A lawsuit over a winning $5 scratch-off lottery ticket may end up costing the state more than $1 million.

Indianapolis resident Tom H. Smith bought a $2 "instant win" ticket in 1996 and won $5. But he didn't try to collect the prize until months later and was told it was too late for the payout.

Smith appealed to lottery headquarters, saying he had no way of knowing the game had ended, and eventually filed a lawsuit against the Hoosier Lottery.

Others joined the lawsuit, saying they also tried to redeem winning tickets but missed a deadline they didn't know about. The suit went to the Indiana Court of Appeals and to the Indiana Supreme Court.

But Esther Schneider, who was appointed to be the Hoosier Lottery's executive director in 2005, said she wanted to settle the suit, which has already cost the lottery more than $450,000 in attorney fees.

"I thought, 'OK, how do we make this thing go away?'" she said.

A proposed settlement filed in Marion Superior Court this month would give Smith $15,000, and the lottery would set up a $600,000 fund to pay others entitled to back payments. If a judge approves the settlement, hundreds of other people could also collect on tickets purchased between 1989 and early 1997.

The lottery has since changed the way it ends payouts for scratch-off tickets. Each ticket sold now includes a precise date by which players must redeem their prizes