Insurance companies – both your own insurance company under first-party claims and a negligent person’s insurance company under third-party claims – have an obligation under the law to resolve auto personal injury claims fairly and promptly. Now “promptly” doesn’t necessarily mean “immediately” — the insurance companies are entitled to take a reasonable amount of time to investigate a claim. They are entitled to have a fair amount of evidence presented to them to prove “liability” (who is legally responsible for causing the incident), “causation” (did the incident cause the claimed injuries), and “damages” (what were the injuries, and what were the economic and non-economic losses caused by those injuries).

Remember also that insurance companies – like most everyone – enjoy holding on to their money. They don’t pay out claims because they like to, but because they are required to. They especially don’t like paying out the full value on a claim when they can get away with paying fifty cents on the dollar, or better yet, thirty cents on the dollar.  And insurance companies are big mathematics practitioners – they employ professional mathematicians (actuaries). The latter can break down very clearly for them just what tiny fraction of a percent interest they can make on their investments if they can hold on to settlement funds for one day extra. And how those small fractions, multiplied over hundreds of thousands of claims, can turn into millions and millions of dollars in profit.

So be skeptical when an insurance company offers you money quickly to settle a personal injury claim. They’re not doing it because they are nice guys. They are doing it because they are in business to make money, and they know that a quick settlement is very often a cheap settlement.

Evaluating a Claim Takes Time and Information

Quick!  You just suffered what your doctor told you is a neck and back sprain injury due to being rear-ended in a motor vehicle accident. What is your injury claim worth? There’s an insurance adjuster on the other end of the phone line, and he wants to give you some cash to settle.

Quick!  Someone’s dog just attacked you and bit your leg. The emergency room doctor had to put in ten stitches to close up the wounds. What is your injury claim worth? Let’s not waste time — there’s an insurance adjuster on the phone who wants to send you a settlement check. Today!

In reality, no one can tell you on day one what your injury claim may be worth. The main elements in evaluating a personal injury claim include:

• The specific diagnosed injuries;
• The amount of medical treatment and associated medical bills a victim sustains to treat his/her injuries;
• What medical treatment and bills may reasonably be necessary for the future for those injuries;
• What wage loss and/or loss of earning capacity the victim has already incurred due to the injuries;
• The wage loss and/or loss of earning capacity the victim is likely to incur in the future from the injuries; and
• The pain, suffering, and all other non-economic damages, both past, and future, resulting from the injuries.

If it’s the day of the auto accident or the day of the dog attack, and you just got out of the emergency room after your first medical visit, how many of these items are clearly defined?  Essentially none of them. You may have a sheet of paper from the ER doctor telling you what the initial diagnoses are, but is that all the injuries?  Might there be complications?  ill that neck and back sprain turn out to be spinal disc injuries that are only discovered two or three months later when you’re sent for an MRI because your “sprains” aren’t healing properly with chiropractic care or physical therapy?   Can those disc injuries be adequately treated with “conservative” care and a little extra time?  Or injections?  Or surgery?  Will that dog bite end up infected and land you back in the hospital a week later? Will the sutured wound heal up well without a visible scar?  Or if – after six months or a year for an injury to “mature” to its final appearance – will the scar be a type that can be repaired by plastic surgery? 

None of these questions are answerable early on in a personal injury claim. They can’t be answered quickly, because only time, treatment, and healing will provide the information needed. No personal injury attorney can tell you the precise value of your injury claim on day one. Neither can any insurance company adjuster. The information simply doesn’t exist yet to do this. So why are you getting a call from an insurance adjuster a week after your injuries offering you $5,000 today to “get some cash in your hands and get this claim out of your hair?”

Settling Quickly Usually Means Settling Cheaply

As we just described, it takes time to develop the information that is needed for accurately assessing the value of a personal injury claim. Ideally, an injury victim will be completely recovered before any attempt is made to settle his or her claim. At that point, all the medical records describing the injuries are available, all the medical bills for treatment are complete, the injury victim is back to work with no problems, and the total amount of the wage loss is known. They’re recovered and healthy, and their doctors don’t expect any problems in the future. Essentially everything about their claim value is known.

An insurance adjuster offering quick cash to settle is not doing so based on all this information that develops over time. They are making their offer on the specific realization that all this information will become known over time and will make the value of the claim greater with time — settling now means they can settle for less because this information isn’t yet known. 

Early on in a personal injury claim, insurance companies and their claims handler will “set reserves” for the claim. This is their quick, initial estimate of the approximate, likely claim value for internal bookkeeping purposes that is based on the early information they have about the injury claim compared with their extensive data on hundreds of thousands of similar claims.  Broken arm?  Reserves are $X.  A low back sprain?  Reserves are $Y.  With most insurance companies, this reserves figure is then a benchmark against which adjusters are graded.  If the adjuster can call you on the phone a week after your auto accident and low back sprain injury and get you to settle quickly for one-half of his reserves of $Y, then that adjuster gets a shiny, gold star for the day.  If there’s no early settlement and an MRI shows up three months later showing a spinal disc injury, then the reserves for that claim have to be increased upward, and the adjuster’s dollar-conscious supervisor has a frown on her face.

It Pays to Take Time and be Skeptical

Patience pays in personal injury claims. Insurance companies are not going to pay anything for physical problems that haven’t yet appeared simply because the medical course of testing and treatment that may reveal additional problems hasn’t been completed. The value in terms of both economic damages and pain and suffering damages for medical treatment that “might” happen in the future is substantially less than for the same medical treatment and associated billings that have already happened before settlement negotiations begin.  Hypothetical wage losses for an injury victim who “thinks I’ll be off work another month” have essentially zero claim value as compared to the same injury victim two months later who was actually documented to have been off work for six weeks instead of four.

There are even situations in which the insurance company for a negligent person who caused injuries offers to pay its full “policy limits” — the most they are obligated to pay under the negligent person’s insurance contract – because the personal injury victim’s claim is clearly worth far more than those limits from the beginning. This is not uncommon, especially where the negligent party has only a minimum $15,000 policy, and the victim has serious injuries such as broken bones or a traumatic brain injury.  But even here, it’s important – perhaps even more critical – to pause and take a little time to evaluate the situation.  The insurance company may offer or “tender” their policy limits immediately – as they should – but they will also require the injury victim to sign a release giving up rights to further pursue compensation from the negligent party. But what if that negligent driver was on the job when he caused the victim’s injuries, potentially making his employer liable for damages above and beyond the $15,000 minimum limits?  Or what if the negligent driver was covered by an umbrella policy from another insurance company that might offer very much greater coverage than what he has admitted to? When that release is signed, the claim is over.

It pays to take time and be skeptical of any insurance company offer to settle a personal injury claim, and the earlier it is in the claim, the more skeptical a victim should be.  Even if it appears to be a “slam dunk” policy limits offer, it pays to carefully evaluate the situation to make certain that even more possible funds aren’t being passed up.  In this type of evaluation, it pays to consult with an experienced personal injury attorney.

For more on the tactics and practices of the insurance companies, see:   

• Colossus and Other Computer Claim Programs
• Types of Auto Coverage and First and Third-Party Claims
• How an Experienced Personal Injury Attorney Deals with Insurance Company Tactics
• Insurance Companies — Huge and Hugely Profitable

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