After your lawyer sends a demand letter, the recipient typically has 14 to 30 days to respond, and what happens next depends entirely on how they react. They might make a counteroffer, deny the claim, ask for more documentation, or ignore the letter altogether. Your lawyer uses that response (or the silence) to push the case toward the best available resolution, which usually means a negotiated settlement and, when that fails, a lawsuit.
How Long Before You Hear Back
Most demand letters set a deadline between two weeks and a month. Responses often arrive later than that, and a missed deadline is not automatically a bad sign. Insurance companies have internal review processes. Corporate legal departments route claims through several layers. If the recipient needs to hire their own attorney, that adds more time.
Complexity matters too. A straightforward fender-bender with clear liability might get a response in two weeks. A claim with disputed fault, multiple parties, or significant medical treatment can take much longer because the other side needs time to investigate before committing to a position. Your lawyer will know when a delay is routine and when silence is a problem.
The Four Responses You Might Get
Responses generally fall into four categories, and each one points the case in a different direction.
- No response at all. The deadline passes and you hear nothing. This does not mean you lose. It usually means the other side is disorganized, hoping you give up, or stalling on purpose. Your lawyer will follow up, and continued silence is a strong signal that filing a lawsuit is necessary to force engagement.
- Outright denial. The recipient rejects the claim entirely, arguing they are not at fault or that the evidence does not support what you alleged. A denial is not the end. It tells your lawyer where the real disagreement lies and what to prepare for if the case escalates.
- Request for more information. The other side or their insurer asks for additional medical records, bills, or documentation. This is often a positive sign because it means they are actually evaluating the claim rather than brushing it off.
- Counteroffer. The recipient acknowledges some responsibility but offers less than you demanded. Most cases head into active negotiation from here.
What’s Happening Inside the Insurance Company
If your claim involves an insurer, their internal process explains much of the pacing. When the demand letter arrives, the assigned adjuster sets a “reserve” on your claim. The reserve is the adjuster’s estimate of what it will cost to resolve the case, and it directly controls how much authority the adjuster has to offer you. An adjuster with a $30,000 reserve cannot offer $100,000 without approval from a supervisor or a claims committee, which takes time.
Every significant development, such as a new surgery recommendation or an MRI showing structural damage, should prompt the adjuster to raise the reserve. Your lawyer’s job during this phase is to make sure the insurer has every piece of information it needs to set the reserve at a level that reflects the true value of your claim. Incomplete medical records are one of the most common reasons insurers come back with lowball offers.
How the Negotiation Unfolds
Once a counteroffer comes in, negotiation starts in earnest, and your lawyer handles every piece of communication. The process is a series of offers and counteroffers where each side moves toward the middle. Your lawyer might begin by explaining why the counteroffer undervalues your claim, pointing to specific medical expenses, lost wages, or pain and suffering that justify a higher number. The other side pushes back with their own reasoning.
Clear liability, thorough medical documentation, and a reasonable initial demand help negotiations move faster. Disputed fault, gaps in treatment, or inflated damages slow things down. Some negotiations wrap up in a few weeks. Others stretch on for months, especially when the money is significant or the parties start far apart.
One protection worth knowing about: anything said during settlement negotiations is generally inadmissible in court if the case later goes to trial. Federal Rule of Evidence 408 prevents either side from using offers, counteroffers, or statements made during negotiations to prove liability or the value of the claim.1Legal Information Institute. Federal Rules of Evidence Rule 408 – Compromise Offers and Negotiations This exists so both sides can negotiate freely without worrying that a concession at the table will be used against them later. It also means the insurer’s initial lowball cannot be waved in front of a jury as proof they did not take your injuries seriously.
The Statute of Limitations Keeps Running
This is where people get into real trouble. Every type of legal claim has a filing deadline called a statute of limitations. If that deadline passes before you file a lawsuit, your claim is gone, no matter how strong it was. Sending a demand letter and negotiating with the other side does not pause or extend that deadline. The clock keeps ticking the entire time.
