The general rule is that lawsuit settlements are taxable, except in cases that involve an actual, physical injury (“observable bodily harm”) or illness that you suffered. In other words: personal injury settlements usually aren't taxable, while other types of settlements usually are.

Where do I enter an award from a taxable legal settlement?

https://ttlc.intuit.com/turbotax-support/en-us/help-article/import-export-data-files/enter-award-tax...

Refer to Pennsylvania Taxation of Fringe Benefits. Delay damages received in connection with a court judgment or settlement is taxable compensation. Federal-taxable punitive damages received for personal physical injury or physical sickness, whether received by suit or by settlement is not taxable compensation.

https://www.revenue.pa.gov/FormsandPublications/PAPersonalIncomeTaxGuide/Pages/Gross-Compensation.as...