Should You Accept an Offer of Compromise in a Car Accident Lawsuit?

Get Legal Help Today

 Secured with SHA-256 Encryption

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Full Bio →

Written by

UPDATED: Jul 15, 2021

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

An offer of compromise agreement is a settlement offer made during or before a lawsuit, which if refused, requires the rejecting party to pay the court costs of the party offering the compromise if he or she is unsuccessful at trial. This type of insurance settlement offer is used strategically by parties who want to settle the case out of court. If a reasonable offer is made, this puts pressure on the receiving party to either accept the settlement offer or risk having to pay more in damages and costs should they lose the case.

Submitting an Offer of Compromise

An offer of compromise may be submitted by either a plaintiff or a defendant, it must usually be in writing, and it must offer something of value in exchange to settle the case. This can be an offer of money, an offer to pay costs so far incurred, or anything else of value to the parties. If the party who receives the offer of compromise decides not to accept (or fails to accept by the deadline, which is seen as a rejection), they run the risk of receiving a lower verdict than the offer amount at trial. If they receive a lower verdict, or lose the lawsuit all together, they must pay their own costs, as well as the other party’s costs. This means that even if the party who refuses the offer to compromise wins the lawsuit, they may still have to pay the other party’s costs.

For example, suppose Susan sues Eric for injuries she sustained in a car accident that she believes is Eric’s fault. After filing the lawsuit, Susan and her lawyer decide to send Eric and his attorney an offer of compromise, offering to settle the lawsuit for $20,000 and attorney fees (but not court costs). Eric’s attorney forgets to file an acceptance of the offer and therefore the offer is considered rejected by the court. At the conclusion of the lawsuit, Susan wins a verdict of $25,000, $5,000 more than her earlier settlement offer to Eric. In the state where the lawsuit was filed, the judge may, by law, award Susan an additional 8% annual interest on the recovery amount of $25,000, plus some amount for her attorney fees, making Eric’s failure to accept the offer of compromise a costly mistake.

Recovering Court Costs

Court costs may also be recovered, depending on the state’s laws, the circumstances surrounding the offer and the court’s discretion. Court costs can include any costs required by state or federal statute, as well as expert witness costs post-offer. The court also has the discretion to award the party who made the offer pre-offer costs, as well as interest on these pre-offer costs. There are no formulas to determine damages in a personal injury case. What’s fair is based on what one could expect a reasonable jury to award and then factor in the costs and risks of filing a lawsuit.

Legal Help with Your Offer of Compromise

The best thing to do when faced with an offer of compromise is identify the risks in your lawsuit, and talk them over with your attorney. Remember that settling your case outside of court will also save you additional time and money, and you should take this into account when determining if the party’s offer is reasonable. If you and your attorney determine that the offer is reasonable in light of all additional costs and risks, then you should accept the offer to prevent any future financial loss.

Visit Do You Need an Attorney to Help File Your Car Accident Claim? for more.

Get Legal Help Today

Find the right lawyer for your legal issue.

 Secured with SHA-256 Encryption