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The act of adjusting or determining the dealings or disputes between persons without pursuing the matter through a trial.

In civil lawsuits, settlement is an alternative to pursuing litigation through trial. Typically, it occurs when the defendant agrees to some or all of the plaintiff's claims and decides not to fight the matter in court. Usually, a settlement requires the defendant to pay the plaintiff some monetary amount. Popularly called settling out of court, a settlement agreement ends the litigation. Settlement is a popular option for several reasons, but a large number of cases are settled simply because defendants want to avoid the high cost of litigation. Settlement may occur before or during the early stages of a trial. In fact, simple settlements regularly take place before a lawsuit is even filed. In complex litigation, especially Class Action suits or cases involving multiple defendants, a settlement requires court approval.

Civil lawsuits originate when a claimant decides that another party has caused him or her injury and files suit. The plaintiff seeks to recover damages from the defendant. The defendant's attorney will evaluate the plaintiff's claim. If the plaintiff has a strong case and the attorney believes defendant is likely to lose, the attorney may recommend that the defendant settle the case. By settling, the defendant avoids the financial cost of litigating the case. Trials are often extremely expensive because of the amount of time required by attorneys, and even alternatives to trials, such as mediation and Arbitration, can be costly. In deciding whether to settle a claim, attorneys act as intermediaries. The parties to the suit must decide whether to offer, accept, or decline a settlement.

The cost of litigation is only one factor that encourages settlement. Both plaintiffs and defendants are often motivated to settle for other reasons. For one thing litigation is frequently unpleasant. The process of discovery—in which both sides solicit information from each other—can cause embarrassment because considerable personal and financial information must be released. Litigation can also have a harmful impact on the public reputation of the parties. Employers, for example, sometimes settle Sexual Harassment claims in order to avoid unwanted media exposure or damage to employee morale.

Like litigation itself, settlement is a process. Generally, the easiest time to settle a dispute is before litigation begins, but many opportunities for settlement present themselves. As litigation advances toward trial, attorneys for both sides communicate with each other and with the court and gauge the relative strength of their cases. If either of the parties believes he is unlikely to prevail, he is likely to offer a settlement to the other party.

Litigation ends when a settlement is reached. The plaintiff typically agrees to forgo any future litigation against the defendant, and the defendant agrees to pay the plaintiff some monetary amount. Additionally, settlements can require the defendant to change a policy or stop some form of behavior.

Often, the exact terms of settlements are not disclosed publicly, particularly in high-profile cases where the defendant is seeking to protect a public reputation. In high-profile cases, settlements are often followed by a public statement by the defendant. It is not unusual for a large company to settle with a plaintiff for an undisclosed amount and then to issue a statement saying that the company did nothing wrong.

In some forms of litigation, settlement is more complex. In class actions, for example, attorneys represent a large group of plaintiffs, known as the class, who typically seek damages from a company or organization. Courts review the terms of a class action settlement for fairness. Complexities also arise in cases involving multiple defendants. In particular, when only some of the defendants agree to settle, the court must determine the share of liability that accrues to those defendants who choose to pursue litigation.

Further readings

Practising Law Institute (PLI). 1996. Class Action Settlements, by Roberta D. Liebenberg, Ralph G. Wellington, and Sherrie R. Savett. Corporate Law and Practice Course Handbook series: Financial Services Litigation, PLI order no. B4-7153.

——. 1996. Settlement, by Norma Polizzi. Litigation and Administrative Practice Course Handbook Series: Litigation, PLI order no. H4-5247.

——. 1995. Damages and Settlements in Sex Harassment Cases, by Richard G. Moon. Litigation and Administrative Practice Course Handbook Series: Litigation, PLI order no. H4-5213.


n. the resolution of a lawsuit (or of a legal dispute prior to filing a complaint or petition) without going forward to a final court judgment. Most settlements are achieved by negotiation in which the attorneys (and sometimes an insurance adjuster with authority to pay a settlement amount on behalf of the company's insured defendant) and the parties agree to terms of settlement. Many states require a settlement conference" a few weeks before trial in an effort to achieve settlement with a judge or assigned attorneys to facilitate the process. A settlement is sometimes reached based upon a final offer just prior to trial (proverbially "on the courthouse steps") or even after trial has begun. A settlement reached just before trial or after a trial or hearing has begun is often "read into the record" and approved by the court so that it can be enforced as a judgment if the terms of the settlement are not complied with. Most lawsuits result in settlement. (See: settle)


1 an instrument by which property is limited to persons in succession or is to vest on the occurrence of specified contingencies. Settlements in England or Scotland are invariably made through the medium of the trust. In English law it is not competent for a settlement, whether of realty or personalty, to be made otherwise. Technically, in other jurisdictions (e.g. Australia and New Zealand and, indeed, Scotland) it is possible to create a simple settlement without a trust but, in practice, such settlements are rarely, if ever, encountered.

In English law, settlements of land developed to a high degree of sophistication. In the 1925 reforms it was provided that land might be settled either by way of strict settlement or by way of trust for sale, but not otherwise.

