How Do Insurance Companies Negotiate Settlements?

personal injury lawyer doing negotiate settlementsInsurance companies use many factors to negotiate settlements in personal injury claims. Usually, they’ll start by taking a look at the evidence surrounding the claim to determine who caused the accident and decide how much it might be worth to the victims. However, not all insurance companies work the same, and some work mainly to keep as much money as they can after dealing with a claim.

If you were in a personal injury accident of some kind and need to seek out compensation for your injuries, it’s best not to rely too heavily on the settlement amount the insurance company offers you. Instead, you need a lawyer who understands how insurance companies work and can negotiate a settlement on your behalf to get the compensation you deserve.

Let’s take a look at the process of a personal injury claim and how insurance companies negotiate settlements so you know what you’re getting into when you decide to pursue a personal injury claim.

The Personal Injury Claims Process From Start to Finish

Each state has different laws regarding civil claims. However, the basic process is the same around the United States.

Every claim starts with some sort of accident that leads to personal injury. The person who caused the accident (considered the at-fault party) will be required by law to pay at least some percentage of compensation for the damages they caused to the other parties injured in the accident.

The Accident

Depending on the state, the amount of compensation you can recover may vary depending on specific circumstances, such as whether you had insurance to cover your damages. For example, while some states require that all drivers carry insurance to cover their damages before they can sue someone, most states allow parties injured in accidents to seek compensation solely from the at-fault parties

After an accident, you’ll need to talk to the at-fault party (usually the other driver in a crash, unless your case is a slip and fall or some other type of accident, in which case it’s whoever was responsible for the condition that led to your accident) to find out what insurance coverage they have. Each state has different requirements dictating how much insurance a driver should have to deal with accidents they cause.

The next step for you is to gather evidence of the damages you’ve suffered. You’ll need to have proof of all the pain and suffering you’ve endured because of the accident to bring a claim against the responsible party.

You’ll want your lawyer to gather:

  • Medical bills and records.
  • Receipts for any repairs to damaged property.
  • Documentation of lost wages and/or earning capacity.
  • Photos or video captured at the accident scene.
  • A police report of the accident, if applicable.
  • A journal detailing the suffering you’ve been through.
  • Testimony from medical experts and mental health experts explaining the future consequences of your suffering.
  • Testimony from family and friends about what you’ve endured.

Once your lawyer has gathered all this evidence, they can move on to the next steps. Let’s take a look at the whole claims process from start to finish.

The Steps In a Personal Injury Claim

Timelines for how long each step can take may vary from state to state, but the basic process will include most or all of these steps.

  1. Call a personal injury attorney Attorneys will usually offer a free consultation on the phone to help you determine whether to pursue your claim. They may also estimate how much compensation you can receive.
  2. Meet with the lawyer. At the meeting, you’ll go into the case in detail to determine how to move forward. If you and the lawyer agree to continue working together, you can sign the paperwork and your attorney will get started on your case right away.
  3. Gather evidence. Once you’ve signed the papers necessary to allow your attorney to act as your legal representative, they will help you gather the important evidence you need from doctors, the police, and anyone else relevant to the case.
  4. File a complaint. After they decide how much compensation you deserve and have enough evidence, your lawyers will file a complaint with the details of the case and send it to the at-fault party and/or their insurance company.
  5. Receive a response. After a set amount of time, the defendant will need to get you a response. In the response, they’ll either accept responsibility and make a settlement offer or refute your complaint.
  6. Gather more evidence. Once you’ve received the response, your lawyers will work on gathering all the evidence they need from you and the other party. This will include further documentation as well as interrogatories (written questionnaires sent to each significant party or witness) and depositions (verbal questioning of each significant party or witness).
  7. Negotiate a settlement. The insurance company and your lawyers will do their best to negotiate a settlement that satisfies both parties.
  8. Go to court. If negotiation doesn’t work, the case will have to go to court to be tried before a judge and jury.
  9. Present your claim. Your attorneys will present a strong claim using all the evidence they’ve gathered to ensure that the judge and jury understand the circumstances of your case and how much compensation you deserve.
  10. Receive the judgment. The judge and jury will pass judgment to let you know how much compensation they believe you deserve. You will then take this compensation and return to your normal life.

Once all these steps have been completed, you’re done! Note that while this process usually takes several months, it can take up to a few years, especially if you have to go to court. That’s why it’s important to understand the negotiations process so you can get your just compensation as quickly as possible.

