Is a Verbal Settlement Agreement Binding in a Personal Injury Case

All too many times, I hear of people entering into a settlement agreement with the insurance company.  Then, they regret that they settled for too little and want out.  Nothing has been signed, but the injured person did verbally agree.  Now, the question is whether that verbal agreement is binding.

The Scenario….

Here is how it normally plays out.  A person gets injured (maybe in a car accident).  The injured person figures they will handle the case themselves (BAD DECISION)!  The adjuster deals directly with the injured claimant.  Sometimes, a spouse or close family member deals with the adjuster on behalf of the injured party.  That brings up a whole new set of problems.

Dallas Personal Injury AttorneyEither way, what generally happens is that the adjuster throws a settlement figure out there.  The injured person thinks they know what an injury case is worth and agrees to it.  Then, sometime later, they realize their injury and pain are worse than they originally thought.  Now, they want out of the settlement.  Can they get out of it?

It depends….

Does the Settlement Agreement Have to Be in Writing?

The simple answer is ‘No.”  Under Texas law, there is a Statute of Frauds. The Statue of Frauds provides that certain contracts and agreements must be in writing in order to be enforceable.  The most popular example includes an agreement for the sale of real estate. Likewise, a person cannot enforce a verbal contract to sell your home or land.  There are many more examples of other contracts that must be in writing in order to be enforceable.

However, a contract for settlement of a legal claim is not listed under the Statute of Frauds.  So, technically, an agreement to settle a personal injury claim does not have to be in writing to be enforceable.  Therefore, a verbal settlement agreement is enforceable.

The Narrow Exception.

This article only deals with situations where an agreement was made before any lawsuit was filed.  The rule is different if a lawsuit is pending.

Although a verbal agreement is enforceable and does not have to be in writing according to the Statute of Frauds, that is not true about cases in which there is a pending lawsuit.  Pursuant to Rule 11 of the Texas Rules of Civil Procedure, all agreements regarding a pending lawsuit must be in writing to be enforceable.

Rule 11, however, only applies when the agreement was made during the pending litigation and does not apply to agreements that were made before a lawsuit was filed.

The Practical Effect.

But, like I have said before (and I will say again), for every legal answer there is also a practical one.

Legally speaking, a verbal settlement of a personal injury claim is binding.  But, if you end up filing a lawsuit in your case, will the insurance company really enforce it?  Probably not.  Why?

Because, if all your communications are strictly verbal, the insurance company will have to interject themselves into the case in order to enforce the agreement.  And, they don’t like that.

That is because direct actions are not permitted under Texas law.  That means, you cannot sue the insurance company directly.  You will have to file against the actual driver who caused the accident.  Therefore, the insurance company remains practically anonymous during the legal proceedings as well as the trial.  The purpose of this rule is to prevent any juror bias against the other driver just because he has insurance.

However, if the insurance company wants to try and enforce settlement, then the adjuster will have to take the stand and testify about the agreement.  Now, the “cat is out of the bag” and the jury will know the other driver had insurance.  This is something both Texas law and insurance companies want to avoid at all costs.

So, even though the verbal agreement might technically be enforceable, it may not be worth enforcing from the insurance company’s viewpoint.

But, is the Agreement Really Verbal?

A verbal agreement is one in which the terms are not documented and acknowledged in any written form.  But, that doesn’t mean there has to be a formal agreement.

An agreement may be made between the parties through letters, emails, checks, and other written materials between the parties.

So, let’s say you are trying to handle your own injury claim.  Maybe the adjuster makes you an offer over the phone and then sends you a letter or email confirming the offer.  You call the adjuster back, verbally agree to the offer and follow up with an email of your own.

Under this scenario, your verbal agreement has now been reduced to written evidence.  These emails and letters that passed between you and the adjuster may be used to prove up the settlement agreement.  Additionally, if the adjuster sends you a check and your deposit it, that may be used as evidence of a written agreement.

So, What if There Is Written Proof of Your Verbal Agreement?

Now you have a problem.  Remember when I said that insurance companies do not like to testify in court….  Well, if there is sufficient written proof of an enforceable agreement, then the adjuster may not have to testify at all.

Rather, during the lawsuit, the attorney for the other driver may simply file a “motion for summary judgment.”  This is a motion where the evidence is so clear and undisputed that there is no need for a trial.  Under this scenario, the insurance company can prove the settlement through a motion and never testify before a jury.  If the judge believes that the written evidence of your settlement agreement is strong enough, then the judge can enter judgment against you based upon that evidence.

The Long and Short of It….

In the end, there are two main things to take away from this article.  First, don’t represent yourself.  You can end up saying or doing something that hurts your ability to get the best value for your case.  When you start dealings on your claim without the benefit of legal counsel, you may cause friction with the adjuster.  And, you can also push your case into a corner that will make it difficult to resolve later.

Second, if you represent yourself and later decide you want an attorney, you may find it difficult to retain one.  That is because attorneys do not want to take on a tainted cases.  If the attorney takes on a case like this, there may be too much work to correct all the problems you unknowingly caused.

The moral of the story is this:  Consult with an experienced personal injury attorney early and don’t say or do anything until you hire one.

1 thought on “Is a Verbal Settlement Agreement Binding in a Personal Injury Case”

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