Maximizing damages and settlements – Lesson 2
Excerpted from How Insurance Companies Settle Cases by David Frangiamore
Partnering with client, funding the case, and negotiating the settlement
First, consider whether your law firm can afford to take on a new, small bodily injury case. If your preliminary thoughts are that the client has a $5,000 bodily injury claim, then you may anticipate your fee at approximately $1,700. This is assuming, of course, that you take the case on a contingency basis (approximately 1/3 of all proceeds recovered due to your efforts). Additionally, unless you are set up to handle a lot of small bodily injury cases, you may be earning only $20 to $30 per hour, gross.
Small bodily injury cases usually turn over (settle) within 3 to 12 months from the date of the accident, thus generating cash flow, the life blood of all law firms. Small bodily injury cases, to be economically sound, usually require minimal time and expense on the part of a plaintiff’s attorney. Consider using a trained paralegal to handle this area of bodily injury claims.
§1620 Limited Partnership
When an attorney takes on a new client, he basically enters into a “limited partnership.” At a recent seminar on personal injuries, one of the speakers made a good point when he stated that he puts his client to work at their first meeting. He explains to the client that this is a “joint venture” and will require the cooperation of the client in order to secure certain documents and provide him with certain information so he can best represent the client. This was an excellent point. Although the client’s primary job is to get well, the client must also keep a running account of what transpired during that recovery period This information will be crucial at the negotiation stage.
One good way to accomplish this is to issue the client an “accordion folder,” explaining the different components of that folder. For example, you could separate the file folder into weekly blocks of time. At the end of each week, ask the client to recap how he felt—worse, better, or about the same. Of equal importance is to have the client explain why he felt worse, better, or about the same for each given week during the recovery period.
The accordion folder should have separate pocket parts in which each part of the folder is clearly marked for medical bills received by the client, lost wage statements or verification received from the client’s employer, transportation costs to and from hospitals, doctors, physical therapy, chiropractor’s office, etc.
In the initial months, a meeting should be set up, either by phone or in person, to see if the client is progressing in his recovery and to see if he is current with his “accordion folder.” The folder may also be thought of as a diary. It is usually difficult for clients to recall the details of recovery from an injury six months or two years after the fact. The folder can provide valuable information to refresh memories in the event that a statement is given to the insurance adjuster or prior to a deposition.
Since such meetings are sometimes time- consuming, you may want to consider assigning this procedural task to a paralegal. At these periodical meetings, you or your paralegal should secure all original documents received by the client, but make copies of those documents and return them to the client so that his accordion folder is kept current.
As is true with all “partnerships,” communication is crucial. Certain plaintiff’s attorneys will take certain clients for granted, and from time to time lose those clients because some other attorney will hold their hand and pay attention to that client. Make the client feel warm, secure, wanted and important.
Your retainer agreement can be an effective tool to encourage intransigent clients to settle. The agreement can provide for a higher contingent fee if the case goes to trial. For example, you can charge a fee of 33.3% of any settlement obtained before trial and 40% of any settlement or verdict obtained after trial begins. In addition, your agreement can require the client to advance any costs and expert fees to give the client a financial incentive to settle the case as it proceeds to trial and to minimize your financial exposure.
§1630 Funding the Settlement
You may have a great case, but if the defendant has no assets, it may be an indication that you should close down your tent and go to the next case. However, there is usually an insurance policy available to fund your client’s case; either first party (uninsured motorists coverage or underinsured motorists coverage) or third party coverage (the defendant has liability insurance coverage that was in force as of the date of the client’s accident).
§1640 Finding the Funder
After a client walks in your office and you decide he has a good case, you then must start to look for the party who is going to fund your client’s damages. The usual procedure is to ask the client who the defendant is. For example, the parties may have exchanged names or business cards at the scene of the accident, secured phone numbers and addresses, as well as the name of the agent and/or insurance company.
Since some jurisdictions now require motorists to carry proof of insurance with them, or in their motor vehicle, this information is usually readily available at the scene of the accident. Not only does the preprinted card identify the insured specifically, but in some cases the card may also outline policy limits. The card may also include the policy number and the name of the insurance company. Hence, if the client was able to review and take notes from such a card carried in the defendant’s vehicle, then your client would have a world of knowledge to present to you to help you track down the insurance adjuster who will be handling your client’s case.
In the alternative, you may secure a police report if one was prepared, even if it only includes the identity, phone numbers and addresses of the drivers (incident report). Once you have the name and number of the adverse motorist, contact that individual and solicit the name of his agent and insurance company. If he states he does not have insurance, then you may submit an uninsured motorist claim against your client’s insurance policy. However, if your client did not carry auto insurance, you will want to look to the net worth of the adverse motorist to see if he is financially able to satisfy your client’s damages.
