How Do Insurance Companies Calculate Their Settlement Offer?
Insurance companies make money by managing risks, including the possibility that their insured will lose a lot of money if a personal injury lawsuit against them goes to trial. They must balance overspending on settling claims and being so cheap they force cases to trial that policyholders lose.
Satterley & Kelley, PLLC, have helped car accident victims with injury claims and lawsuits for decades. We have dealt with reasonable insurance companies and those who seem to go out of their way to make the process as painful as possible for our clients.
One of our clients’ most significant benefits is that we deal with the insurance company, not them. They focus on their recovery and getting their lives back together.
Insurance Basics
Insurance companies, for a fee (the premium), will, within limits and exclusions, assume the risk of unexpected losses or liabilities their policyholders may face. This contract is detailed in the insurance policy. It covers the terms, coverage limits, and process for filing claims.
If a covered loss happens, the policyholder or injured party submits a request or claim for coverage to the insurer company. It asks them to provide compensation and possibly a legal defense for the insured based on the policy’s terms.
The claim should be investigated. If it appears to be factual, something the policy covers, and the amount is within the policy limits, the insurer is legally obligated to cover it. Insurers must comply with policy language, state statutes, and court decisions interpreting them. Failing to do so can result in severe penalties and legal action.
Just because an insurance company finds a claim is legitimate, it falls within the policy, and coverage isn’t beyond the policy’s limits doesn’t mean the company’s obligated to give the injured party anything it wants to resolve the claim. It can balance the interests of resolving a claim while not draining its resources.
What’s Covered by a Claim?
If you’re injured because of the insured’s negligence, their insurance company should compensate you for different types of losses:
- Medical care and expenses, including hospital bills, medications, surgeries, physical therapy, and follow-up care. Any psychological help you need should also be covered
- If your injuries stop you from working or result in lost time due to treatment, you should be covered for this lost income and benefits. If those losses will continue, you should be paid for your expected lost pay and benefits
- If your injuries cause long-term physical impairments or visible scars, you should be compensated for these effects
- Pain and suffering, including stress, depression, embarrassment, negative impacts on relationships, emotional and physical distress you endure should be compensated
- You should be paid for personal property damaged or destroyed in the accident, including the cost of vehicle repairs or the value of your vehicle if those repairs would cost more than what the car is worth
Losses are unique to each accident and they must be documented before they’ll be considered.
What is a Claim Settlement?
A settlement is an agreement between the claimant and the insurer on the compensation needed to end the dispute and prevent the claim from becoming a lawsuit or a lawsuit from proceeding. Both sides have some leverage over each other, and neither side settles a claim out of the goodness of their hearts. This is a business transaction.
Insurers must manage their financial exposure. Like any business, they want to balance their income and expenses so they get the return on investment they seek. Minimizing claim payouts is one way to control their costs, while claimants want maximum compensation.
When the sides disagree over a claim, they normally find a middle ground through negotiation. If they can’t, a judge and jury usually decide if the defendant is liable and, if so, how much the injured party should be paid.
How Do Insurance Companies Calculate Damages?
Damages are the monetary value of your losses that can be compensated through an insurance claim or personal injury lawsuit. There are many formulas insurance companies use to calculate them, and they usually factor in the following:
- They total your medical costs, known as “medical special damages” or just “specials”
- To put a figure on pain, suffering, and other non-economic losses, the medical specials are multiplied by a number. If it’s a minor injury, it may range from 1.5 to 2. For more severe or chronic injuries, the multiplier could be as high as 10
- Another multiplier considers the strength of the case and or the degree of wrongdoing by the insured
- Lost income and property damage are added
- Kentucky is a comparative negligence state. Your share of the fault can reduce your recovery for the accident. An insurance company will reduce compensation by how much they feel you’re to blame for the crash
These multipliers vary depending on the insurance company and their approach to claims. This formula is a starting point for negotiations, not the final settlement. The final compensation amount varies depending on negotiations and other factors.
We will understand your case’s settlement value and will do what’s necessary to get the insurer to offer a fair amount. If that doesn’t happen, going to trial may be an option, resulting in the insurance company improving its offer. Taking a case to a jury verdict involves risk. The plaintiff may not receive what they planned, or the insurer may be ordered to pay much more than anticipated.
Speak To a Satterley & Kelley Personal Injury Lawyer Today
If another party injured you due to their negligence, Satterley & Kelley, PLLC lawyers can protect your interests and legal rights to compensation for the harm you suffer.
Call our Louisville office at 855-385-9532 to schedule a free initial consultation so we can discuss the accident and your injuries. If it’s more convenient, you can complete our contact form.