Are you wondering, “How are car accident settlements paid in Kentucky?” Kentucky is a no-fault state, where motorists in a crash file a claim with their primary insurance carriers. So, a claimant’s insurance carrier pays the settlement amount. You can, however, sue the at-fault party if medical damages exceed certain limits, or you sustain long-term, life-changing injuries. It will take one to eight weeks to receive the payment once you win the claim or lawsuit. Uncovered liens, loans, and other fees must be paid first. Personal injury compensations are generally tax-free, although you might have to file tax returns on some economic damages you recover.
The personal injury claim process has many legal steps and standard procedures. Without legal knowledge, you can weaken your case, resulting in lower compensation or a denied claim. A car accident lawyer at Young, Reverman & Bolotin can provide legal representation to ensure you are fairly compensated. Call us at (513) 400-0000 to schedule a free consultation.
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Does Kentucky Have a No-Fault Insurance System?
Kentucky uses a “no-fault” insurance law to govern accident claims. This law requires every driver to obtain vehicle insurance with personal injury protection (PIP). Every injured party files a claim with his or her insurer before taking other courses of action. The PIP covers damages, such as medical expenses, lost wages or income, and other out-of-pocket payments.
Additionally, the insurance policy must protect against various types of car accident injuries and property damages. The insurance must cover a minimum of $25,000 for bodily injuries per person, $50,000 for total bodily injuries per incident, and $10,000 for property damage.
When Can You File a Lawsuit in Kentucky?
Since Kentucky is a no-fault state, drivers essentially forfeit their right to sue and the risk to be sued. So, when can you sue the at-fault party in an accident claim? If you hold a no-fault vehicle insurance coverage, Kentucky law gives you the legal right to file a lawsuit against the negligent party in either of the following situations:
- You spent over $1,000 treating the injuries sustained in the accident.
- The crash caused physical and emotional pain and suffering, permanent disfigurement, loss of organ function, or serious injuries, such as fractures of weight-bearing bones.
Under the Kentucky statute of limitations for car accident claims, you have two years from the crash date to file a claim. The two-year window starts on the crash date or when you received your last PIP insurance benefits.
How Does the Distribution of Settlement Funds Work?
Your lawyer and the defendant’s insurer will negotiate the settlement. Your lawyer knows how vehicle accident settlements are calculated and will ensure the offer is fair. That amount is the gross settlement. It must be distributed across various parties with a legal interest in the compensation. You only receive your net compensation after all parties are paid.
Typically, the at-fault party’s insurance carrier will hand your car accident lawyer the settlement check. The lawyer will deposit the amount in an escrow account, separate from his or her personal or business account. The attorney will then distribute the funds as follows:
Unpaid Liens
Some accident victims can’t cater to their medical expenses out-of-pocket. Many lawyers partner with other professionals, such as health insurance providers, medical doctors, or loan providers. They refer their clients to these partners for financial and medical help. These service providers can file liens in the counties where they offer services. The lawyer covers all liens once the insurer pays the claim.
Case-Related Expenses
Filing a car accident claim is a legal process, and victims often incur various legal fees. The forms and legal services at the Claims Court Clerk’s office cost money. Additionally, retrieving the necessary copies of medical records and obtaining expert testimonies all come at a cost. Most attorneys understand their clients’ situations. They are usually more than happy to cover these expenses during the claims process and recover them after the settlement payment.
Lawyer Fees
Many personal injury law firms provide their services on a contingency basis – they only get paid if accident victims receive compensation. So, your car accident lawyer is entitled to a portion of the settlement amount for the legal support and guidance the lawyer has provided. This is especially the case if you signed a contingency fee agreement.
A reputable lawyer must be upfront and clear about his or her services and costs. Lawyer fees often vary from 30% to 40% of the settlement amount. These fees depend on factors like the time it takes to resolve the case, the length of representation, and the total settlement amount.
Client Compensation
Your car accident lawyer will transfer the remaining amount to your account once all unpaid liens, attorney fees, and legal costs are covered. Most claimants receive their payments within one to eight weeks after signing the settlement release form. The net settlement you pocket depends on various factors. Fortunately, your lawyer can provide an estimated amount you can recover and the period for receiving the payment.
Are There Tax Implications for Car Accident Settlements?
Car accident settlement payouts are generally not subject to state or federal taxation. The law doesn’t consider it a financial gain. So, there aren’t tax implications on the monetary damages you recover.
The IRS tax guidelines specify that people pay taxes on the finances they gain or profits. You are, for instance, legally mandated to file tax returns after receiving your wages/income, selling your home, or conducting any business that brings profit.
The law takes a rather empathetic view of your situation when it comes to claim settlements. A car accident dents your finances, physical well-being, and mental health. These are considered losses. The payout you receive after a successful claim or lawsuit isn’t seen as income, but a way of “making you whole again.” It makes up for the losses you endured because of the at-fault party’s recklessness.
Non-Taxable Personal Injury Settlements
According to the IRS rules on “Compensation for Injuries and Sickness,“ all non-punitive financial proceeds from a personal injury case aren’t part of gross income. This consideration applies whether you and the insurer agree on a lump-sum settlement or staged payments – smaller payments over an agreed-upon period. Examples of tax-free personal injury settlements include:
- Medical costs
- Property damage
- Pain and suffering
- Physical injuries and sickness
- Emotional distress and mental instability
Taxable Personal Injury Settlements
Some of the damages you recover in a vehicle crash claim might be subject to taxation in Kentucky and at the Federal level. While these damages might be part of the total compensation (which essentially shouldn’t be taxed), they are considered replacements for money you would’ve otherwise gained and filed tax returns. Lost wages/salary, interest on delayed settlement payment, and punitive damages are examples of taxable settlement funds.
Reasons for Settlement Payment Delays
You’d normally expect to receive your settlement payment after one or eight weeks from the date you signed the settlement release form. Still, some circumstances can delay the settlement process. It’s critical to have legal representation during the car accident negotiation process to eliminate any pitfalls that might derail the process.
Inaccurately Filled Papers
Filing a claim is a legal process with several legal forms that claimants must complete. The law is strict. Any mistakes, inaccuracies, or errors when completing and filing the claim can impact the progress of the case and the settlement process.
You can avoid paperwork issues by hiring a personal injury attorney experienced in handling the insurance settlement process. A lawyer knows how to write a confirmation letter agreeing to the settlement details. The insurance company will then send a settlement release form. Your lawyer will interpret the settlement terms so that you understand them before signing the form.
Insurance Carrier Causing Delays
Insurance companies operate to make profits. In claims with large compensations, insurers resort to unscrupulous ways to minimize car accident settlement payouts. For example, an insurer may focus on what a claimant says during a conversation to find words to use against him or her. Insurance adjusters also try to lowball the settlement amount by providing lower property damage valuation during inspections.
Your car accident lawyer is a legal professional who understands personal injury laws. The lawyer is a good communicator and knows what to do or say to “nudge” insurance companies to offer the maximum settlement. The lawyer acts as your settlement guardian. An insurance company is less likely to take unprofessional routes when a seasoned lawyer is on your side. This is because the company understands your lawyer will be ready to take legal actions in the event of any insurance bad faith acts.
Hiring a car accident lawyer is your best bet at recovering reasonable compensation after a car accident and ensuring a smooth settlement process. Speak with one of our lawyers at Young, Reverman & Bolotin if you have been hurt in a car accident in Kentucky. You will get the legal, emotional, and financial support you need. Our focus is to help you get back on your feet by ensuring you receive a fair settlement. Contact us to request a free case review.