In either case, contact the respective agent and confirm coverage is in force and make out a “first notice of loss” in the event that the adverse motorist has not previously reported the accident. When speaking to the agent, it is always a good idea to ask what the policy limits are for the bodily injury coverage. This is a legitimate question if you are submitting a claim against the adverse motorist’s carrier, since your claim may exceed the policy limits of the adverse motorist. If this is true, after contacting the claimant’s carrier or agent, you will want to simultaneously contact your client’s own carrier and submit an underinsured motorists claim. In essence, you are filing two claims simultaneously, in order to fund the full value of your client’s bodily injury claim.
§1650 Preparation for Preliminary Negotiations
The first thing you want to do is “get all your ducks in a row.” By this, I mean you want to secure copies of all medical bills, lost wage statements from your client’s employer, the police report, property damage estimates on your client’s vehicle, copies of any rental car expenses, and organize all this information into specific categories. Forward these documents to the adjuster along with a cover letter.
If you just throw all of these expense records and receipts into an envelope with a one sentence cover letter, your claim will usually be put on a back burner until the adjuster finds time to organize your expenses and outline them. It is very beneficial to do the adjuster’s work for him in organizing the damages so he has to spend the least amount of time to understand the documents submitted to him for consideration of payment.
For example, enclosure of the police report and witness statements that you have secured on behalf of your client cover the liability issue. Your list of medical bills and lost wage statements and any other documentation outline your client’s damages.
Basically, the adjuster is looking for two things: confirmation of liability and damages. When you write to or report to an adjuster, the basic theme of all your correspondence should be limited to these two categories: liability and damages.
Always be brief and to the point. Usually the longer the letter, the less impact it will have, since the adjuster has a limited amount of time to spend on each case in his control.
When “packaging” your product, your client’s claim, always use captioned headings. For example, the type of correspondence that adjusters like to see are those that have a first caption which covers liability of the insured, followed by a caption regarding medical expenses and medical reports, followed by a caption regarding lost wages or lost income, and then the final caption which regards general damages (pain and suffering, discomfort and inconvenience).
The letter should be summed up with a demand (dollar figure) which is supported by liability of the insured, coupled with the medical specials and lost wage specials and general damages which must have a basis. That is, if you write a letter and just ask for “X” amount of dollars without a basis, your letter will have little meaning and little impact on the adjuster.
You should be able to document all damages and have the basis for the general damages by allotting so many dollars for so many days of pain and suffering or weeks of pain and suffering or months of pain and suffering, etc. (See Chapter 12: How to Estimate Bodily Injury Settlements.)
When you prepare to sell your case, there are nine points to keep in mind:
Get a grip. Shake hands firmly enough that the other person notices. Usually a solid handshake sets a confident aura about you, from the first moment you meet your opponent.
Set the mood. It is your responsibility to create an atmosphere where information can flow comfortably and naturally.
Pace your delivery. Get a feel for the time and timing. Regulate and balance your timing between the need of your opponent and the requirements set upon yourself. Do not make the mistake of going so fast through your presentation or delivery that you are the only one who understands it.
Tag Team sell. This is very important for younger attorneys and insurance adjusters. Occasionally you should ask a co-worker or your supervisor go with you to watch and listen as you conclude a settlement. Ask them what you could do to improve your presentation and what your strong points and weak points were.
Record your negotiation sessions as you are able to. Ask yourself, would you buy a used car from this person? Did you come across in a straightforward manner? Were you evasive? Did you instill confidence in the opposing party? After listening to your tape, you may be the first person to see why a settlement was not reached. If you are able to videotape yourself, pay attention to the pace of your words and your body English. Take the tape home and view it at night or on the weekends. Be honest with yourself about your weaknesses.
- Be prepared. Know your case cold. Get comfortable with your process and your side of the story.
- Be yourself. Usually your personality will shine if you believe in what you are selling. Being genuine will win the confidence of your opponent.
- Join Toastmasters. This is an organization dedicated to helping others get better at presentation skills. You also get peer feedback instantly.
- Visual aids, such as diagrams and photographs, can be significant in communicating with insurance adjusters. In a disfigurement case, especially scars on the face, hands, or any visible area of the body, a photograph can truly be worth 1000 words. The same is also true of traumatic amputation cases and dog bites. Photographs of the injuries are usually mandatory to accurately communicate the location and severity of the wound. Visual aids also add variety to an otherwise mundane settlement package and can have a lasting impact on the claims adjuster.
