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Confidential Settlements with Insurance Companies



Lexington Personal Injury | Kentucky Motor Vehicle Attorney |

Most insurance companies insist that a settlement with an injured party remain confidential. Not only are the parties required not to disclose the terms and conditions of a settlement agreement, but the attorneys of the injured client are also expected to confirm their agreement to follow the confidentiality provision.

However, attorneys for injured parties should be prepared for claims made by the Internal Revenue Service that the consideration paid for the confidentiality provision is taxable, because it is separate from consideration paid for settlement of the personal injury claims. Personal injury claims are normally excluded from income under Section 104 (a) (2) of the tax code. Hurt, Crosbie and May is fortunate to have attorneys who have worked in the Kentucky Department of Revenue and understand tax laws and how certain settlements should be drafted to hopefully avoid future disputes.

One option that is often evaluated and integrated into the settlement agreement is to include language that expressly state that only one dollar was paid as the consideration for the confidentiality clause. In the end, it is critical that the attorney representing the injured client has a complete understanding of how IRS rules may impact the compensation paid to settle a case before trial.




Hurt, Crosbie & May serves clients in Kentucky, including the following areas:
Cities: Lexington, Nicholasville, Georgetown, Richmond, Winchester, Louisville, Frankfort, Lawrenceburg, Cynthiana, Mt. Sterling, Versailles, Paris, Stanton, Harrodsburg, Clay City, Wilmore, Berea.

Counties: Fayette, Jessamine, Scott, Jefferson, Madison, Franklin, Woodford, Shelby, Anderson, Clark, Mercer, Powell, Garrard, Bourbon, Montgomery, Spencer, Estill.

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