Minor Settlements: Why is Court Approval Required?

Minor settlements, personal injury settlements for those under the age of minority, often need court approval before funds are released.

Here’s the problem: minors lack legal capacity to make binding decisions.  Minors in most cases can’t sign enforceable contracts.  So, an insurance release cannot bind a minor.  This contradicts the basic purpose of insurance company releases seeking to resolve a claim permanently.

Suppose a boy or girl receive injuries in an accident.  The parents at some point later settle the case.  What happens if, after the boy or girl turn 18, they realize that injuries were more serious than anyone knew and they claim the insurance company and their parents sold them short?  That’s why courts get involved in reviewing minor settlements.

What Happens in Court in Minor Settlements?

The process can involve the trial court in which the claim is filed.  But, if no case was filed, then a petition for approval of minor settlement can be filed.  Sometimes called a ‘friendly suit’ this filing formally seeks court approval of the minor settlement.

The judge will want the minor and parents to be present in the courtroom for potential questions unless unique circumstances exist. A medical report must be submitted detailing the minor’s injuries and the outlook for future problems. Structured settlements with long term payouts require an affidavit from a certified public accountant or other financial professional showing present value of the plan.  An annuity, too, requires backup paperwork convincing the court that the terms of the plan are truly in the best interest of the child.

The process for approving minor settlements seems time consuming.  Sometimes the court even requires a guardianship.  The goal of all this is protecting the minor.  But in the long run, it also protects parents.

That’s the theory.  Laws in each state control the process and the procedure.

Massachusetts

Massachusetts law does not mandate court approval.  The law states the trial court “may” review and approve minor settlements.  But for the above reasons, most insurance companies will not pay on a minor settlement without a court stamp of approval.  The court may make various rulings, including appointment of a guardian, although this tends to be rare in smaller ticket cases. (MGL c. 140C1/2 provides the Massachusetts procedure.)

New Hampshire

In New Hampshire, if the settlement is $10,000 or less you don’t have to do anything. This law doesn’t apply. But, amounts over that must be submitted to court for approval. The Superior or District Court require certification that the Probate Court has appointed a guardian of the estate of the minor to accept the settlement funds and to be responsible for the funds. This will usually be a parent, “next friend or other person” who will receive the settlement money and be responsible. That means every year they must file an accounting, showing the court that the funds are being handled properly.  (RSA 464-A:42 states the NH procedure.)

Prepare Minor Settlements Right First Time

My office represents clients in Massachusetts and New Hampshire where I am licensed.  That’s why this summary highlights the process there.  It is highly recommended that an experienced personal injury be retained to handle minor settlements for everyone’s protection and to speed things up to the extent possible.

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