Sale—What the Case Is Worth
Do not fall into the trap of an offer by the adjuster for 3 times or 5 times the sum of the medical expenses incurred by your client plus the property damage to your client’s vehicle plus lost wages, if any, as a basis of settlement unless your client was only seen by a physician on three or four occasions. The 3 or 5 times the medical bill approach was originally intended for only nominal bodily injury settlements where the claimant was merely shaken up, versus receiving substantial injuries above and beyond being merely “shaken up.” The factor of 3 to 5 times medical specials as a guideline for compensation for general damages (pain and suffering) was never intended to be extended to cases involving muscle strain, muscle sprain or torn ligaments.
If your case deals with something more than your client just being “shaken up,” then see Chapter 7, Settlements, Negotiations and Compromises and Chapter 12, How to Estimate Bodily Injury Settlements.
Pain and suffering is a subjective concept to most insurance companies, and few of them even accept that concept. Rather, they would prefer to pay the net “out of pocket” expenses incurred by a claimant and ignore pain and suffering as damages. Hence, it can be difficult to sell pain and suffering to some adjusters. One approach would be to use the minimum wage rate, approximately $5.00 an hour, to compute a figure for damages. For example, if you have a soft tissue injury such as a whiplash, and the claimant incurs approximately three weeks of pain and suffering, then a figure of $2520.00 would be reasonable compensation at twenty-four hours a day for three weeks.
Key Points to Remember
- Understand your weaknesses. Do not make demands and dig in your heels. Avoid emotional techniques.
- Determine what your goal is. Before you start negotiating, identify those things that you must walk away with. If you cannot tell whether your goal has been achieved, then it is not solid enough.
- Learn as much as possible about your adversary. The more you know about the person with whom you are negotiating, the better off you will be. Do your homework. Take time and listen to the other party. You will learn a lot more listening than you will talking. Talk to other people who know your adversary. What do they think? What are your adversary’s strengths and weaknesses? Get a feel for their reputation.
- Establish a relationship before negotiations begin. If the other party approaches you and says, “Let’s get right down to business,” offer your adversary a refreshment or ask how their day is going, or something to prevent an immediate rush to settlement.
- Do not negotiate at the negotiation table. Meet at a neutral location. If possible, at the first negotiation session, get acquainted rather than get active towards ultimate resolution of issues. Explain that you wish that the other party achieved their goal as much as you want to achieve your goal. As Marlon Brando said in “The Godfather,” “Keep your friends close, but your enemies closer.” Do not be afraid to invest the time, no matter how valuable it is, in which to lay out a foundation on which to build a settlement program.
- Once an agenda is established, stick to it. Show your opponent that you made a blueprint that helps keep the discussion on track and reduces the chances of extraneous issues working their way in. Ask the other party to make a contribution toward setting up an agenda. Be flexible. Be reasonable. If your adversary deviates from the agenda, you can point to the agenda in order to get back on track. Never force your adversary into a corner. Never let your adversary feel threatened.
- Keep the negotiation business-like and control personal quirks, including your own.
- Emotions can run high when there is a lot at stake, and it is easy to vent frustration by lashing out at the other party. Sometimes, if your opponent gets personal, the best thing to do is listen and say nothing. Once your opponent has vented their frustration, then the negotiation talks can continue. Of course, there is always a limit to everyone’s ability to be personally attacked. Refuse to fight. While the other party is talking, take notes. It is usually flattering when someone who is listening to you is taking notes while you are talking. Massage the other party’s ego. If your adversary is an egomaniac, this should be an easy task. If the negotiations get out of hand, call a time out, whether it’s for five minutes or a half-hour. Let tempers cool. If your adversary is an attorney, and his client is present, let the attorney show off a little bit for his client.
- If there is a stalemate, look for the underlying cause. Stalemates usually develop over small matters. Fear and uncertainty are often what kill a deal.
- When a deadlock looks hopeless, buy time. Take a time-out to think about what has been said by both parties. Take a coffee break or a lunch break, but get away from your adversary. Come back with a fresh state of mind. Problems can be approached by a number of ways. Do not limit your thinking as to a single avenue towards a single solution. If all fails, an impartial party, a mediator, can be utilized to resolve deadlocks. It helps to have a third party who is not impassioned about the issues. With careful forethought, just about anyone can develop the ability to win the best deal possible. Negotiators are made. Not born.
The above advice came from…
How to Negotiate with Insurance Companies
Speed the processing of your claims and reduce your frustration with insurance companies. How Insurance Companies Settle Cases will teach you:
Insurance company settlement techniques to watch out for
Aspects of claims frequently questioned by insurance companies
Insurance policy defenses and coverage issues
How to communicate with insurance companies
Duties owed by insurance companies
How to deal effectively with adjusters
How insurance companies process claims
Adjusters’ most popular negotiating techniques
How reserves and indexing systems work
What insurance companies look for in their investigations
How insurance companies seek to limit coverage