A voluntary resolution between the parties in a lawsuit.

Rather than have a lawsuit decided by a judge, some parties will work out a resolution on their own. Settlements can happened anytime during or before a lawsuit actually goes to trial. Typically, the defendant agrees they've harmed the plaintiff and pays some or all of the damages.

For small-business owners, settlements are often preferable to court trials because they tend to cost less time and money. Settlements are covered by liability insurance.