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How are lawsuit settlements reached?

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Quick Answer

Lawsuit settlements are reached through negotiations among the parties involved, according to FindLaw. After such a settlement, the party filing the lawsuit, who is the plaintiff, gives up the right to pursue any future legal action in regard to the matter in concern. Sometimes a settlement can be reached even before the lawsuit is officially filed. In exchange for the foregoing of such right, the plaintiff receives an agreed-upon sum of money.

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Full Answer

The parties consider various important issues before agreeing on a settlement, reports FindLaw. Among some of the issues are the strength of the case based upon jury verdicts and settlement amounts in similar cases; the chances of winning if a trial takes place; difficulties that may arise during a trial; and advantages and disadvantages of evidence on both sides. Other issues depend on the minimum amount that the defendant requests in order to forgo a trial; the defendant's financial situation; and the amount of insurance coverage the defendant carries.

More general issues also affect the willingness of either side to settle and the situations under which they would do it, adds FindLaw. One of these issues is the handling of the plaintiff's attorney's fees in the settlement agreement, and another is how a payment affects the plaintiff's present tax situation. Each side must also consider what they are willing to give up to facilitate the compromises necessary for a settlement.

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