HOW INSURANCE COMPANIES CALCULATE VALUE OF PERSONAL INJURY CLAIMS

The most difficult and crucial aspect of a personal injury claim is to determine the value of accident injuries. The amount you may claim as damages varies in each and every personal injury case. While there is no hard and fast rule on how to value a personal injury claim, insurance companies follow their own standards.

There are a few things that a person/company held liable, and thereby, the liable insurance company, must pay for. These include medical care, loss of income and wages related expenses, loss of enjoyment of life, loss of consortium, property damage, and permanent physical disfigurement or disability.

Damages Formula

In order to determine the value of a personal injury claim, liable insurance companies follow a set procedure. Putting a dollar value on money that has been spent or will be spent is relatively simple as there are bills and records to supplement the calculation. It is infinitely more difficult to put a dollar value on pain and suffering damages, loss of enjoyment and consortium expenses because they are not tangible damages. When trying to determine the value of such intangible damages, insurance companies resort to using a damages formula.

• Claim negotiations with insurance adjusters start with calculating the value of the total medical expenses incurred owing to the accident. This amount, known as ‘medical special damages’, forms the base figure of the settlement.
• Damages that will be paid under categories like pain and suffering, loss of enjoyment and consortium are categorized under the heading of ‘general damages’. For minor accident related injuries, the insurance company adjuster will most likely use a multiplier to multiply the special damages amount by 1.5 or 2. For injuries that are more serious or that will have a lasting impact on the life on an individual, the multiplier may be higher (approximately 5 times). In extreme cases, the multiplier may even be increased to 10.
• After the new amount is arrived at, the adjuster will add the amount of accident-related lost wages/salary to it.

The Process

Broken down like this, the formula is a fairly simple one. However, the figure that is finally arrived at after applying multipliers is not the final compensation by any means. This is simply the ballpark figure needed to begin the process of negotiation. Other factors like the degree to which both parties are at fault can change the final figure by a large margin.