The Settlement Negotiation Step Explained

Settlement negotiations are very important to a personal injury claim. It’s usually in everyone’s best interest if you can settle your case in negotiations instead of having to go to court.

However, the process can be challenging, especially when you and the insurance company you’re negotiating with have different goals in mind. So, let’s look at how you (with your lawyers) and your insurance company engage in negotiations.

#1. How Lawyers Calculate a Settlement

Lawyers calculate a settlement amount by taking into account the damages you’ve suffered after your accident. These damages will include both economic and non-economic losses that you’ve had to endure after the accident.

The main categories of damages you’ll see your lawyers considering include:

  • Medical expenses. This will cover both the initial emergency room visit as well as costs for ongoing treatment, therapy, or medications.
  • Property damage expenses. This covers any damage to your car or other property that you had to pay to repair.
  • Lost income. This covers the initial lost income if you took time off work to recover. It also includes ongoing lost earning capacity if you can’t return to your job at the same hourly or pay rate as you worked before (e.g., you used to work full-time, but now can only remain in the office a few hours at a time).
  • Pain and suffering. This broad category covers the discomfort, inconvenience, and distress you endured from your injuries.
  • Emotional distress. This is any trauma you personally and mentally endured because of the traumatic event of the accident.
  • Loss of consortium. This covers the loss of important relationships because of the difficulties in your life after your accident.
  • Loss of life enjoyment. This will include the loss of any activities or other important parts of your life that you can’t do because of your injuries.

Your attorneys will gather evidence and documentation of all these losses and put them together to calculate how much you deserve in compensation. They will likely talk to plenty of medical experts to determine just how much you’ll suffer in the future as well.

Finally, based on the likely present and future costs (both economic and non-economic) they’ve calculated, they’ll set an average amount of compensation you should be able to recover.

Likely, they’ll set the amount they think you can recover along with the lowest amount you should even consider accepting. This range will provide you room to negotiate with the insurance company.

#2. How Insurance Companies Calculate a Settlement

Insurance companies start with the same evidence as your lawyers. They’ll look at medical records, police reports, expert testimony, and the receipts and bills you’ve received that led to your injuries. Once they determine who they think caused the accident and how much they think you deserve, they’ll send you an offer.

However, insurance companies work differently than lawyers in one key area: they need to make money. While lawyers calculate a settlement based on what you deserve, insurance companies also look at what they think they should have to pay.

The truth is, most insurance companies make money by taking in more from their customer’s monthly premiums than they have to pay out in claims. Therefore, to make enough money, they have to pay as little in claims as possible.

If the first offer you receive from an insurance company seems low, it probably is. They are doing what they can to save money by offering you the lowest amount they think you might accept. This is where you’ll need to start negotiations, usually with the help of a professional attorney who can make sure the insurance company doesn’t trick you.

#3. How The Negotiation Process Goes

Initially, as soon as you file your claim, the insurance company will start calculating the settlement they think you should get. Then, they’ll send you their response with an initial offer. This offer, as mentioned, will probably be pretty low.

Your lawyers will talk the offer over with you and let you know what they think, based on their experience, you should do. If they think you should keep fighting for a higher settlement, they’ll let you know. However, they won’t force you to do anything. The final decision on any offer is always yours to make.

Once you’ve decided to take the settlement or reject it, your lawyer will help you send a reply to the insurance company either accepting the offer or asking for a higher amount. The insurance company will either meet your demand or make you a different offer. This back and forth process will continue until you reach a settlement that satisfies both sides of the claim.

If you can’t settle, you may go to court with your claim. However, this doesn’t happen often, because insurance companies know going to court means they’ll have to pay a lot more. It’s in their best interest (and yours as well) to negotiate until reaching a fair settlement.

The Importance of a Personal Injury Attorney

You need an attorney on your side. Insurance companies will do everything they can to pay you as little as possible. If someone injured you in an accident and you need to negotiate a settlement, find a personal injury attorney to help you.

Your attorney has been through many negotiations before. They know how much you deserve and will continue to fight until you get it. Personal injury attorneys also usually work on a contingency basis. This means they won’t accept any payment from you until they win your case—hiring a lawyer is usually no out-of-pocket cost to you at all.

Make sure that you get the compensation you deserve in your claim by talking to a lawyer to help you with the negotiation process. As soon as you can after your accident, call a lawyer for a free consultation. As soon as you do, they’ll help you reclaim your life by taking back the compensation you deserve.