The relationship between a lawyer and a client should always involve mutual communication when a personal injury lawsuit is pending. Finding a way to settle during a case often takes time, and requires patience on both sides.
One of the biggest questions our law firm receives is whether a lawyer can settle without the client’s consent. Many clients worry that their attorney might take a settlement offer early if the attorney believes doing so is in the client’s best interest.
There is a simple answer to this. In between are various complexities and circumstances every client should know about.
The Answer to Settling Without Consent
No attorney can legally accept a settlement without the client’s consent. If they do, the attorney breaches fiduciary duty. It’s always the goal of every reputable lawyer to communicate with their clients about any settlement offer.
Every client has a right to accept or deny any settlement. An attorney who accepts a settlement without the client agreeing is asking for legal trouble.
An ethical violation like this is one we still see occur on occasion. Jacoby & Meyers LLP, for example, never does this to any of their clients based on our longstanding, established mutual trust.
One way to take action if an attorney does settle without consent is to report them to the state bar organization.
Defining Fiduciary Duty
Cornell Law School defines fiduciary duty “as acting in a way that will benefit someone else, usually financially.”
Attorneys are bound to a code saying they have to work in the best interests of their clients at all times.
This makes the lawyer is a fiduciary, and the client the beneficiary.
Some shades of gray exist on rare occasions. Sometimes the attorney might simply forget to provide information about a settlement to the client. Even if they did, misunderstandings may have clouded communications.
This is why we take communication so seriously through our legal team. We make sure we communicate every procedure we undertake so that the client fully understands what’s going on.
Any fiduciary breach is a serious legal matter on its own. Clients can take legal action against an attorney in cases like this, albeit having to prove damages.
Now that you understand what fiduciary duty is, what scenarios might come up related to settlements during a pending lawsuit?
Getting Settlement Offers From a Company
One common scenario during personal injury lawsuits is an insurance company offering a private settlement to the client. Insurance companies often try to persuade clients to settle early by contacting them personally and offering a specific amount to avoid a trial.
Clients have a right to accept a settlement on their own if they so choose, though they should always consult their attorney first. Common scenarios here involve an injured person (perhaps in a car accident) bargaining with insurers over a settlement to cover medical bills.
In a claim, all clients need to send a letter describing their damages and how the insured party caused the accident. Every demand letter in these cases should ask for a settlement with a high amount, as Justia notes. Unfortunately, the insurance company will usually respond with a low counteroffer.
A sizable settlement may come down to negotiations with the insurer. It also comes down to how powerful a case you have in proving the damages inflicted on you.
All negotiations can take place through your attorney. Never talk with insurance companies on your own since the offer they give you is always lower than what’s possible.
How Does Your Attorney Communicate Settlement Offers?
Our legal team always looks at a client’s case and determines what it’s worth. We communicate said value to the client immediately so they understand what a potential settlement might look like.
It’s then when we start negotiating with insurance companies or other companies that may offer a settlement. During the negotiation stage, it may take some time to field different settlement offers.
Once a final settlement comes in that we think hits the value mark, we’ll report this to you to see if you’ll take it. You have the legal right to accept it or not, no matter our opinion.
If you don’t take it, we respect your decision. While this does increase legal costs, we base our recommendations on our own legal experience. Most clients go with their attorneys’ legal opinions, though we can always go to trial if you so choose.
We can communicate settlement offers through any manner of contact the client wants. Usually, it’s by phone, but we can also text or video conference the offer.
Upholding our own fiduciary duty here is, once again, very important. We’ll let you know what settlement offers are on the table.
Communicating Attorney Fees After Winning a Settlement
Most settlement outcomes are positive, though anything can happen.
Most lawyers settle personal injury cases on a contingency basis, meaning your legal team won’t charge you for legal services unless you win a case. Once you win a settlement, your attorney will collect any fees from it.
Your attorney should communicate this fact as part of the final settlement. Not communicating settlement offers is bad enough. Not telling you about legal fees is just as bad, and takes away all faith in the attorney-client relationship.
Your attorney should also tell you how the settlement might affect your income taxes. The IRS and your states may not tax a settlement. In most personal injury cases, compensation for economic damages and pain or injury is usually non-taxable; however, punitive damages or previously deducted healthcare expenses could result in a tax bill. You should know that in advance.
Through negotiations, your attorney should ask what you might give up to secure a settlement. The art of negotiation sometimes means give and take between two parties.
On some occasions, your personal injury lawyer may negotiate a partial settlement and work to settle more challenging provisions later on.
First Steps to Take if You Encounter an Ethical Violation
We always hate to see other attorneys break their code of ethics when it comes to settlement cases. These situations are not overly common, but we still see and hear about cases here and there.
People ask us what they can do if an attorney does not properly communicate a settlement. As we mentioned, reporting them is important.
Your first step is to contact the State Bar and report them there. They are the only ones who can take disciplinary actions against a lawyer. In New York, for example, you can find contact information for the New York Bar Association on the State Bar Associations’ page.
Once contacted, you may file a complaint through your state’s disciplinary board. Each board is usually part of the state’s supreme court.
They might just give the attorney a private reprimand for a first-time offense. Or, if evidence exists that they’ve done this more than once, they might choose to suspend or disbar the attorney.
Sometimes the disciplinary board has websites with information about attorneys with past disciplinary actions taken against them.
As your first steps, you can take real action to make sure such violations stop. Next, you’ll want to consider filing a complaint.
How Do You File an Official Complaint?
To file a complaint with the disciplinary board, you’ll want to mail them a letter with the attorney’s name and describe what happened. Sometimes they let you file the complaint by phone or digitally on their websites.
Either way, once you file the complaint, the board takes it seriously. Fellow lawyers and even non-lawyers investigate the ethical violation and decide how to handle it. First, they send a copy of the complaint to the attorney to give them a chance to tell their side of the story.
If the violation is minor, the disciplinary board may only send a letter or call the attorney. Something more serious, like a breach of trust, may require a deeper investigation. An evidentiary hearing usually comes afterward.
Keep in mind this process disciplines attorneys, but it does not help you get compensation. Perhaps it might lead to file a malpractice suit against a prior attorney who breached trust on a settlement.
Cases like this aren’t commonplace, yet it’s not much different from any other malpractice suit that financially wrongs you.