Legal Definitions - structured settlement

A structured settlement is an agreement reached to resolve a legal dispute, most commonly in personal injury cases, where the injured party receives compensation through a series of periodic payments rather than a single, immediate lump sum. These payments are typically funded by an annuity purchased by the defendant or their insurance company, providing financial security over a specified period or for the recipient's lifetime. This arrangement is frequently chosen when the injured party requires long-term financial support for ongoing medical expenses, lost income, or other damages that will continue into the future.

Here are some examples illustrating how structured settlements work:

• Example 1: Long-Term Disability from a Car Accident

  Imagine a pedestrian who is severely injured after being hit by a car, resulting in permanent mobility issues and chronic pain that prevents them from returning to their previous job. Instead of a one-time payment, the at-fault driver's insurance company agrees to a structured settlement. This arrangement provides the injured pedestrian with monthly payments for the next 30 years. This ensures a stable, long-term financial stream to cover ongoing medical treatments, physical therapy, and to compensate for their inability to earn a living, rather than a single lump sum that might be depleted too quickly.

• Example 2: Medical Malpractice Leading to Lifelong Care

  Consider a child who suffers severe brain damage during a complicated birth due to a doctor's negligence. This injury requires round-the-clock care, specialized equipment, and therapies for the rest of their life. The hospital's insurer agrees to a structured settlement. In this scenario, the settlement provides escalating annual payments to the child's guardians. These payments are designed to cover the increasing costs of their medical care, specialized education, and living expenses as they grow older, ensuring continuous financial support for their lifelong needs.

• Example 3: Wrongful Death Claim with Dependent Children

  Suppose a construction worker dies in a preventable workplace accident, leaving behind a spouse and two young children who were financially dependent on his income. The construction company's insurance carrier offers a structured settlement to the family. Through this agreement, the family receives regular monthly payments for a specified number of years. This provides a steady income stream to replace the deceased worker's earnings, help with the children's education, and support the family's living expenses during their formative years, offering financial stability over an extended period.