When a birth injury lawsuit is settled, money is first paid out of the settlement to the various parties who are owed money, such as doctors who haven’t been paid for treating the child, the birth injury lawyer for fees and expenses, the insurance company, and to the parents for their out-of-pocket payments to doctors.
There are states where the remainder of the birth injury settlement money can be paid to the parents to be used on the child’s behalf but in general, the remainder of the settlement is placed in a blocked account and/or an annuity, both of which limit a parent’s ability to spend the settlement money in ways that do not benefit the child. A blocked account is a bank account that only the court can control. The annuity pays out to the injured child when he or she reaches the age of majority. When the birth injury settlement involves an annuity, it is referred to as a structured settlment.
Parents may also receive damages as a result of their own claims stemming from the birth injury (for something like emotional suffering or for the costs associated with caring for the injured child).