What Is a Claims-Made Settlement?
In a claims-made settlement, the company pays only for the claims people actually file, rather than funding a fixed pot up front.
A claims-made settlement is a class action settlement in which the defendant pays each valid claim that is submitted, rather than paying a fixed amount into a fund up front. The company's total cost depends on how many people file.
Why it matters to you
In a claims-made deal, your payment is usually a set amount or a set formula, such as a fixed sum per product bought, and it does not shrink as more people file. Some claims-made settlements set an overall cap, and if claims exceed it, payments may be reduced. Either way, you are only paid if you file a valid claim by the deadline.
Claims-made versus common fund
- ✓Claims-made: defendant pays per valid claim; unclaimed money never leaves its hands
- ✓Common fund: defendant pays a fixed amount into a fund; money is split among claimants
- ✓Payout behavior: claims-made payments are often fixed; common fund payments often rise or fall with the number of claims
- ✓Leftover money: in a claims-made deal, there may be none to redistribute
Claims-made settlements behave much like reversionary settlements, since the defendant keeps whatever is not claimed. Judges look closely at whether the claims process is simple enough for people to use.
A simple example
A company agrees to pay a fixed amount to each customer who bought a mislabeled product and files a claim. Customers with proof of purchase can claim for more units than those without. The company pays every valid claim, and there is no fund to split.
What to check in the notice
Look for whether payments are a fixed amount or adjusted, whether there is a cap on total payments, and what proof each payment tier requires. If documentation unlocks a higher payment, it may be worth digging up receipts, bank statements or order emails. If no proof is needed, the claim may take only a few minutes.
Claims-made structures are common when the class is very large and many members would only be owed a small amount, or when the defendant can identify customers and their purchases from its own records. In those cases, a simple form and clear notice make the biggest difference to how much the class actually receives.
Related terms
Compare with the common fund doctrine and pro rata distribution, which describe how fixed funds are typically split.
Because claims-made payments only go to people who file, SettleScout's deadline reminders matter most for these deals.
Frequently Asked Questions
Is a claims-made settlement worse than a common fund?
Not necessarily. Individual payments can be predictable and sometimes higher. The concern is that low claim rates mean the defendant pays little overall.
Will my payment be reduced if many people file?
Only if the settlement has an overall cap and claims exceed it. Check the notice for any cap or pro rata reduction language.
How do I know if a settlement is claims-made?
The long-form notice or settlement agreement will say whether the defendant pays per claim or into a fixed fund.
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