2 in Scottish conveyancing practice, the day when the title is exchanged for the money.
3 settlement in the sense of living in the UK gives a person a right to permanent residence in the UK provided he continues living here; such a person is subject to deportation if he commits a serious crime or if his presence is no longer conducive to the public good. Having a right of settlement may lead to the right to register or to be naturalized as a British citizen. Once settled, a person may call for members of his family and other dependants to join him in the UK provided their maintenance and accommodation does not require recourse to public funds.
4 resolution of a legal dispute out of court.

SETTLEMENT, domicil. The right which a person has of being considered as resident of a particular place.
     2. It is obtained in various ways, to wit: 1. By birth. 2. By the legal settlement of the father, in the case of minor children. 3. By marriage. 4. By continued residence. 5. By the payment of requisite taxes. 6. By the lawful exercise of a public office. 7. By hiring and service for a year. 8. By serving an apprenticeship; and perhaps some others which depend upon the local statutes of the different states. Vide 1 Bl. Com. 363; 1 Dougl. 9; 2 Watts' Rep. 44, 342; 2 Penna. R. 432; 5 Serg. & Rawle, 417; 2 Yeates' R. 51; 5 Binn. R. 81; 3 Binn. R.. 22; 6 Serg. & Rawle, 103, 565; 10 Serg. & Rawle, 179. Vide Domicil.

SETTLEMENT, contracts. The conveyance of an estate, for the benefit of some person or persons.
     2. It is usually made on the prospect of marriage for the benefit of the married pair, or one of them, or for the benefit of some other persons, as their children. Such settlements vest the property in trustees upon specified terms, usually for the benefit of the husband and wife during their joint lives, and then for the benefit of the survivor for life, and afterwards for the benefit of children. Ante-nuptial agreements of this kind will be enforced in equity by a specific performance of them, provided they are fair and valid, and the intention of the parties is consistent with the principles and policy of law. Settlements after marriage, if made in pursuance of an agreement in writing entered into prior to the marriage, are valid, both against creditors and purchasers.
     4. When made without consideration, after marriage, and the property of the husband is settled upon his wife and children, the settlement will be valid against subsequent creditors, if, at the time of the settlement being made, he was not indebted; but, if he was then indebted, it will be void as to the creditors existing at the time of the settlement; 3 John. Ch. R. 481; 8 Wheat. R. 229; unless in cases where the husband received a fair consideration in value of the thing settled, so as to repel the presumption of fraud. 2 Ves. 16 10 Ves. 139. Vide 1 Madd. Ch. 459; 1 Chit. Pr. 57; 2 Kent, Com. 145; 2 Supp. to Ves. jr. 80, 375; Rob. Fr. Conv. 188. See Atherl. on Mar. passim.
     5. The term settlement is also applied to an agreement by which two or more persons, who have dealings together, so far arrange their accounts, as to ascertain the balance due from one to the other; and settlement sometimes signifies a payment in full.

References in periodicals archive ?
D., 1993, Are Viatical Settlements Securities Within the Regulatory Control of the Securities Act of 1933?
Viatical settlements allow insured policy owners to sell their insurance death benefits to investors.
(157) Although viatical settlements and other life settlements are distinguishable from SPIN-Life policies insofar as the underlying life insurance contracts for viatical and life settlements were originally entered into without the contemplation of a future sale of the policies, (158) they are similar to SPIN-Life in that they are both investments and not insurance, properly speaking.
The availability of a viatical settlement is based on two major criteria: (1) the specifics of the life insurance policy, and (2) the health condition of the insured.
Accordingly, (Insurer), effective with applications dated March 7 and later will require that financial professionals certify on the life insurance application that they or their client has no intent to use this policy for any type of viatical settlement, senior settlement or any other secondary market."
Accordingly, the type of individual who would most benefit from taking an accelerated benefit or a viatical settlement is a financially independent person without a financially dependent spouse or children who is unable to work and who has no long-term care or disability insurance.
Currently, a majority of the states regulate viatical settlement transactions, which are simply the sale of all ownership and beneficial rights to a life insurance policy in exchange for an immediate cash payment.
Trade Partners contributed viatical settlement contracts valued at $8.3 million and gained a near 65 percent stake in TradeArk Properties, the joint venture with Capitol Communities.
One way to defraud the investor is to sell a viatical knowing that the insured lied about his or her health condition when applying for the policy, as did one Florida viatical settlement company.(12) Sometimes, insureds acquire a policy by hiding evidence that they have a life-threatening condition.
From insurance programs and viatical settlements to discounts on travel and merchandise, VFW has something for every member.
settlement.(3) Viatical settlements are a specialized form of receivable financing under which viatical settlement companies buy from the policyholder, at a discounted rate, the right to receive death benefits under life insurance policies.(4) The viatical settlement company may then hold the policy, sell the policy to an individual investor, or pool the policy with others and sell fractions of the pool to investors.(5) The return to investors is the difference between the discounted value paid to the policyholder and the full value paid by the issuing insurance company upon the policyholder's death.(6)
Prior to the insurance industry entering into this market, private investors formed groups commonly known as Viatical settlement companies for the purpose of purchasing, or taking assignments of, policies at a discount owned by the terminally ill.(2)