Structured Settlements: Special Damages

Structured Settlements: Special Damages

Seventh in a series of blog posts dedicated to helping clients decide when a structured settlement should be considered.

Today’s Installment: Special Damages

July 17, 2019 – Like wine & cheese, Rodgers & Hammerstein, peanut butter & jelly, and countless other famous pairings, certain combinations are greater than the sum of their parts.

Special damages & structured settlements are such a match made in heaven.

They go together like a horse and carriage

This I’ll tell you brother

You can’t have one without the other”

When resolving personal injury disputes, too many practitioners resort to simply tallying up damage claim numbers and consolidating the result into a single lump sum, sometimes not even reduced to its estimated present value.

This approach, while easy, fails to properly address the underlying concerns of those who’ve been injured:

Future security and a return to some semblance of normalcy

Serious accidents can result in immediate and harsh change of financial circumstances for individuals and their families when injuries are severe. An unwelcome new reality awaits many, stemming not just from one’s oft-compromised ability to earn a living, but from the cost of medical care required to treat the ensuing injury or condition.

Special damages: Damages that compensate the plaintiff for quantifiable monetary losses such as medical bills and the cost to repair damaged property (direct losses) and lost earnings (consequential damages). Distinguished from general damages, for which there is no exact dollar value to the plaintiff’s losses. (Definition from Nolo’s Plain-English Law Dictionary)

Those with physically demanding jobs may be unable to return to their previous position. A construction worker with shattered vertebrae. A truck driver with right foot paralysis. A neurosurgeon with an arm amputation. While not all accidents result in permanent injury, many struggle to make ends meet following life-altering mishaps.

For those injured on the job, indemnity and medical benefits afforded by the workers’ compensation system provide a welcome, if imperfect, remedy allowing the injured person to receive necessary medical treatment and continue meeting some of their monthly financial obligations.

For others, because recovery is dependent upon the circumstances causing the accident and available insurance coverage, the road back to financial stability can be long and stressful.

When evaluating an insurance claim or lawsuit for value, special damages are more easily quantified than their compensatory damage counterpart, general damages. And because of their unique ability to help address these needs, structured settlements are usually the best option for the parties to consider.

Why Structure Specials?

It may seem quaint in today’s world but structuring an individual’s future wage loss and medical care is simply the right approach to helping a person maintain their pre-accident lifestyle as best they can.

A person can maintain their dignity when they have ongoing resources to take care of themselves and their families despite a change in physical circumstances.

A single mother of two unable to return to her job as an airline pilot is better served, not by a single lump sum of cash, but by crafting a settlement plan which pays anticipated income she likely would have earned over her career had she not been injured.

Lump sums can be squandered.

Lump sums can be mismanaged.

But replicating income puts the injured party on solid financial footing serving her family better. Especially when the future income is tax-free (physical injury cases) and guaranteed by some of the most secure companies in the world as is the case with structured settlements.

Further, such needs-based settlement evaluations serve several important purposes:

It allows the settling parties to address certain anticipated future needs more realistically than a lump sum ever could;

Matching future needs with future dollars permits negotiating parties to set aside that which they can agree upon allowing important dialog on non-economic matters to continue;

A lump sum is just a number whereas guaranteed income over time represents a paycheck, insurance premiums, rent or mortgage payments, etc.

We don’t live in a lump sum world so why try to meet future needs with a lump sum today? By personalizing the resolution with a structured settlement, a better outcome is achieved by all involved.

Study after study reveals how strongly people feel about guaranteed, annuitized income. Social security beneficiaries, pension recipients and annuity owners report very high levels of satisfaction with their guaranteed cash flows.

Don’t those whose lives have been turned upside down by an accident deserve the same chance at happiness?

Although you technically can have one without the other, resolving a special damages lawsuit without a structured settlement is far less desirable than linking the two together come time for settlement.

“Try, try, try to separate them

It’s an illusion

Try, try, try, and you will only come

To this conclusion”

Like the song says, they’re just right for each other.

“Love and Marriage” lyrics by Sammy Cahn and Jimmy Van Heusen


Finn Financial Group