Responding to a Low Personal Injury Settlement Offer

The insurance company made a low—maybe a ridiculously low—settlement offer for your personal injury claim. Now what?

Updated by , J.D. · University of San Francisco School of Law
Updated by Dan Ray, Attorney · University of Missouri–Kansas City School of Law

You've been injured in an accident and you're pursuing a personal injury claim. You sent a demand letter to the other side's insurance company. The insurance company responded with a low offer. What should you do next?

Is the Insurance Company's Offer Too Low?

Almost certainly, yes. At the beginning of the claim process, the insurer has little incentive to make a fair settlement offer. Here are some red flags to watch out for during settlement negotiations.

1: "Cases Like Yours Never Settle for That Much."

If you hear something like this, the insurance adjuster is testing you. Because you're unrepresented, the adjuster figures, you're an easy mark. Make a low offer, push you around a little, and you'll take the first offer and run. Don't fall for it.

2: "We Don't Pay for Chiropractic Care."

The kind of medical treatment you get impacts the value of your claim. If you've received chiropractic care, acupuncture, massage therapy, or other less "conventional" treatments, you'll need to show that the care you received was medically necessary. If you do, it should be covered in your settlement.

3: "It's Only a Nuisance-Value Claim."

If you suffered a significant injury and the adjuster tells you that your claim only has "nuisance value," the adjuster is trying to browbeat you into an unfair settlement. We'll talk about how you respond to that kind of "lowball" offer below.

How the Settlement Process Works

Most personal injury cases settle. Yours probably will, too. Let's briefly review the settlement process.

Your Opening Settlement Demand

The settlement process is an extended negotiation. Most often, it begins when you send a demand letter to the insurance company. The demand letter describes the facts, your injuries, and your medical treatment. It explains why the other party is legally responsible for the accident. Finally, you itemize your damages and close the letter by demanding a sum of money equal to your damages to settle.

Your opening demand should ask for more than what you're willing to settle for, but shouldn't be outrageous or unreasonable. If you ask for hundreds of thousands of dollars for a claim involving minor injuries and little in the way of medical costs and lost income, the adjuster knows right away you're an amateur just looking to cash in. You've lost the negotiation before it ever started.

The Insurance Company's Response

In most cases, the adjuster will reject your settlement demand as excessive. That's a good thing. If the insurer accepts your opening settlement demand, it was too low. You want the adjuster to counter your demand and in most cases, that's what happens.

But be prepared: The insurance company's starting offer will be low. It might be insultingly low (a lowball offer). Your first impulse might be anger, and that's understandable. Take a deep breath and plan your next steps with a cool head.

Know Your Opponent

Here's what the adjuster is doing with a lowball offer. The insurance company isn't interested in paying you a fair settlement. That's not how the company makes money. It makes money by not paying you at all. And if it does have to pay you, the insurer is looking for the cheapest settlement it can get.

The insurance company handles thousands of claims like yours every year. The adjuster has learned from experience that sometimes, unrepresented claimants like you can be bullied into a quick, cheap settlement. You've been injured and you might be out of work. The bills are piling up and you've got no money coming in. You're an easy target. There's little incentive for the adjuster to make you a fair offer, at least not yet.

If you've received a lowball offer, don't lose your cool. Simply write the adjuster a short letter explaining that you don't consider the offer to be a legitimate attempt to settle and that you won't bid against yourself by reducing your demand. Ask the adjuster to reconsider your offer and respond with a serious settlement proposal. If the adjuster still refuses, it's possible that your settlement demand is off the mark. Think about consulting with a personal injury lawyer for an objective opinion about the value of your claim.

If the insurer's opening offer is low but appears to have been made in good faith, you'll need to come up with a counteroffer.

How to Counter a Low Settlement Offer

Responding to any settlement offer, including a low offer, involves these four steps:

  • determine the value of your claim
  • adjust the value of your claim
  • evaluate the adjuster's offer, and
  • prepare a counteroffer.

Determine the Value of Your Claim

If you sent a demand letter to the insurance company, then you've already done some or all of this work. If not, or if you're rethinking how you valued your claim, here's what to do.

