A structured settlement is a negotiated financial or insurance arrangement through which a claimant agrees to resolve a personal injury tort claim by receiving part or all of a settlement in the form of periodic payments on an agreed schedule, rather than as a lump sum. As part of the negotiations, a structured settlement may be offered by the defendant or requested by the plaintiff. Ultimately both parties must agree on the terms of settlement. A settlement may allow the parties to a lawsuit to reduce legal and other costs by avoiding trial.[1] Structured settlements are most widely used in the United States, but are also utilized in Canada, England and Australia.
Structured settlements were first utilized in Canada as part of the settlement of birth defect claims arising out of pregnant mothers ingesting Thalidomide.[2] Structured settlements are now used in a wide variety of types of lawsuit settlements such as aviation, construction, auto, medical malpractice and product liability.
Structured settlements may include income tax and spendthrift provisions. Often the periodic payments will be funded through the purchase of one or more annuities, that generate the future payments. Structured settlement payments are sometimes called periodical payments, and when incorporated into a trial judgment may be called a "structured judgment".[3]
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