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Peace of Mind Through Court Approval of Minor Settlements

            It may be very tempting for a busy claims professional to avoid obtaining court approval of a settlement with a minor. This may be particularly so in a case involving less serious injuries, a relatively low settlement amount, or a minor claimant whose family is unrepresented by counsel. Avoiding court approval may permit an insurance carrier to close its file more quickly and avoid seemingly unnecessary legal expenses. However, given Wisconsin’s statutory requirements regarding minor settlements and the statute of limitations applicable to personal injuries incurred by minors, obtaining  court approval of a minor settlement is a prudent and necessary step that will provide piece of mind to an insurance carrier, protect its insured, while incurring relatively modest legal expenses.

            Wisconsin’s statute regarding minor settlements provides as follows:

807.10 Settlements in behalf of minors; judgments.

(1)  A compromise or settlement of an action or proceeding to which a minor or mentally incompetent person is a party may be made by the general guardian, if the guardian is represented by an attorney, or the guardian ad litem with the approval of the court in which such action or proceeding is pending.

(2) A cause of action in favor of or against a minor or mentally incompetent person may, without the commencement of an action thereon, be settled by the general guardian, if the guardian is represented by an attorney, with the approval of the court appointing the general guardian, or by the guardian ad litem with the approval of any court of record. An order approving a settlement or compromise under this subsection and directing the consummation thereof shall have the same force and effect as a judgment of the court.

(3) If the amount awarded to a minor by judgment or by an order of the court approving a compromise settlement of a claim or cause of action of the minor does not exceed $5,000 (exclusive of interest and costs and disbursements), and if there is no general guardian of the ward, the court may upon application by the guardian ad litem after judgment, or in the order approving settlement, fix and allow the expenses of the action, including attorney fees and fees of guardian ad litem, authorize the payment of the total recovery to the clerk of the court, authorize and direct the guardian ad litem upon the payment to satisfy and discharge the judgment, or to execute releases to the parties entitled thereto and enter into a stipulation dismissing the action upon its merits. The order shall also direct the clerk upon the payment to pay the costs and disbursements and expenses of the action and to dispose of the balance in one of the manners provided in s. 880.04 (2) as selected by the court. The fee for the clerk's services for handling, depositing and disbursing funds under this subsection is prescribed in s. 814.61 (12) (a).

History: Sup. Ct. Order, 67 W (2d) 585, 746 (1975); 1975 c. 2181981 c. 317.

Cross-reference: See s. 880.125 for provision requiring a court approving settlements to be satisfied as to the sufficiency of the guardian's bond.

            The above statute is mandatory. A Wisconsin Supreme Court has recognized that settlements are often made without the benefit of court approval and “[T]his practice is ordinarily followed only in cases in which the injuries are modest and the settlements correspondingly small. Since it is clear that a minor cannot be bound by an extrajudicial settlement, a calculated risk is taken in striking a bargain without the benefit of judicial approval.” In re Andresen, 17 Wis. 2d 380, 382, 117 N.W.2d 360 (1962). A calculated risk is a result of the fact that in Wisconsin, the personal injury statute of limitations for a personal injury claim is extended to two years after the minor’s 18th birthday. Wis. Stat. § 893.16(1) at a minimum. (This means, of course, that a minor injured at age six, who receives a settlement not approved by a court, could emerge up to 14 years later asserting injuries arising from the incident for which the insurer, and its likely unsuspecting insured, thought they had a settlement.

            For most cases, obtaining court approval of a minor settlement is not a very time-consuming affair. For a represented claimant, his or her attorney would most likely be very cooperative and, in fact, have the necessary motion papers ready to go. The filing fee in Milwaukee County for a minor settlement is currently $194.50. It is fairly simple to have a guardian ad litem appointed, a motion and proposed order approving settlement prepared, and a  minor settlement hearing scheduled. At the hearing, the judge is likely to ask the minor and his or her parents questions regarding the injuries and relevant medical treatment as well as the child’s current condition, school activities, etc.  In the case of a more significant claim involving a structured settlement, the court may inquire regarding the claimant’s understanding of the payment plan, as well as the fact that the claimant was given an opportunity to chose among different plans. I have also heard judge’s warn claimants that when they reach the age of 18, they will be approached by individuals or entities seeking to purchase their annuities. Once the court approves the settlement and signs the relevant order, a release can be executed and payment made or the annuity funded. The whole process is relatively quick and painless and will result in a settlement providing finality and piece and mind to the insurer and its insured, for a relatively small expense in comparison to having to defend a claim down the road.

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