In any kind of personal injury case, from a car accident claim to a slip and fall lawsuit, there are usually two main categories of "damages" available to the injured person ("damages" is just a legalese term for losses). These are economic (also called "special") damages and non-economic ("general") damages.
Special damages consist of the more easily calculable losses stemming from your accident or injury—your medical bills, your lost income because of time missed at work, your property damage, and any other out-of-pocket losses. General damages cover things like pain and suffering, which includes discomfort and physical pain, but also can apply to emotional distress, anxiety, and other (more subjectuve) effects of the accident and your injuries.
In a personal injury lawsuit, the compensation awarded to a winning plaintiff after a trial is based on these different categories of damages. It follows that a settlement reached out of court will be based on similar factors, but how do you put a dollar value on something as personal as "pain and suffering"?
It's not easy to pin a dollar amount on general damages. But when an insurance adjuster makes a personal injury settlement offer, there are a number of approaches the adjuster might take when calculating pain and suffering. The two most common are the "multiplier" method and the "per diem" (daily rate) method. Try out the calculator below to compare both methods (and see the explanations below for details on each method).
The most common approach is to add up all the special damages (remember, those are your more easily calculable economic losses) and multiply those by a number between 1.5 on the low end, and 4 or 5 on the high end.
This second number (called a "multiplier") will depend on a number of factors related to your case, including the seriousness of your injuries, your prospects for a quick and complete recovery, the impact of your injuries on your day-to-day-life, and whether or not the other party was clearly at fault for the accident that led to your claim.
The multiplier method is used in AllLaw's Injury Settlement Calculator, because it's believed to be the calculation most frequently used by insurance adjusters. The sticking point in settlement negotiations is going to be the multiplier used. The injured person will argue for a higher multiplier while the defendant (or their insurer) will want to use a lower multiplier. Learn more about the "multiplier" formula for settling a personal injury claim.
Another approach to calculating pain and suffering is called the "per diem" method. "Per Diem" is just Latin for "per day", and the idea is to demand a certain dollar amount for every day you had to live alongside the pain caused by your accident.
The slippery part of this approach is justifying the daily rate you use. A good way to make sure your daily rate is "reasonable" is to use your actual, daily earnings. The argument here is that having to deal with the pain caused by your injuries every day is at least comparable to the effort of going to work each day.
Let's illustrate the "per diem" method with an example. Imagine you were rear-ended and suffered a moderate neck strain (a whiplash-type injury). You must wear a neck brace and take pain pills for two months. You continue to suffer pain for another three months, for a total of five months (roughly 150 days) of pain and discomfort. At your current or most recent job, you earn $45,000 per year—that's $180 per day when you divide your salary by 250 working days per year.
To get to a pain and suffering settlement in this case, just multiply your $180 daily rate by 150 days of pain, and you arrive at $27,000.
This method often falls apart with permanent or long-term injuries, but in those cases you'll probably want to hire a personal injury lawyer, and your settlement would be based off of related verdicts in your jurisdiction—data that only lawyers usually have access to.
It's always a good idea to use both methods to start, and then adjust your demand from within that range. You may get wildly different numbers, and that's okay—it all boils down to a negotiation dance at the end. If you were hit by a drunk driver that ran a red light and have a bunch of medical bills, start on the highest end of your settlement range. If you slipped on ice or snow in front of a private residence, and liability is not so clear, your settlement will be closer to the lower end. Every case is unique, but the idea is that you want to start at some reasonable number that you can justify in your demand letter.