Claim vs. Lawsuit

Claims and lawsuits are both ways to recover money or benefits after an injury, damage to property or other loss. A claim involves requesting payment or benefits directly from an insurance company, government program or other party. A lawsuit involves filing a formal legal action with a court of law, asking a judge or jury to hear your evidence and provide specific relief, which often includes monetary compensation.

Is filing a claim the same as suing?

No, filing a claim is not the same as suing. You can only file a claim if there’s an insurance policy or program that applies to your losses. Some examples include:

• A vehicle insurance policy that covers damages if you’re in a car accident
• Workers' compensation that covers a workplace injury
• Homeowner’s insurance that covers your injury if you trip and fall at a neighbor's house
• Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) for disability benefits
• VA benefits for service-related injuries or disabilities incurred by a veteran

You don’t have to go to court for a claim. To recover compensation, follow the process set by the insurance company or program.

If your claim is denied or not paid in full, you may be able to file a lawsuit to recover your damages. If no insurance or program covers your losses, a lawsuit may be your only option.

When to file a claim vs. a lawsuit

Whether to file a claim or lawsuit depends on your situation. Sometimes, you may only be entitled to use one or the other.

For example, a workers' compensation claim is the only option available to most people injured on the job. In no-fault auto insurance states, lawsuits may not be allowed unless your injuries are severe.

On the other hand, a lawsuit is how you’d get compensation as a pedestrian hit by an uninsured driver. It’s also the way to determine who legally owns a disputed piece of property.

Claim

Claims can have some advantages over lawsuits. These include:

• Faster resolution: Resolving a claim is usually quicker than a lawsuit because it’s handled directly by the insurance company or agency. There are fewer formal steps, such as mandatory waiting periods and scheduled hearings. Claimants aren't at the mercy of overcrowded court systems with backlogs of cases.
• Cheaper: Claims usually cost less because you don’t have to pay filing fees and other court costs. Many people settle their claims without paying a lawyer or other representative.
• Often simpler and less stressful: Claims usually involve filling out forms and providing documents. Many claims can be handled online from the comfort of your home.

Disadvantages of claims include:

• Potentially biased:
A company or agency decides the outcome, rather than an impartial judge or jury. Claim settlement offers are generally lower than what you might win in court, especially if the company knows you’re unlikely to file a lawsuit.
• Fewer resources: Lawsuits give plaintiffs many tools to gather evidence, such as subpoenas or depositions. Without these, it can be harder to prove the full extent of your loss and convincingly argue your case.
• Limited appeals: It's often difficult to challenge unfair claim decisions. Appeals can be slow and complicated. Most decisions are made within the same organization rather than by a neutral party.

You don’t need a lawyer to file a claim. However, having one can significantly improve your chances of success. A lawyer can help you gather strong evidence, meet deadlines and avoid mistakes that could result in a denial.

A lawyer can also negotiate with the insurance company for you. Aside from making the process less stressful, this can help you get more money or benefits. Even if you don’t hire a lawyer for the whole claims process, having one review your settlement agreement before you sign it can be smart.

Lawsuit

In a lawsuit, a person files a formal document asking the court to resolve a dispute. They may ask for money to cover their losses or for another type of remedy, such as a court order requiring someone to stop a specific action. A judge or jury reviews the evidence, hears arguments and makes a binding decision.

The advantages of pursuing a lawsuit include:

• Fairness: The legal process provides tools for both sides to prepare and present their evidence. Then, an independent judge or jury reviews the facts and applies the law. This can lead to a more balanced outcome.
• Higher recovery: Courts can award damages beyond insurance policy or benefit program limits. It may compensate you for a broader range of economic losses. Awards can also include non-economic damages, such as pain and suffering or emotional distress.
• Other relief: A court can order many types of non-monetary relief. Examples include settling disputes about property ownership or enforcing a child custody schedule.

The disadvantages of a lawsuit are:

• Length of time: Lawsuits usually take much longer to resolve than claims. How long it takes involves many factors that are out of your control. Many cases take years to reach trial and appeals can cause further delays.
• Expense: Lawsuits are expensive. Court costs, attorney's fees and the expenses of pursuing a case add up quickly. The costs matter even if a lawyer takes your case on contingency, an arrangement where, instead of you paying fees or costs upfront, they deduct the expenses from your share of a settlement or verdict.
• Added stress: Pursuing a lawsuit can be stressful and time-consuming. You may have to attend court hearings, formal interviews (also known as depositions) and other case-related meetings. The stress of a lawsuit can negatively affect your career, finances and personal relationships.

Lawsuit or claim: Which is right for you?

Consider your situation before deciding whether to file a claim or pursue a lawsuit. First, figure out whether both options are on the table. Does an insurance policy or government program provide potential benefits? Are you entitled to file a lawsuit for your damages? Which would give you the best, most complete resolution?

Then, think about the strength of your evidence and the chances of getting a fair settlement through a claim. While a claim can offer a faster and less costly resolution, a lawsuit provides the benefit of an impartial court, broader damages and additional forms of relief.

Sometimes, claims that aren't fully resolved lead to lawsuits. For example, a person injured in a car accident might file an insurance claim for medical expenses and vehicle damage. If the insurer denies the claim or offers a lowball settlement, the injured person may file a lawsuit.

Weigh the advantages and disadvantages of each option against your goals. Talking with an attorney can help you make the most informed decision.