Calculate Your Economic (Special) Damages

Economic damages (also known as "special" damages) are intended to make you whole for losses like medical bills, property damage, lost wages, and the cost of medical equipment. If you've been injured through someone else's fault, you should be repaid for these out-of-pocket costs.

You'll need proof of these amounts, so be sure you've collected all of your medical records and bills. Get a letter from your employer documenting your lost income, including any vacation or paid time off you used to cover your absence.

Total your past (and, if applicable, an estimate of future) medical expenses separately from your other economic losses. You'll use the amount of your medical bills to calculate your noneconomic damages.

Calculate Your Noneconomic (General) Damages

Noneconomic (also known as "general") damages compensate you for "intangible" injuries such as pain and suffering, emotional distress, disability and disfigurement, and loss of enjoyment of life. These losses are more difficult to quantify. How do you put a dollar value on them?

Attorneys and insurance adjusters often calculate noneconomic damages by applying a multiplier to your medical expenses. In most cases, the multiplier ranges between 1 and 5. The multiplier chosen depends on several factors, including the nature and severity of your injuries, the difficulty of your recovery, and whether you'll have future medical problems.

Here's a quick example. Suppose you slip and fall at the grocery store and break your wrist. We'll assume, for the moment, that the store is 100% at fault for your fall. Your medical expenses are $4,500 and you lost $1,000 in wages. Your recovery was uneventful and your doctor doesn't expect you to have any future medical problems.

In a case like this, you'd probably start with a multiplier of 3 or 4 in your demand letter. Your case likely won't settle at 4, but starting with a number bigger than you expect to get is a sound negotiating strategy. When it comes time to haggle with the insurance adjuster, most of the argument is going to be over the value of your noneconomic damages.

So let's begin with a multiplier of 4. Applying that to your medical expenses gives a value of $18,000 ($4,500 x 4) for your noneconomic damages. When you add that figure to your economic damages ($5,500), your total damages are $23,500. That's your tentative opening settlement demand.

Adjust Your Settlement Demand

You're not ready to make a counteroffer just yet. You might need to adjust your tentative opening number upward or downward, depending on the facts of your case.

Upward Adjustment

In some cases, you'll need to adjust your demand upward. Let's change the facts of our slip and fall example to illustrate. Say that your wrist fracture needed surgery. You developed a post-operative infection requiring more surgeries and strong antibiotics. Your wrist ended up permanently disabled and disfigured. In that case, a multiplier much bigger than 5 is appropriate.

If your injury was catastrophic, then multipliers should be off the table completely. Suppose the post-op infection couldn't be controlled and you needed a lifesaving below-the-elbow amputation. Multipliers have no place in a case with those kinds of injuries.

If your case involves complicated injuries, a difficult recovery, or catastrophic, life-changing losses, you shouldn't try to handle it on your own. You need an experienced personal injury lawyer to help you get the most value for your claim.

Downward Adjustment

You might need to adjust your settlement demand downward. The most common reason for a downward adjustment is that you're partially at fault for your injuries. In most states, if you're also at fault then you must reduce the value of your claim by your share of the fault.

In our slip and fall example, you could be found partially at fault if you didn't see an obvious hazard. Let's assume that your tentative settlement demand is $30,000 and that you're willing to settle for a reduction of up to 30% for your fault. This means that in a final settlement, you're willing to reduce your claim by $9,000 ($30,000 x 30% = $9,000), to $21,000.

In your first counter to the adjuster's offer, don't agree to a 30% reduction. If you do, the adjuster will argue for a bigger reduction. Start by offering a 5% or 10% reduction, then see where negotiations take you.

Evaluate the Adjuster's Offer

If the adjuster made a low but good-faith offer, make sure you understand how the adjuster arrived at the amount offered.

Economic Damages

Is the adjuster refusing to pay for all of your economic damages? If so, is it because the adjuster thinks you're partially at fault? Or is the insurer willing to pay for some, but not all, of your medical expenses and lost wages? Remember: You're in this situation because of someone else's careless behavior. Absent a good reason—like you being partially to blame for the accident—you're entitled to full compensation for your out-of-pocket losses.

