chance you are going to be dealing with some type of insurance company. For example, if you get into a car accident, the insurance company of the driver responsible will provide you with compensation. If you sue a doctor for medical malpractice, his medical malpractice insurer will handle the case. If you sue for premises liability, the homeowner's insurance or liability insurance is going to kick in. Because you are almost always going to be dealing with an insurance company, it is very important to understand how insurance handles liability claims.
Insurance Adjuster Motivation
Insurance adjusters are assigned to a case to investigate facts and determine how much the case is worth. They work for the insurance company, not for you as the insured or the victim. They are not interested in making sure you get the fair and just compensation that you deserve. Instead, they are interested in keeping the payouts as low as possible so the insurance company is more profitable.
While insurance adjusters want to pay out as little as possible, they also have the ultimate goal of avoiding a lawsuit by making a settlement offer that the injured party will accept. If a case does not settle outside of court, the individual who was injured usually has the right to file a civil lawsuit and, once the plaintiff has proven his or her case, the judge or jury will make a decision on what damages are appropriate. This is risky for an insurance company, as the damage award can end up being very high if the jury is sympathetic to the plaintiff. Legal fees and other costs associated with a trial can also become expensive for an insurer.
The insurance adjuster, then, generally has the job of getting the insured to accept as low of a settlement offer as possible instead of filing suit. Typically, adjusters decide on how much they are actually willing to pay out (the maximum) and then will make an offer that is lower than that max, sometimes as much as 25 to 50 percent lower. This gives them negotiating room during settlement talks.
How an Insurance Adjuster Decides on an Offer
In personal injury cases, insurance adjusters usually consider the same factors that juries would look at in deciding what damages are appropriate. This means the adjusters are usually looking at:
- Actual expenses (medical bills and costs) that have been incurred and that will be necessary in the future
- Actual losses in the form of lost income or lost wages
- Pain and suffering damages
- Emotional distress damages
Some of these costs, like for actual expenses and losses, are very easy to determine. The numbers can just be added up. Pain and suffering, on the other hand, is much more subjective. There may also be additional forms of compensation necessary in certain cases, such as if an individual dies as a result of an injury and a wrongful death suit is possible.
Pain and Suffering Calculations
Because of the complexities associated with calculating pain and suffering, insurance adjusters usually have a formula or system that is used. Two examples of possible techniques used to calculate pain and suffering include:
- A per diem system, where the injured victim is paid a set amount for each day of suffering
- A pain multiplier system, where the insurance company multiplies the cost of the actual losses (for medical bills and lost income) times a set number. The number that is often used for a pain multiplier will usually vary between 1.5 and 5, but each insurance company may have a slightly different system here.
Past court cases from the jurisdiction where the claim would be made can also influence how much money an insurance adjuster is willing to pay out.
Other Considerations
Insurance adjusters also consider two other key factors:
The policy limits.
An insurance company is never going to pay more than the maximum amount of the insurance policy. For example, if a driver bought $50,000 in liability insurance, the maximum the insurance company will ever pay out is $50,000 total in legal fees and damages.
The strength of the plaintiff's case.
If the plaintiff has a really solid case (like a medical malpractice claim where a doctor left a surgical instrument inside of him or amputated the wrong leg) then the insurer is more likely to offer a larger settlement because a plaintiff's victory in court will be almost certain. If a plaintiff's case is fairly weak, then the insurer is likely to offer much less, since the insurer and the plaintiff will be aware that there's a chance he could go to court and get nothing.
Insurers and insurance companies also know that they have a legal duty to evaluate claims fairly. When an insurer acts in "bad faith" and denies claims that it should pay as a result of the insurance contract, this can lead to a tort action against the company.
Effectively Dealing With an Insurance Company
Once you have an understanding of how insurance companies work and of what the motivation of the insurance adjuster is, you can use that information to your advantage to negotiate the best settlement possible. There are a few key things in particular that you should do:
You should consider hiring a lawyer.
This lets the insurance company know immediately that you do take your rights seriously and that you will be filing a lawsuit if you aren't given a fair settlement. Your lawyer also knows how to determine what your specific case should settle for and can use his expert legal knowledge and negotiation skills to get you the benefits you deserve.
Make sure you have clear evidence of fault and of the extent of your injuries
Photographs, pain journals, extensive medical records, and records of all bills paid and work lost are all essential to maximizing your recovery.
Consider sending a demand letter
This is essentially a letter where you state what you will accept in order to settle the case. If you send such a letter, then the negotiations with the insurance adjuster can begin at the number that you believe is fair, rather than the number that the insurance adjuster decides is right. This can result in a more favorable final outcome for you.
Try to determine what the policy limits are whenever possible.
This will let you know exactly what the maximum payout from the insurer is. While technically you could get a judgment for a larger amount than the maximum payment from the insurer, you'd have to try to collect this excess from the defendant personally. This might be hard to do if the defendant has limited assets.
You must make sure that you do not accept a settlement offer until you know the full extent of the damage and injuries you have suffered and until you are confident that the settlement is fair and sufficient. Once you accept the offer, you must sign a release of all claims and you cannot change your mind and decide to sue later.
Using Your Evidence
The above steps should all help you to make the best deal possible with the insurance company. The main key, however, is to make sure you have evidence necessary to prove fault and to prove your injuries. With sufficient evidence, even if you are not able to reach a settlement, you will be able to go to court and get the compensation you deserve.
In your dealings with the insurer, you should make sure that they are aware of the amount of evidence you have. You should also be careful not to give them any evidence to use against you. Do not volunteer more information than asked, think carefully about your answers to questions, and never admit fault or guilt to the insurer.
Insurance companies have lawyers and sometimes whole legal teams working on their behalf to try to pay you as little as possible. You should hire an experienced personal injury lawyer when you are involved in dealing with an insurance company. Your lawyer can help to ensure that your legal rights are protected and that you get the compensation you deserve.
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