What is a Structured Settlement and How Do They Work?

Many civil cases, especially those related to accidents and

personal injury, never actually make it to trial. This is because the parties usually reach a settlement before. This is what we can describe as a structured settlement.

A Structured Settlement is a payment or compensation paid by one party to another in the event of an unfavorable accident or injury caused to someone. It may be voluntary or it could be the result of a legal battle where the aggrieved party is paid the sum for the harm done against him/her.

Structured Settlements can be paid at once as a single payment. There is also an option of paying it in installments. This may or may not be subject to conditions which are previously agreed upon by the parties. This is actually quite a frequent occurrence. The ones paying the compensation usually enlist the help of an insurance company to pay the structured settlement in regular equal installments. A major advantage of this method is that there is proof of the transaction being made, hence there can be no conflicts later.

Now that we know exactly what structured settlements are, we can evaluate it on the basis of some advantages and disadvantages.

The most important advantage of structured settlements is that it provides the aggrieved party with instant help or relief. Most often, the settlement is paid out as a combination of a lump sum and installments. This is helpful as the person who was subjected to the accident can pay medical bills or any other expenses which may have resulted due to the mistake of the guilty party. Also, the installments can provide a steady income to the aggrieved, especially if he or she is unable to work due to the accident.

The downside, however, is that once the instalments or the lump sum has been paid out, the aggrieved cannot seek any further remuneration, even if the accident continues to affect the person. If any further sum is claimed, it may be termed as exploitation or extortion.

What are the types of cases where structured settlements are applicable?

1.    Individual injury: the aggrieved party can claim compensation based on the harm caused to him or her. The ones responsible for the harm have to pay the compensation in the form of a structured settlement.

2.  Workers’ compensation: when a worker is injured while on duty, he or she can claim compensation from the employer company, especially if the worker is unable to continue work. This is only applicable if the worker suffers injury while on duty.

3.  Hospital malpractices: in India, negligence by hospitals is a criminal offense and even has a set of penalties enlisted. Patients or their families can claim compensation if any malpractices are observed.

Wrongful death: in case a natural calamity like a flood or cyclone claims lives, the government concerned must pay compensation to the affected or the families of the injured and dead, so that they can seek treatment and continue their lives. This is especially important in cases where the earning member of the family passes away. A compensation of some sort is required to ensure that the family can get back on its feet.