How Personal Injury Settlement Negotiation Works

Here's how you (and your attorney) will reach an agreement with the other side and settle your personal injury claim.

Updated by , J.D. · University of San Francisco School of Law

Negotiating a final settlement in your personal injury case is a little like bargaining to buy something at an outdoor market where haggling is commonplace. You and the buyer (the insurance adjuster) both know roughly how much an item (your damages) is worth. You know how much you are willing to take for it, and the adjuster knows how much the insurance company is willing to pay. But neither of you knows how much the other side might be willing to accept/pay. So you go through a process of testing each other, a dance of bluff and bluster that usually only last through two or three phone calls.

Here are a few typical steps in that "settlement dance":

  • You ask for a high amount in your written demand letter.
  • The insurance adjuster tells you what's wrong with your claim—that there is a question about liability, or that your lengthy physical therapy was unnecessary.
  • You respond to these arguments.
  • The adjuster makes a low counteroffer to feel out whether you are in a hurry to take any settlement amount.
  • You concede a little bit concerning the adjuster's arguments and make another demand slightly lower than the one in your demand letter.
  • The insurance adjuster increases the company's offer.
  • You either accept that amount or make another counter-demand.

It is usually as simple as that. The main factors determining the outcome of a personal injury settlement are how well you have prepared all stages of your claim—investigation, supporting documents, and demand letter—how much you are willing to settle for, and how much of a hurry you are in to settle.

When Will Settlement Negotiations Begin?

Negotiations with the insurance claims adjuster will begin shortly after the adjuster receives your demand letter. Usually the adjuster will telephone you within a week or two after receiving your demand. The length of time between demand letter and response depends on how busy the adjuster is, and how much time the adjuster needs to go over your claim and perhaps to speak with the insured about the accident. Learn more about how long it takes to settle a personal injury case.

Don't Sweat the Reservation of Rights Letter

The first thing you might receive from an insurance company is called a "reservation of rights letter." This letter informs you that the company is investigating your claim but is reserving its right not to pay anything if it turns out that the accident is not covered under the policy.

A reservation of rights letter is intended to protect the insurance company so that you cannot later claim that because it began settlement negotiations with you, it acknowledged that the policy covers the accident. It also serves to plant the idea that the insurance company might not cover the loss at all, intimidating some people into taking a quick (and small) settlement.

Do not be intimidated by a reservation of rights letter. The insurance company still must investigate your claim and negotiate with you fairly. Of course, if there is good reason to deny coverage altogether under the policy, the insurer is legally free to do so. But a reservation of rights letter does not change how the insurance company will respond to your claim. That will be determined by the facts of your accident and the nature and extent of your injuries.

What If the Insurer Isn't Responding?

If you do not hear from an adjuster within two weeks after sending your demand letter, call the claims department and ask when you can expect a response. If an adjuster says that he or she hasn't had a chance to review your demand yet, be polite but ask for a specific date—two more weeks, perhaps—by which the adjuster will contact you with a response. Confirm the date with a brief email or written letter.

If you haven't heard anything by the date mentioned, call or send an email and firmly remind the adjuster of the promises made. If, after that, you still do not get a prompt response to your demand, you may have to go over the adjuster's head to a supervisor. Get tips on responding to an insurance company's unfair tactics.

This article is an excerpt from How to Win Your Personal Injury Claim by Attorney Joseph Matthews (Nolo).

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