Maximizing damages and settlements – Lesson 1
Excerpted from Maximizing Damages in Small Personal Injury Cases
by Derry Rundlett
Adjuster preferences, justification, company variations, specials, defense attorneys, happy clients, and case weaknesses
1. Insurance companies are not afraid of being sued in small personal injury claims.
The cost of defending a small personal injury claim usually will not be very high when considered against the outside chance of a substantial verdict against the carrier. An insurance company would rather not pay $6,000 to defend a claim worth $10,000, but they will do so if they have to or if they want to. An insurance company would rather make you litigate a case to completion or to the courthouse steps than to leave the impression with you or with any other plaintiffs attorney that they will settle a claim just to avoid litigation. If liability is a big issue, believe me, they will spend $10,000 to defend a case that could have settled for $3,000. So remember, threatening to sue in a small case is not going to make either the insurance adjuster or his supervisor shake in their respective boots.
2. Insurance adjusters prefer to close files, but they will not do so at the expense of settling a small claim for much more than it’s worth.
Insurance adjusters are no different than other bureaucrats, including plaintiffs lawyers. They prefer to close cases, put the files away, and move on to other things. Closing files is a goal of all adjusters just as judges have the goal of moving crowded dockets along. However, an insurance adjuster or his supervisor will not substantially compromise the value of a small claim just for the convenience of closing the file. If suit is commenced the file is simply referred to the defense attorney and the internal process takes a different turn. The adjuster begins a communication process with the defense attorney and leaves the hard work to the defense firm.
3. Every insurance adjuster or claims supervisor must justify the settlement they are paying to at least one superior at some point in time.
Even a senior adjuster or claims manager will have to justify the payment of a settlement to somebody either before or following the settlement. This means that they can always talk about “getting authority” and will not pay a claim without realizing that the settlement could be questioned or tested at a later date. Every settlement must contain appropriate justification and documentation. An insurance company employee will not run the risk of job security just to close a file or avoid litigation. Therefore, the days of settling a case with one letter and two telephone calls are over. Even the small personal injury claim requires substantial documentation and support; it is the plaintiffs attorney’s job to provide that.
4. Insurance defense attorneys make more money by litigating cases as long as possible than they do by settling cases early after suit.
If it has not already become clear to you, insurance defense firms earn the bulk of their money by litigating. They send the insurance company bills for services based upon hourly participation in the case. They do not work on commissions, and they are not paid huge fees to settle cases early in the game. If you commence litigation in a small case, be prepared to do some work. Even if the defense attorney knows that you may be willing to settle your case for much less than your demand, he won’t be on his knees begging you to do so. Therefore, once you file suit, be committed to take it to trial if necessary because the defense attorney will not be going out of his way to settle immediately.
5. There are certain insurance companies, local and national, who will seldom settle small to medium range personal injury cases for a fair amount without the necessity of suit and perhaps a full trial.
If you are brand new to the practice of personal injury you have two ways of finding out which companies don’t settle cases easily:
Spend a few years learning through experience; or
I recommend the latter approach because it will save you countless hours of aggravation, frustration, and effort.
The names of those companies will be known to experienced plaintiffs attorneys in your jurisdiction. There are certain national and statewide companies who are known throughout the industry as being extremely conservative when it comes to settling personal injury claims. Those carriers have a philosophy, mind-set, and even formal procedure regarding the settlement of claims. They will seldom put forth a reasonable offer to settle the small personal injury claim, especially those involving soft tissue injuries. Such companies know that most individuals unrepresented by counsel will succumb to the “take it or leave it approach.” Those individual claimants believe, want to believe, or are forced to believe that they must accept an insurance adjuster’s offer. The carriers also know that the majority of plaintiffs attorneys will settle claims rather than commence suit or go to trial. Only a small minority of plaintiffs attorneys are willing to take the time, effort, and expense to go all the way to trial. The conservative carriers know this.
Example: The Three Cousins
This firm had the experience of representing three girls from the same family, all cousins, over the course of several years. Each of them had automobile accident claims involving clear liability with well-documented soft tissue injuries. Two of the girls, approximately the same age, were involved in automobile accidents in which a conservative insurance carrier of national stature was involved. Their claims were worth approximately $20,000 each at the time of the first letter of demand. On each occasion the final offer by the insurance carrier prior to suit was less than $10,000. In each case suit was commenced, discovery took place over a two-year period and the carrier settled both of these cases on the courthouse steps for amounts approaching $25,000.
The third cousin was also involved in an automobile accident, but the insurance carrier was a more reasonable company with whom our firm had fair success over the years. Our client’s claim was worth approximately $30,000 maximum and the final settlement after the original letter of demand and a few courteous follow-up letters was $33,000.
MORAL OF THE STORY: some insurance companies settle—some don’t.
