Should You Accept an Offer of Compromise in a Car Accident Lawsuit?

An offer of compromise agreement is a settlement offer made during or before a lawsuit, which if refused, requires the rejecting party to pay the court costs of the party offering the compromise if he or she is unsuccessful at trial. This type of insurance settlement offer is used strategically by parties who want to settle the case out of court. If a reasonable offer is made, this puts pressure on the receiving party to either accept the settlement offer or risk having to pay more in damages and costs should they lose the case.

Submitting an Offer of Compromise

An offer of compromise may be submitted by either a plaintiff or a defendant, it must usually be in writing, and it must offer something of value in exchange to settle the case. This can be an offer of money, an offer to pay costs so far incurred, or anything else of value to the parties. If the party who receives the offer of compromise decides not to accept (or fails to accept by the deadline, which is seen as a rejection), they run the risk of receiving a lower verdict than the offer amount at trial. If they receive a lower verdict, or lose the lawsuit all together, they must pay their own costs, as well as the other party’s costs. This means that even if the party who refuses the offer to compromise wins the lawsuit, they may still have to pay the other party's costs.

For example, suppose Susan sues Eric for injuries she sustained in a car accident that she believes is Eric’s fault. After filing the lawsuit, Susan and her lawyer decide to send Eric and his attorney an offer of compromise, offering to settle the lawsuit for $20,000 and attorney fees (but not court costs). Eric’s attorney forgets to file an acceptance of the offer and therefore the offer is considered rejected by the court. At the conclusion of the lawsuit, Susan wins a verdict of $25,000, $5,000 more than her earlier settlement offer to Eric. In the state where the lawsuit was filed, the judge may, by law, award Susan an additional 8% annual interest on the recovery amount of $25,000, plus some amount for her attorney fees, making Eric’s failure to accept the offer of compromise a costly mistake.

Recovering Court Costs

Court costs may also be recovered, depending on the state’s laws, the circumstances surrounding the offer and the court’s discretion. Court costs can include any costs required by state or federal statute, as well as expert witness costs post-offer. The court also has the discretion to award the party who made the offer pre-offer costs, as well as interest on these pre-offer costs. There are no formulas to determine damages in a personal injury case. What's fair is based on what one could expect a reasonable jury to award and then factor in the costs and risks of filing a lawsuit.

Legal Help with Your Offer of Compromise

The best thing to do when faced with an offer of compromise is identify the risks in your lawsuit, and talk them over with your attorney. Remember that settling your case outside of court will also save you additional time and money, and you should take this into account when determining if the party’s offer is reasonable. If you and your attorney determine that the offer is reasonable in light of all additional costs and risks, then you should accept the offer to prevent any future financial loss.

Visit Do You Need an Attorney to Help File Your Car Accident Claim? for more.