Noneconomic Damages

The adjuster will certainly object to your noneconomic damage demand. Noneconomic damages are more subjective than economic damages because they are difficult to measure. Once again, see if you can figure out why. Did the adjuster object to the number you chose for a multiplier? This is a common negotiating point.

To counter the adjuster's argument, you'll need to point to evidence that supports your noneconomic damage claims. Medical and therapy records can be good sources of evidence. In addition, let the adjuster know that you have family members, friends, and coworkers who will vouch for your pain and suffering and the emotional distress your injuries caused. Think about including written statements from your witnesses.

Not Enough Insurance

You might get a low offer because the other party has a low insurance policy limit. Suppose you were injured by a negligent driver who has just $25,000 in auto liability coverage. What do you do if your medical bills are $50,000 and your total damages are $300,000? In that situation, regrettably, your options are limited.

Before you settle for policy limits, though, consult with a personal injury lawyer to explore possible alternatives. For instance, if you've got underinsured motorist coverage, you might consider bringing a claim for those benefits under your own insurance policy.

Prepare a Counteroffer

Once you've got a solid handle on the value of your case and you understand the adjuster's offer, it's time to prepare a counteroffer.

Form and Format

Your counteroffer should be in writing, preferably typed. Like your demand letter, your counteroffer should be professional in tone and factual in content. Avoid overblown rhetoric and emotional appeals. Keep in mind your audience. This is an intensely personal matter for you but to the adjuster, it's just another claim and, ultimately, a business transaction.

Responding to the Adjuster's Points

Thank the adjuster for responding and then begin by saying that the offer is rejected. Summarize the adjuster's arguments in a paragraph and then, in separate paragraphs, respond point-by-point. Here's an example:

"You claim that my settlement demand must be reduced by 30% because that's the share of fault a jury would assign to me at trial. I disagree. After I fell, a store employee said that another customer had reported the spill that caused me to fall, about 45 minutes before I fell. Forty-five minutes was more than enough time to clean the aisle and remove the hazardous condition.

By the time I fell, the spill had been tracked through so much that it was difficult to tell what was on the floor. Based on these facts, I think that at most, a jury would find me to have been 5% at fault. I'm willing to reduce my settlement demand by that amount."

Be sure to make clear the amount of your counteroffer. Close the letter by asking the adjuster to respond in a reasonable amount of time. Two weeks should be enough.

Here's a sample counteroffer letter you can use to get started on your own response.

When Should You Think About Hiring a Lawyer?

Sometimes it's okay to negotiate a personal injury settlement without a lawyer. Other times, that's not a good idea. Here are some reasons you should think about hiring a lawyer.

Your Opening Demand Was Way Off the Mark. Your settlement demand needs to be reasonable. If you demanded $500,000 to settle a minor soft tissue injury case with $1,000 in medical bills and a few hundred in lost wages, the insurance company's $3,500 offer wasn't a lowball. Your demand was way off the mark. You should talk to a personal injury lawyer about how you valued your claim.

Your Claim is Complex. Valuing and settling a personal injury claim can be a complex process. The bigger the claim, the more complicated it's likely to be. A variety of factors, including some difficult legal issues, can make valuing your claim more art than science. If this describes your situation, once again, think about hiring a lawyer to help.

You Want to Minimize Stress. Negotiating a settlement with an adjuster or an insurance company lawyer can be anxiety-provoking and stressful. If you're not equipped to deal with that kind of stress, you'll be better off with legal representation.

You Don't Have Time. Like many others, you might find yourself too busy with everyday life to take on the added burdens of settling your case. Keep in mind that you only get one chance to bring a personal injury claim. If you don't have the time to devote to it, hire a lawyer to get it done for you.

You Need Advice. How much you decide to settle for isn't always a matter of numbers and equations. Perhaps you just want the whole thing over with so you can get on with your life. Or maybe you're really in need of cash and don't have the luxury of holding out for a better deal. A good lawyer can help you sort these concerns out and come to a decision that's best for you.

Next Steps

If you're ready to find a lawyer to help you respond to a low insurance company settlement offer, use the resources on this page to get started.

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