6. You are wasting your time preparing for negotiation or trying to settle with the insurance companies referred to in paragraph 5 above.
When you learn the identity of the insurance companies who do not settle without litigation, you must decide whether or not to accept cases involving those carriers and if you do, commit yourself to litigation. There are no two ways about it.
If your case is a soft tissue case with subjective complaints, or the injury involves substantial chiropractic treatment, you can count on certain insurance carriers to pay very little for pain and suffering. The adjuster will question everything in the file and if there is even the slightest liability question, the offer will approach the special damages and sometimes even less. If you waste your time trying to convince the carrier with letters, phone calls, documentation, and settlement brochures, you are merely delaying the inevitable. If your case is a soft tissue injury and you anticipate a medium range settlement value ($25,000 range or better), simply commence your lawsuit after the initial investigation and preparation. Do not waste your time trying to convince these conservative carriers about the merits of your claim. Litigation and verdicts are the only language they really respect.
7. Plaintiff’s attorneys make a living by settling cases, but they can settle cases only if they also know how to litigate.
As stated throughout this book, you can settle cases for maximum damages only if you also know how to litigate. If you plan to practice personal injury law and you intend to accept small to medium range cases, prepare yourself for litigation. Otherwise, I suggest you either move to another area of law or refer to yourself as a settling attorney.
8. Insurance carriers are far more impressed with special damages such as medical bills and well documented loss of income, than they are with lengthy dissertations about pain, suffering, inconvenience, and mental anguish.
Do not try to build your case with explanations of pain, suffering, and subjective complaints without substantial documentation of tangible damages. Insurance companies are just not moved by such intangibles as pain, suffering, inconvenience, loss of consortium, and mental anguish. Facts, figures, objective signs of injury, and substantial documentation are the necessary elements to convince insurance carriers to settle cases.
Example: Tweedle Dee and Tweedle Dum
Imagine two passengers in the back seat of a rear-end collision case with absolute liability and substantial collision damages. The names of the passengers are Tweedle Dee and Tweedle Dum. They are the same age, same weight, and work for the same company. Each received the same impact and essentially the exact same injuries. Tweedle Dee goes to a medical doctor who prescribes six weeks of physical therapy. He takes approximately eight weeks to recover from his acute injuries and misses work for a period of six weeks. His medical bills and physical therapy charges are approximately $2,500 and his lost wages are approximately $1,800. His residual injuries are minimal and he has virtually recovered after six months.
Tweedle Dum goes to the local hospital emergency ward which recommends that he see a specialist. Instead, he visits a chiropractor for four or five visits and because of his unwillingness to miss work, he loses only five days of wages. However, he is in considerable pain, is unable to interact with his family, has difficulty performing his activities at work, and misses all his leisure activities for almost an entire year. His medical bills total approximately $500 and his lost wages approximate $300. Many of his friends, family, and work associates write letters concerning the incredible pain and difficulty he has had for the one-year period since the accident.
The insurance company will settle Tweedle Dee’s case for an amount approximating $12,000 or even better, and they will offer Tweedle Dum no more than $3,000 to $5,000 maximum, if he is lucky. MORAL OF THE STORY: Insurance companies believe facts and figures more than they believe letters from friends about pain and suffering.
9. Most capable defense attorneys can find weaknesses in your case that have either been overlooked by the adjuster or could not be discovered by the adjuster without engaging in formal discovery procedures.
When you attempt to settle your case directly with an insurance adjuster you control most of
the information that he receives. Once litigation is commenced, the defense attorney will use every possible opportunity to scrutinize your case in its entirety to find weaknesses. By using formal discovery methods such as medical authorization forms, independent medical examinations, depositions, interrogatories, and requests for production of documents, some, if not many, weaknesses of your case will be disclosed. Therefore, your case can often get weaker rather than stronger after you file suit. If you are aware of potential weaknesses such as a number of prior injuries, previous permanent impairment claims, convictions which are admissible, or other problems, do your best to settle the case prior to litigation.
10. A verdict that is close to or equal to the amount offered before trial is not really a win, but it may help your practice.
A verdict that is close to the final offer before trial may not be considered an absolute win. It will, however, show the carrier and defense firms that you are willing and able to go to trial, and secondly, you will gain the experience of the trial process. In some cases it is better to roll the dice and go to trial just to keep yourself honest and able.
11. Defense attorneys will usually have more settlement authority or knowledge of settlement authority than they will admit to.
During negotiations after litigation has been commenced the defense attorney will almost always refer to the necessity of obtaining permission or authority from the carrier. In point of fact, most defense attorneys know the potential authority in almost every case. One way of estimating what the authority figure may be is by asking the following question: “Mr. Defense Attorney, what would you do if you were in my place? What do you think this case is worth?” If the defense attorney gives you a figure, add another fifty to one hundred percent depending upon the size of the case, the nature of liability, and the extent of documented damages. As the case approaches trial the figure from the defense attorney may approach accuracy, but believe me, the defense attorney will always try to save the carrier some money.
