How Insurers Often Value a Car Accident Claim

Ultimately, insurance companies’ main objective is to make money for their shareholders. One of the most obvious ways that insurance companies can maximize profits is by minimizing the amount they pay for personal injury claims or cases.

I have told many clients, “if insurance companies did the right thing, I would have to practice a different type of law.”  It is true that some insurance companies are more reasonable than others.  But I have yet to meet the insurance company that voluntarily pays full value for a claim or case unless they are forced to do so by an experienced, aggressive personal injury attorney.

When insurance companies evaluate a personal injury case or claim, their first step is to assess the value of that claim. This critical assessment depends on a case’s particular facts and circumstances.  However, insurance adjusters often follow similar procedures—and place the most weight on the same key factors—when determining value.  Here are some of the methods used by auto insurance carriers in determining their value of a personal injury case.

What Insurers Must Compensate For

To determine what a claim is worth, one must know the types of losses (damages) that are compensable under Florida law. When a person who is found to be at fault for an accident, it is his or her insurance company that must pay an injured person for:

  • Medical care and related expenses
  • Income lost because of the accident
  • Permanent physical disability or disfigurement
  • Pain and suffering, loss of enjoyment of life and other emotional damages, such as stress, depression, or strains on family relationship
  • Damaged property

Calculating Each Party’s Fault

Determining fault for an accident is not an exact science, but in most claims, an insurance adjuster will have a good idea whether the insured person was entirely at fault, partially at fault or not at fault. Fault is based on a percentage (Ex: 10%, 50%, 75%, etc.) and the damages formula total will be reduced by the amount that an injured person is at fault for their own accident in order to arrive at a final figure.

The Damages Formula

When determining compensation for a not-at-fault victim of an accident, it is customary to add the money spent or projected to be spent (e.g. medical bills, property damage, etc.) to lost wages (e.g. income). But there is no precise way to put an actual dollar figure on pain and suffering or other related emotional injuries.

That’s where an insurance company will attempt to use their internal formula to assess value.  An aggressive and experienced personal injury attorney is imperative in forcing the hand of the insurance company to get the most value for a personal injury client.

At the outset of a personal injury negotiation, an insurance adjuster typically calculates the total medical expenses related to the injury. These expenses are often referred to as “medical special damages” or simply “specials.” However, insurance companies will often try to reduce the amount of the specials based on their own formula as to what they think is the appropriate amount of the bill for the care provided.

The insurance company will then assess the non-economic damages, such as pain and suffering, loss of enjoyment of life, inconvenience, etc.  This is an inexact science and where personal injury attorneys and insurance companies will often have the biggest disagreement on value.

Much of the value of non-economic damages depends on the severity of the injuries suffered in the accident. The general understanding is the more injured a person is, the more their non-economic damages are worth because of what they have been through.

The adjuster then adds on any lost wages as a result of the injuries to the total value. Even this amount can be disputed by the insurance company.

Artificial Intelligence vs. Reality

Insurers are turning more and more to technology and software to help calculate case value.  However, because trials are decided by people (jurors), the reality is there is no way a computer system can truly calculate the pain and suffering an injured party experiences after an accident.

Insurance companies’ software programs assess data provided by adjusters and return a mathematically calculated settlement offer. These programs use thousands of “rules” to generate questions related to the injury for the insurance adjuster handling the claim. The adjuster enters strings of data into the software program and the programs will return what it deems to be a mathematically fair settlement offer.

Unfortunately, software cannot truly assess the value of someone’s case.  It is up to a client’s personal injury attorney to convince the adjuster to pay a fair number for a client’s case.  If the insurance company will not do so voluntarily, the personal injury attorney needs to be willing and capable to fight for their clients’’ rights in litigation and potentially at trial.

 How Insurers Try to Limit Their Exposure

Insurance companies are great at advertising how ready, willing and able they are to pay a claim or case. The reality is insurance adjusters and their bosses have a different mission. They look for ways to try and diminish the value of an accident case. Their job is to reduce the insurance company’s exposure by claiming among other things:

  • The property damage was minor, and the injury could not have occurred in the accident.
  • The injury was due to pre-existing conditions.
  • The medical bills are too high.
  • The client does not need future medical treatment.

Whether the insurance adjuster uses a computer program, their own training or any other method to determine the value of a personal injury case, the reality is that a lawyer should make an independent decision and advise his or her clients accordingly.  It is imperative that a personal injury victim work with an experienced attorney who can advise regarding the value of the case.