Valuing a personal injury (PI) claim isn't an exact science. Truth be told, you won't know what your claim is really worth until you've been paid for it. Our goal here is to help you estimate a reasonable range of settlement values for your PI claim. Armed with that information, you can begin settlement negotiations with the other side.
We'll start with a brief discussion of several common, though unwritten, case valuation rules of thumb. From there, we'll show you a step-by-step method you can use to estimate a range of values for your claim.
As you work to arrive at a range of values for your PI claim, keep in mind these six (mostly unwritten) claim valuation rules of thumb.
Rule 1: Hard injuries usually are worth more than soft tissue injuries. Stated a bit differently, the more serious your injury, the more value it adds to your PI claim.
Injuries we can see or that show up on an X-ray or CAT scan are sometimes called "hard" injuries. It doesn't take any medical training to know that these can be serious, sometimes even life-threatening conditions. Hard injuries need medical treatment and often take considerable time to heal.
Here are some examples:
Sprains and strains make up the bulk of soft tissue injuries. These too are real injuries. But relentless jokes about "whiplash" claims have made them easy to dismiss as minor injuries that don't amount to anything.
Rule 2: Conventional medical treatments are more likely to be reimbursed than less traditional types of care.
Some insurance adjusters will argue that the kind of care you receive should influence the value of your PI claim. Specifically, conventional treatments—things like surgery, therapy, or medications ordered by M.D.s or D.O.s—deserve insurance reimbursement. But nontraditional therapies like acupuncture, massage therapy, and chiropractic care, the argument goes, are done to inflate medical costs and shouldn't be reimbursed in a settlement.
Rule 3: Injuries that leave long-term or permanent disability have more value than those that heal quickly and completely. This rule should make sense when you think about it.
When your injuries are relatively minor and don't need much time or treatment to heal, your life gets back to normal more quickly. You don't need long-term care, you can return to work, and you don't have to deal with the lingering effects of a disabling condition.
But when your injuries are severe or catastrophic, the costs add up quickly. Ongoing treatments, surgeries, and rehabilitation will drive up your medical expenses. You might find yourself unable to work for long periods, or even permanently disabled from working. Lost earnings and diminished earning capacity are recoverable damages.
Rule 4: Your share of the blame for an accident will reduce the value of your PI claim. Here's how it works.
Your PI case is probably based on a claim that someone—another driver, a property owner, or maybe a doctor—was negligent (careless). In many PI cases, the other side will argue that you share some of the blame for your injuries. This shared fault defense, if it succeeds, will reduce the value of your claim. In some states, your shared fault might wipe out your PI claim completely.
Rule 5: Your PI claim is only worth as much as you can collect for it. This explains why insurance is crucial in estimating the value of your case. In most cases, unless the other side has what lawyers call "deep pockets"—meaning lots of cash or other assets you can seize to pay for your claim—it rarely makes financial sense to sue somebody who's uninsured.
Rule 6: Good lawyers strongly prefer to avoid trial, except as a last resort.
Most lawyers—whether they represent plaintiffs or defendants—will tell you that taking a personal injury lawsuit to trial is a risky proposition. Why? Because you're putting control of your case in the hands of a judge or a jury. Even if you think you've got a strong claim (or defense), you're rolling the dice on the outcome.
There are a variety of risks that attend a trial. Here are just a few:
Settlement lets both sides avoid these and other trial risks.
To illustrate how we estimate PI case values, we'll use these example facts.
You're the assistant manager of a local restaurant earning $19 per hour. One dark December evening, you went to a year-end holiday party at a neighbor's house. A few days before, a winter storm hit the area but by the evening of the party, the streets and area sidewalks were mostly clear and dry.
As you came up your neighbor's lighted front walk, your foot unexpectedly hit what turned out to be a patch of ice, causing you to slip and fall backward. On impact, your head and back hit the ground forcefully, leaving you momentarily unconscious. An ambulance took you to a nearby hospital. In the emergency room, you were diagnosed with a concussion and a mid-back bruise. Because of your concussion-related symptoms, you were hospitalized for a couple of days.
You missed two weeks of work, costing you $1,500 in wages. Your medical bills total $14,000. You suffer from lingering memory problems, have trouble concentrating at work, and have recurring headaches. Your doctor reports that these problems might go on indefinitely. The back bruise is fully healed. The homeowner has $250,000 in liability insurance coverage.
The first step is to calculate your compensatory damages. These damages, as the name suggests, compensate you for out-of-pocket losses (called "special damages") and for intangible injuries (called "general damages").
