Structured Settlements and Medical Malpractice

Medical malpractice cases can be emotionally and financially devastating for victims and their families. When a healthcare provider’s negligence leads to injury or harm, the affected party may seek compensation through a lawsuit.

What is a Structured Settlement?

A structured settlement is an arrangement in which the plaintiff receives compensation through periodic payments over an extended period, rather than as a single lump sum settlement.

In medical malpractice cases, the defendant’s insurance company typically funds an annuity that provides a steady stream of tax-free payments to the plaintiff, as per their specific needs and circumstances.

Advantages of Structured Settlements

Structured settlements offer several compelling benefits for plaintiffs in medical malpractice cases:

Tax Benefits

One of the most significant advantages of structured settlements is their tax-free status. According to the U.S. Internal Revenue Code, compensation for physical injuries or sickness is generally exempt from federal and state income taxes, ensuring that plaintiffs retain more of their settlement funds.

Guaranteed Long-term Financial Security

Through a structured payment schedule, one gets a reliable source of income over an extended period, often for the plaintiff’s lifetime. This financial security is especially valuable for those facing ongoing medical expenses or permanent disabilities resulting from medical malpractice.

Customizable Periodic Payment Options

Structured settlements can be customized to meet the plaintiff’s unique needs and goals. Payment schedules can be designed to provide larger sums for anticipated expenses, such as medical procedures or home modifications, while also offering a steady stream of income for daily living expenses.

Protection Against Mismanagement of Funds

By receiving periodic payments rather than a lump sum, plaintiffs are less likely to deplete their settlement funds prematurely. Structured settlements offer built-in protection against the temptation to overspend or make ill-advised investments, ensuring that the money is available when needed.

Disadvantages of Structured Settlements

While structured settlements offer numerous benefits, there are also some potential drawbacks to consider:

Lack of Flexibility for Changing Financial Needs

Once a structured settlement is in place, it can be difficult to modify the payment schedule or amount, even if the plaintiff’s financial needs change unexpectedly. This lack of flexibility may be a concern for some individuals.

Potential for Lower Overall Payout Compared to Lump Sum

In some cases, the total amount received through a structured settlement may be lower than what the plaintiff could earn by investing a lump sum payout. However, this potential disadvantage must be weighed against the security and tax benefits provided by structured settlements.

Possible Fees and Commissions

Establishing a structured settlement may involve fees and commissions paid to insurance companies or brokers. Plaintiffs should carefully review any associated costs and work with their attorney to ensure that the structured settlement remains a cost-effective option.

Structured Settlements vs. Lump Sum Payouts

When resolving a medical malpractice case, plaintiffs must choose between a structured settlement and a lump sum payout. Factors to consider include:

Immediate financial needs
Long-term financial goals
Tax implications
Ability to manage a large sum of money
Personal preferences and risk tolerance

An experienced medical malpractice attorney can help plaintiffs assess their unique circumstances and determine the most appropriate settlement option.

Examples of Medical Malpractice Structured Settlements

Case Study 1

In 2012, a 45-year-old woman was awarded a $9.6 million structured settlement after a misdiagnosed brain aneurysm led to permanent paralysis. The settlement provided an initial lump sum of $1 million for home modifications and medical equipment, followed by monthly payments of $10,000 for the remainder of her life, ensuring ongoing financial support for her care and living expenses.

Case Study 2

A 28-year-old man received a $4.5 million structured settlement after a surgical error during a routine appendectomy resulted in severe brain damage. The settlement included an upfront payment of $500,000 for past medical expenses, followed by annual payments of $100,000 for 10 years and $150,000 for an additional 20 years, providing long-term financial stability for the plaintiff and his family.

