Orlando Harmon
When determining settlement amounts, auto insurance companies consider three main factors: liability, damages, and policy terms. The first step is to establish liability by determining fault in the accident. This involves reviewing police reports, witness statements, and other evidence. Once liability is clear, the insurance company assesses the victim's losses, including medical bills, property damage, lost income, and pain and suffering. Finally, the insurance company reviews the policy to determine coverage limits and types of losses covered. The settlement amount is then calculated based on these factors.
Liability and fault
When determining settlement amounts, insurance companies consider three factors: liability, damages, and the terms of the insurance policy.
The first thing an insurance company will look at when determining a settlement amount is legal fault. In other words, the insurance company will only pay out if the insured person or their insurance company is legally responsible for the accident. Whether a person is legally responsible for the accident depends on state laws and the specific facts of the case.
In some states, called no-fault states, drivers must first rely on their own insurance coverage to pay for their injuries or those of their passengers. Once this coverage is exhausted, they can seek compensation from the other driver's insurance. In these states, relatively minor crashes can result in settlement offers from the at-fault driver's insurer.
In fault states, on the other hand, the driver who caused the crash will always be responsible for losses. Here, even relatively minor crashes can result in settlement offers from the at-fault driver's insurer.
When liability is clear, this can result in a larger settlement. The insurer representing the at-fault driver will accept responsibility and likely provide a reasonable settlement offer to avoid a lawsuit.
If fault is uncertain, no settlement may be offered, or a settlement offer may be lower. If fault is shared between the drivers, this can significantly impact compensation.
In contributory negligence states, if a driver is even 1% at fault for a collision, they cannot collect any compensation from the other motorist. In pure comparative negligence states, a driver can collect compensation from another motorist for injuries even if they were mostly at fault. In modified comparative negligence states, a driver can pursue a claim as long as they are not 50% or 51% responsible for the crash.
The Role of the Adjuster
When negotiating a personal injury claim with an insurance company, you will likely deal with a "claims adjuster". The adjuster will investigate the claim by talking to the insured person, reading any police reports, talking to witnesses, and gathering evidence. They will also investigate the claimant by checking databases to see if they have filed a personal injury claim before and conducting a background check.
The adjuster will then contact the claimant to request documentation relating to the claim, such as medical bills, proof of earnings, tax returns, and proof of property damage. They will use this information to determine the settlement value by considering the claimant's chances of winning at trial and how much a jury might award the plaintiff in damages.
Distribution of Fault
If the other party is entirely at fault for your injury, that can make settlement more likely. If you are partially at fault for the accident, your total potential recovery may be reduced, and any settlement amount will reflect this.
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Damages
Financial losses can include current and future medical expenses, lost income, and property damage. The cost of medical treatment for injuries caused by a car accident can be significant, with the average cost of hospitalisation following a car accident being as high as $57,000. Lost income claims can also be substantial, especially for those who are unable to work for extended periods due to their injuries. Property damage claims can cover the cost of repairing or replacing the damaged vehicle and any other damaged property.
In addition to financial losses, damages can also include compensation for pain and suffering. This type of damage is more challenging to calculate, as it is not based on specific bills or expenses. Adjusters often use formulas and specialised software to assign a value to pain and suffering claims. Insurance companies may also total the medical and property damage bills and multiply that by a number between 1.5 and 4, depending on the severity of the case, to calculate an offer for pain and suffering.
The severity of the injuries sustained in the accident is a major factor in determining the settlement amount. More serious injuries, such as traumatic brain injuries, spinal cord injuries, or paralysis, are generally valued higher and may result in a higher settlement offer. The long-term effects of the accident on the victim's life are also considered, including any permanent disabilities or significant lifestyle changes caused by the injuries.
It is important to note that the settlement amount may be limited by the insurance policy's coverage limits. The insurance company will pay up to the policy limits, and if the damages exceed those limits, the victim may need to pursue additional compensation from the at-fault driver directly.
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Policy terms
Coverage for Types of Losses
The insurance policy outlines the specific types of losses or damages covered. These can include financial losses, such as medical bills, damage to the vehicle, and lost income. It is important to carefully review the policy to understand what types of expenses are covered to ensure they are included in the settlement calculations.
Policy Limits
Policy limits refer to the maximum amount of benefits that the insurance company agrees to pay in the event of a loss. When determining settlement amounts, the insurance company will not exceed these policy limits. It is important to note that car insurance coverage can limit the settlement amount even if the damages incurred are greater than the policy limits.