Special damages pay you for out-of-pocket items like medical expenses, lost wages, and the cost of medicines or medical equipment. In our example, you have past medical expenses of $14,000 and $1,500 in lost wages. Your special damages total $15,500. Note that if you expected future out-of-pocket expenses for things like medical care or lost earnings, those would be special damages, too.
General damages reimburse you for injuries like pain and suffering, lost enjoyment of life, and disability. How do you put a value on these losses?
In many cases, lawyers and insurance companies use a simple formula. The formula multiplies your medical expenses by a number that typically ranges from 1 to 5. The number that's used depends on several of the factors we discussed above—the nature of your injuries, your medical treatment, and whether you made a complete recovery.
Because of your long-term head injury, let's use a multiplier of 5 as a starting point for your general damages. The calculation looks like this: $14,000 x 5 = $70,000.
When we total your special ($15,500) and general ($70,000) damages, your compensatory damages come to $85,500. This figure is just a starting point. We might need to adjust it upward or downward.
In most slip and fall cases, the property owner raises a shared fault defense. Let's assume that you live in a comparative negligence state. You should expect the adjuster to argue that had you been paying attention, you would have seen—and could have avoided—the patch of ice that caused your fall.
It's common for a slip and fall injury victim to be assessed some share of the blame. In this case, let's estimate your share of the fault at 20%. We multiply your percentage of fault by the total of your damages: $85,500 x 20% = $17,100. We'll reduce your total damages by this amount: $85,500 - $17,100 = $68,400.
We don't have any facts telling us about your likeability versus that of the defendant. Nor do we have any information about other potential trial risks in your case.
Because we don't have enough information about trial risks, we won't adjust your case value—not yet, anyway. If the case reached a settlement impasse and a trial became likely, some trial risk adjustment might be necessary.
The facts tell us that the homeowner has ample insurance coverage, so collecting your damages shouldn't be a problem. If the homeowner was uninsured—not likely in a slip and fall case if there's a mortgage on the property—you'd almost certainly be out of luck. Your medical bills would be covered if you have employer-provided health insurance, but you wouldn't get any compensation for your lost wages or general damages.
Having considered the relevant case valuation factors, we now have a starting point ($68,400) to determine a range of likely values. For ease of computation, let's round our starting point up to $68,500.
While $68,500 is a realistic opening value estimate, a range of case values better reflects the reality that many variables—even some that we can't really anticipate—likely will play a part in how your case turns out. Some of those variables will mean your case is worth less, but others might increase your recovery.
Let's estimate a cushion of 20% in both directions. In other words, we'll subtract 20%, or $13,700, from our opening estimate to represent the low end of your claim value: $68,500 - $13,700 = $54,800. We'll add $13,700 to estimate the high end: $68,500 + $13,700 = $82,200.
For negotiation purposes, then, the value of your personal injury claim falls into a range between $54,800 and $82,200. If you get a settlement offer somewhere in that range—the higher the better, obviously—it's an offer you should consider seriously.
Though some PI cases take on a life of their own, most follow a fairly predictable path toward settlement. The claim process usually begins with a claim notice letter to the responsible party or their insurance company. Later, you'll open settlement negotiations with a demand letter.
After your condition has reached maximum medical improvement, you can send a settlement demand letter to the other side. There isn't a one-size-fits-all template for demand letters, but most will:
The insurance adjuster will respond to your demand letter, usually in writing. You should expect the initial offer to be much lower than your opening demand. Don't be offended or angered by this negotiating tactic. It's simply how the PI claim dance works. Most times, you'll haggle back and forth with the adjuster until you meet somewhere in the middle and settle the case.
If the case doesn't settle, then you'll begin to prepare for trial.
All personal injury lawsuits are subject to a case filing deadline called a "statute of limitations." If you need to file a personal injury lawsuit in court, it must be filed before the statute of limitations runs out. If you try to file your case after the statute of limitations has expired, the court will have no choice but to dismiss it.
In all but the simplest cases, estimating the value of a PI claim can be a complex process. While we've boiled that process down to the basics here, don't be fooled. Knowing how to value claims is a skill that's learned over many years by handling a wide variety of PI cases. The time to learn isn't while you're trying to figure out how to settle your own claim.
The stakes are too high, and a mistake can be too costly, to go it alone. Chances are you'll come out dollars ahead if you've got expert legal help on your side. Here's how to find an experienced personal injury lawyer who's right for you and your case.