Association, Model Rules of Professional Conduct, Rule 1.2(a) — as of October 2026
  4. Cornell LII, Federal Rules of Evidence, Rule 408 — as of October 2026
  5. BJS, Tort Bench and Jury Trials in State Courts, 2005 (NCJ 228129) — as of November 2009

Last reviewed October 29, 2026 by the Accident Claim Facts editorial team. Found an error? Tell us.

Keep reading

  1. GlossaryGlossaryShort, plain-English definitions of the legal and insurance terms that come up after a crash, each with an example, related terms and the sources behind it.Reviewed
  2. The claim processSettlement negotiationHow offers and counteroffers work after a demand letter, what signing a release ends, and what has to happen with liens, Medicare and children's claims before…Reviewed
  3. Money and compensationTaxes on settlementsUnder federal law, damages for physical injuries are generally not taxable income, but punitive damages, interest and some other parts of a settlement can be…Reviewed
  4. The claim processMediationMediation is a negotiation led by a neutral mediator who cannot decide the case. Learn when courts order it, what stays confidential, and what happens with or…Reviewed
  5. GlossarySubpoenaA court order that requires a person to appear and testify, or to hand over documents. Witnesses who are not parties are usually brought to a deposition with…Reviewed
  6. GlossaryTortA wrong that causes harm to someone and lets them sue for compensation. A car-crash injury claim is a tort claim.Reviewed

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