Should I settle a car accident or file a lawsuit?

Many people are confused on what are the best steps after a car accident are. When you're the defendant—the person being sued—in a car accident lawsuit, one of the biggest questions confronting you is when to fight the claim, and when to settle it (agree to pay something). If you have liability insurance that would cover all the claimed injuries and damages, this decision may be effectively made by the insurance company, which is putting up the money. However, when you don't have insurance, or your insurance won't cover all the claims, you need to make this decision yourself.

In thinking about settling, there are two main factors: likelihood of winning, and cost.

Likelihood of Winning

No court case is ever a given for either the plaintiff (person suing) or defendant. But some cases are clearly stronger for one side or the other. The first factor therefore to weigh in deciding whether to settle is how likely it seems to be that you'll win. After all, if the law and facts are on your side, why agree to pay anything? And conversely, if it looks like you'll lose no matter what, then it becomes about damage control—how do you pay the lowest amount possible?

Cost

The second factor is cost. This is not just the amount you'd likely pay if you lost the case, but also includes the costs you'd incur in defending it: legal fees, witness fees, tests or analysis, etc. Leaving aside any emotional reactions, from a purely pragmatic point of view, your goal is to minimize your total payout. For example, consider a fender-bender case where you are being sued for $3,000 of auto damage and $500 of medical costs (basically, a quick trip to the emergency room) and you don't have insurance to pick it up.

Even in a simple case like this, you could easily spend $3,000 on a lawyer if it goes to trial—that's basically just two lawyer days at $175 to $200 per hour. If you'd spend $3,000 on defense and still maybe lose, you'd be better off paying the full $3,500 the plaintiff is demanding, and if you could get him to accept $2,500 total, you'd be well ahead.

Evaluating a Case Is an Art, Not a Science

There's a huge variability in what a case might be worth; it's also very difficult for a layperson to have an accurate appreciation of the costs and chance of success. In a small, simple case like the above example, you can make the calculation yourself. But if you're sued for tens or hundreds of thousands of dollars, you need an attorney to advise and represent you, including advising you as to whether and when to settle. The other side will have a lawyer; don't handicap yourself by trying to go it alone.