The insurance company has no obligation to warn you that your deadline is approaching. If negotiations drag on until the statute runs, the insurer can simply stop negotiating because you have lost your leverage. Your lawyer should be tracking this closely and will file suit before the deadline if a fair settlement has not been reached. If your case feels like it has been in a holding pattern, ask your attorney directly how much time remains on the statute of limitations. It is the single most important deadline in your case.
If You Reach a Settlement
When both sides agree on a number, the deal gets put in writing. The settlement agreement spells out the exact amount and any other conditions. Built into it is a release where you give up the right to bring any future legal claims against the other party related to the same dispute.2Legal Information Institute. Release Both sides sign, and the matter is legally closed once payment is made.
Payment does not arrive instantly. The insurer or defendant typically issues the check within a few weeks, though it can take up to six weeks. The check usually goes to your attorney’s trust account first. From there, your lawyer deducts legal fees and outstanding costs before disbursing your share.
What You Actually Take Home
The settlement number is not what ends up in your pocket. On a contingency fee, the standard arrangement is roughly one-third of the recovery if the case settles before a lawsuit is filed, rising to around 40 percent if litigation becomes necessary. Your fee agreement should spell out the exact percentage and when it changes.
On top of the attorney’s fee, litigation costs come out of the recovery. These are expenses your lawyer advanced during the case: filing fees, charges for obtaining medical records, expert consultation fees, deposition costs, and similar out-of-pocket items. On a $100,000 settlement with a one-third contingency fee and $5,000 in costs, your net recovery would be roughly $61,700. Ask your lawyer for an itemized breakdown before you sign so there are no surprises.
How the Money Is Taxed
How your settlement is taxed depends on what it is compensating you for. Damages received for personal physical injuries or physical sickness are excluded from gross income under federal tax law. The exclusion covers compensation for medical expenses, pain and suffering, disfigurement, and loss of enjoyment of life, as long as the damages stem from a documented physical injury.3Office of the Law Revision Counsel. 26 USC 104 – Compensation for Injuries or Sickness Emotional distress damages qualify only if the distress was caused by a physical injury. Standalone emotional distress claims that do not involve a physical injury are taxable, except to the extent you are reimbursed for actual medical expenses related to the distress.4Internal Revenue Service. Tax Implications of Settlements and Judgments
Several categories of settlement money are always taxable. Punitive damages are taxed as ordinary income regardless of the type of case. Lost wages and lost business income are taxable unless they resulted directly from a physical injury. Interest that accrues on a settlement amount, before or after judgment, is taxable as interest income even when the underlying damages are tax-free.3Office of the Law Revision Counsel. 26 USC 104 – Compensation for Injuries or Sickness How your settlement agreement allocates the payment across these categories matters for tax purposes, so work it through with your lawyer and a tax professional before finalizing the deal.
If Negotiations Fail
If the demand letter goes unanswered or negotiations hit a wall, your lawyer files a lawsuit. This moves the dispute from informal negotiation into the court system. Filing involves preparing a formal complaint that lays out the factual basis for your claims and the relief you are asking the court to grant.5Legal Information Institute. Complaint The complaint and a summons are then served on the defendant, officially putting them on notice.
Filing does not mean you are headed for trial. The vast majority of civil cases still settle, often after litigation has begun. Sometimes the act of filing is what finally gets the other side to negotiate seriously, because now they face real deadlines, court costs, and the prospect of a judgment they cannot control.
Once the defendant is served, they have a limited window to respond. In federal court, the deadline is 21 days to file an answer or a motion challenging the complaint.6Legal Information Institute. Federal Rules of Civil Procedure Rule 12 – Defenses and Objections: When and How Presented State court deadlines vary but generally fall in a similar range. If the defendant fails to respond at all, your lawyer can ask the court for a default judgment.
After the answer is filed, the case enters discovery. Both sides formally exchange information. You might be asked to answer written questions under oath, produce documents like medical records and tax returns, or sit for a deposition where the other side’s lawyer questions you in person. Your lawyer does the same to the other side. Discovery is the most time-consuming part of litigation and commonly takes several months to over a year depending on the complexity of the case. Your lawyer should give you a realistic read on what pushing forward will cost, how long it will take, and whether the likely outcome justifies the expense before you decide whether to accept any settlement offer that comes in along the way.