Deductibles
The policy will also specify any deductibles that apply. A deductible is the amount the policyholder is responsible for paying out of pocket before the insurance company provides coverage. For example, in the case of comprehensive or collision coverage, the policyholder pays the deductible, and the insurance company covers the remaining amount up to the policy limits.
Endorsements and Exclusions
It is important to review any endorsements or exclusions listed in the policy. Endorsements are written agreements that modify the original coverage by adding or removing certain types of coverage. Exclusions, on the other hand, are contractual provisions that deny or restrict coverage for specific perils, persons, property, or locations. Understanding these provisions ensures that all applicable coverage is considered in the settlement amount.
Additional Coverage Options
In addition to the basic coverage, the policy may include additional coverage options that can impact the settlement amount. These could include rental reimbursement coverage, roadside assistance coverage, or loan/lease payoff coverage, among others. Reviewing these options and understanding their impact on the overall coverage is essential when determining a fair settlement amount.
Understanding Policy Terms
When reviewing policy terms, it is important to carefully read through the entire document. Insurance policies can be complex, and it is crucial to have a comprehensive understanding of the coverage and limitations outlined in the policy. Consulting with an experienced insurance attorney or agent can help ensure that all relevant policy terms are considered when determining a settlement amount.
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Claimant's history
When determining a settlement amount, insurance companies will look at the claimant's history to assess their chances of winning at trial if a personal injury lawsuit is filed in court. They will also consider how much a jury might award the claimant in damages.
The adjuster will investigate the claimant by checking their claims history in insurance company databases. They will also Google the claimant and may hire an investigator to ensure the claim is legitimate. For example, to check that the claimant is not playing in a competitive soccer league while claiming for a debilitating back injury.
The adjuster will also contact the claimant or their lawyer to request documentation relating to the claim, such as medical bills, proof of earnings, tax returns, and proof of property damage. They will scrutinise this documentation to see if anything is missing, if there is any suggestion the claimant has had prior injuries, or if the claim raises questions.
The nature and extent of the claimant's injuries will also be considered. More serious injuries are generally valued higher and may result in a higher settlement offer. Pre-existing conditions can also affect the settlement amount.
The long-term effects of the accident on the claimant's life will also be considered. Injuries that are permanent, disabling, or severely impact the claimant's lifestyle may lead to a higher settlement amount. The insurance company will consider any lost income, pain and suffering, and other serious life disruptions when weighing settlement options.
The claimant's history is just one of many factors that insurance companies take into account when determining a settlement amount. Others include liability, damages, the terms of the insurance policy, the type of claim, the policy limits and amounts allowed for recovery, the distribution of fault, and previous matters (such as previous jury verdicts or settlements in similar cases).
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Settlement value
Liability
For a settlement to be offered, liability must be clear. The insured party must be liable for the claim. In the case of car accidents, the fault lies with the person that caused the accident. However, when there are multiple parties with varying descriptions of the accident, things can get complicated, and the car insurance company will determine who pays.
Damages
Once liability is established, the insurance company looks at damages to determine the settlement amount. Damages include financial losses like medical bills, property damage, loss of earning capacity, lost wages, and other out-of-pocket costs. They also include non-economic damages such as loss of enjoyment of life, loss of consortium with a spouse, pain and suffering, and reputational damage.
Insurance Policy Terms
Finally, the insurance company reviews the insurance policy in question to determine coverage for the types of losses and policy limits. The settlement amount will be affected by payout limits and restrictions.
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Frequently asked questions
Auto insurance companies consider three main factors when determining settlement amounts: liability, damages, and policy terms. They assess who is at fault, what the claimant's losses are, and what the policy covers.
The multiplier method is a way to estimate the value of a car accident claim. Adjusters total up the claimant's medical bills, multiply that number by a factor (usually between 1 and 5) to estimate general damages like pain and suffering, then add the special and general damages together with any lost earnings to get an overall estimate.
Assigning fault can be tricky and depends on state laws and insurance company practices. Insurance companies look at evidence such as police reports, witness statements, and damage reports. They may also use in-house attorneys to defend their client.
Damages are typically divided into two categories: economic (or special) damages, and non-economic (or general) damages. Economic damages include financial losses like medical bills, property damage, and lost wages. Non-economic damages include pain and suffering, loss of enjoyment of life, and loss of consortium.
Settlement negotiations with an insurance company can be complex and lengthy. It involves investigating the claim, the claimant, and gathering claim documentation. The adjuster will then determine settlement value by assessing the claimant's chances of winning at trial and the potential jury award.