12. Defense attorneys obtain and maintain insurance company clients by settling cases for less than authority and by winning defense verdicts.
Insurance defense firms do not attract business by being best friends with the plaintiffs attorneys. Therefore, do not expect them to bend over backwards to settle your case. They will only pay top authority if they believe they may get clocked with a substantial verdict at trial. If the defense attorney believes he can win on liability or damages, the roll of the dice will be much more attractive. Thus, while some defense attorneys will tell you how hard they are trying to get you a settlement, do not count the money until it is in your pocket.
13. An offer made that you cannot refuse is almost never the best that you can do in any given small personal injury case.
An offer that can’t be refused can be used by either party in settlement negotiations. If you allow the insurance adjuster to “make an offer you can’t refuse,” you can count on that offer being sufficiently lower than the reserves in the case. If you have a case with strong liability, well-documented damages, and a great plaintiff (refer to the PI-5 criteria described in §131) ask that the insurance adjuster make an offer that no one would refuse. In cases in which some of the PI-5 criteria are weak, you should probably consider taking an offer you can’t refuse.
14. Clients that settle their cases without the necessity of litigation may always have second thoughts, but on the whole they will be far happier than the client who has to go all the way to trial to win a verdict in a small case.
The philosophy that “a case settled is a case won” is very appropriate in small personal injury claims. Just as divorce clients often complain about their settlements, there are some personal injury clients who will always have doubts about the adequacy of their settlements. Remind those clients that the difficulty and emotional stress associated with litigation are seldom worth the few thousand dollar difference that may come with a plaintiffs verdict. It is my opinion that a $15,000 settlement is far better than a $17,000 verdict with interest after two years of discovery, depositions, harassment, and the ultimate emotional drain of a jury trial.
15. Insurance companies as entities are not fair, logical, predictable, or understandable, but the insurance adjusters who work for these companies are almost always ordinary, likeable human beings.
I have been in the practice of personal injury claims for almost 18 years and it has become clear to me that it is impossible to “figure out” insurance companies just as it is impossible to “figure out” the opposite sex. It is impossible to explain the logic of insurance companies, or the lack thereof, to clients. It is extremely important, however, to remember that insurance adjusters and their supervisors are human just like you. Treat them with the same respect that you require.
16. Be aware of several predominant weaknesses or shortfalls in personal injury cases which reduce the settlement value and which must be considered during settlement negotiations.
There are certain weaknesses in many personal injury cases which are addressed by insurance adjusters during settlement negotiations, in an attempt to reduce the value of your potential settlement. Insurance adjusters are trained to look for these weaknesses in all cases, but they are most often used in the small to medium cases. If your case has any of these weak elements, it is often difficult to weigh their negative value in your settlement demand. You should be aware that these factors frequently send small to medium cases to suit and eventually to trial. They are discussed extensively in §512, with suggestions as to how to alleviate, or at least minimize, the deficiencies before you take the case to suit or trial.
If the weaknesses are significant, such as a pre-existing injury, you will need to reconsider the settlement value of your case or be prepared to roll the dice at trial. When adjusters receive settlement authority from the claims supervisor, and their authority is based upon the weaknesses—as opposed to the strengths—of your case, you will often be surprised at the small amount of the offer. If several of the listed weaknesses exist in your case, you must confront your client and make certain that he or she understands the difficulties inherent with the settlement, and the eventual trial of the case. If the client refuses to accept the “facts of life” that the case has been weakened by factors out of your control, I recommend that at the outset of your representation, you obtain as much of your costs and expenses of suit as possible.
The above advice came from…
Settle Small Cases for More
Maximizing Damages in Small Personal Injury Cases will teach you dozens of proven techniques for obtaining top dollar in small cases. For example:
14 negotiating techniques that really work. §445
Insurance carrier negotiating tactics and how to deal with them. §450
How to minimize the impact of independent medical examinations. §445
18 steps to evaluation of a small personal injury case. §458.4
16 mediation preparation tips guaranteed to lead to settlement. §474.1
How to deal with unreasonable insurance adjusters and carriers. §490.2
9 major case weaknesses to consider before filing suit. §512
14 defense tactics you need to know about before filing. §513
How to deal with nominal property damage impacts. §512.7
23 tips on how to deal with large chain store cases. §131.3
Strategies for maximum discovery at minimal cost. §522
The 30 most common objections in small-case trials. §664.1
Techniques to avoid in openings and closings. §643, 684
Topics that are prohibited in closing argument and how to get around them. §682
37 trial tips from jurors. §685