Negotiating a Structured Settlement

Working with a skilled medical malpractice attorney is essential for negotiating a fair and comprehensive structured settlement. An experienced lawyer can help plaintiffs:

Assess the strength of their case
Determine a reasonable settlement amount
Negotiate with insurance companies
Structure the settlement to maximize tax benefits and long-term financial security

Determining the Appropriate Settlement Amount

To arrive at an appropriate settlement amount, attorneys consider various factors, including:

The severity and permanence of the plaintiff’s injuries
Past and future medical expenses
Lost wages and earning capacity
Pain and suffering
Comparative negligence, if applicable

Negotiation Strategies

Effective negotiation strategies for structured settlements may include:

Presenting a compelling case backed by strong evidence and expert testimony
Emphasizing the plaintiff’s long-term needs and the benefits of a structured settlement
Countering low initial offers with well-reasoned and supported demands
Maintaining open lines of communication and a willingness to compromise when appropriate

How To Get A Structured Settlement For Medical Malpractice:

File a medical malpractice lawsuit
Engage in discovery and case building
Participate in settlement negotiations
Agree on settlement terms, including the structured settlement arrangement
Draft and execute the necessary legal documents
Establish the annuity with a reputable life insurance company
Receive periodic payments according to the agreed-upon schedule

Timeline of Events

The timeline for a medical malpractice case involving a structured settlement can vary widely depending on factors such as the complexity of the case, the willingness of parties to negotiate, and court schedules. On average, the process may take several months to a few years from the initial filing of the lawsuit to the commencement of structured settlement payments.

Receiving Payments

Once the structured settlement is finalized and the annuity is established, the plaintiff will begin receiving periodic payments according to the agreed-upon schedule. These payments are typically made by the life insurance company that holds the annuity and are designed to provide a steady, tax-free income stream for the duration of the settlement term.

Conclusion

Structured settlements provide numerous advantages for plaintiffs in medical malpractice cases, including tax benefits, long-term financial stability, and the ability to tailor payment options to individual needs. Collaborating with a knowledgeable medical malpractice attorney allows plaintiffs to effectively navigate the settlement process and make well-informed decisions that align with their specific circumstances.

Although structured settlements may not be the perfect solution for every individual, they continue to be an attractive choice for many plaintiffs looking to safeguard their financial well-being following a life-changing medical malpractice incident.

FAQs

In most personal injury cases, including medical malpractice settlements, it is possible to sell your future structured settlement payments for a lump sum. However, consult with your law firm and a financial advisor before making this decision, as it may have long-term financial implications.

If you pass away before receiving all your structured settlement payments, the remaining funds will typically be paid to your designated beneficiary or your estate. This ensures that your loved ones continue to receive financial support even in the event of your untimely death.

Once a structured settlement annuity is established, it can be difficult to change the structured settlement payout schedule. In some cases, you may be able to sell your future payments for a lump sum payment through a qualified settlement fund, but this should be carefully considered with the help of your law firm and financial advisor.

In most states, structured settlement payments for personal injury case, including a medical malpractice settlement and catastrophic injury case like spinal cord injury or birth injury, are protected from creditors and lawsuits. This ensures that the injured party can continue to receive their settlement money without interference.

When selecting an insurance company for your structured settlement annuity, work closely with your law firm and a structured settlement expert. Look for well-established, financially stable companies with a history of providing reliable periodic payments. Your attorney can help you make an informed decision based on your unique needs and the specifics of your personal injury case.

If you or a loved one has been involved in a car accident, suffered a catastrophic injury, or lost someone due to wrongful death in New York or any other state, contact us for a free consultation.

We will guide you through the intricacies of medical malpractice settlements, structured settlements, and lump sum payouts, working diligently to secure the compensation you are entitled to.

Bara Goldberg Finance Writer

Bara Goldberg - Amanda Dobanton Esq. is a General Counsel for Fairfield Funding. She has been crucial to the growth of Fairfield Funding for the past 9 years. Prior to Fairfield, she interned at a law firm in Gwinnett County. Ms. Dobanton received a B.S. in History and Political Science from Brenau University and went on to obtain her Juris Doctorate Degree from Atlanta’s John Marshall Law School. Amanda is currently serving on the Board for the National Association of Settlement Purchasers. Amanda is a seasoned expert in the structured settlement and annuity field.

See Full Bio