By Francis M. Smith
Reaching a personal injury settlement agreement with an insurance company involves a process of negotiation and at times can bear some similarity to bargaining over the price of a used car or haggling with a street vendor for a vacation souvenir. The dollar amounts are greater and the stakes are much higher in an injury claim, but the basic principles of negotiation can be present in all three cases.
In any negotiation process, there are three basic pieces of information: the approximate value range of the "product," the minimum figure that the "seller" will accept, and the maximum amount the "buyer" will pay. During your attorney's efforts to reach a settlement agreement for your injury damages, your attorney takes the role of the "seller," the insurance adjuster holds the position of the "buyer," and the "product" represents your damages. Each party to the negotiations knows only two of those three critical pieces of information: your attorney knows the ballpark value of your claim and the bottom-line figure that he or she would recommend to you, and the adjuster knows the estimated value of your damages and the highest amount that the insurance company is willing to pay out before risking a jury trial. Both your attorney and the adjuster are each missing a crucial bit of data, and the negotiation process mostly involves poking and testing one another in an effort to tease out that last essential fact -- how little are you willing to accept, or how much can you convince them to give?
This mutual process of testing the waters of one another's positions may take no longer than the space of a few telephone exchanges, though in some cases it can drag on for months (or years!) without resolution. A typical settlement negotiation might follow stages like these:
- Your attorney calculates the approximate value of your damages and choose a figure at the high end of that range, leaving room to negotiate downward while still ending up with reasonable compensation. Your attorney may send the insurance adjuster a written demand letter including that high-end figure, or much more often, it is conveyed during a telephone conversation.
- The insurance adjuster responds to the demand, whether by letter or given orally, by pointing out any real or perceived weaknesses in your case, including disputed issues of fault, "excessive" medical treatment supposedly not justified by your diagnosis, and the recovery achieved after treatment.
- Your attorney addresses these objections.
- The adjuster makes an offer, often an unreasonably low figure, to see how impatient you are to be compensated (even inadequately) for your injuries. Many attorneys refer to this as bottom fishing.
- Your attorney adjusts the demand figure slightly downward to demonstrate a willingness to negotiate reasonably.
- The insurance adjuster raises his offer.
- Your attorney and the adjuster continue this back-and-forth bargaining process until his offer enters the range your attorney and you feel comfortable accepting. (Your attorney can only accept an offer of settlement with your consent.)
The way in which any individual claim proceeds through these steps is determined by the facts of the case, the level of preparedness and organization of the injured plaintiff and their attorney, and how quickly you feel you need to settle.
Negotiations typically start shortly after the insurance company receives your initial demand. There is no "normal" here, but many times your attorney should receive a phone call from the insurance adjuster within a week or two of the demand being made. Cases that require more investigation or consultation with the insured party tend to result in longer wait times than simpler claims, and delays may also happen if the insurance adjuster has a large workload. If you don't receive a response within two weeks of the demand, your attorney will probably contact the insurance company's claims department and ask the adjuster -- politely but firmly -- for a hard deadline date by which they will respond. It may be wise to then send a letter to get written confirmation of this date. If the insurance adjuster misses this deadline, a firm reminder of their commitment should be issued, and in the worst cases, an appeal to their supervisor can be made if they still fail to respond promptly.
Although the legal duty is honored in the breach, the insurance company remains obligated to examine your claim fairly and negotiate with your attorney according to its legal merits. However, many insurance companies overload their employees with work to the point where only the most severe cases or the cases that are about to go to trial are evaluated. And of course the larger the demand for compensation, the higher the level of authority must be reached to obtain authorization to settle. It's a complicated process at times, and this is why an experienced personal injury attorney is best to handle the negotiation process for you on all but the simplest claims.
If you or a loved one have been injured in a serious accident, please contact me or call me at 908-233-5800 for a free consultation.