What Is A Good Settlement Offer?

A good settlement fully compensates the plaintiff for medical expenses, lost wages and pain and suffering.

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What Is A Good Settlement Offer?

When you have a claim for damages against someone else, going to trial and letting a jury decide what you are entitled to receive is one option. The better option may be to reach a settlement directly with the person responsible for the accident or their insurance company. Here is what you need to know in order to evaluate settlement offers and negotiate the best deal possible.

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There may be advantages to achieving a quick settlement in a lawsuit, but any settlement, whether it comes shortly after the claim arises or while the jury deliberates after hearing the evidence presented at trial by both sides in the lawsuit must be fair and provide adequate

compensation for your losses to be considered a “good settlement.” So, how do you evaluate settlement offers to identify a good settlement offer, and how does your personal injury lawyer negotiate to ensure that you get one?

Regardless of at what stage in the lawsuit a settlement offer is made by the defendant or their insurance company, it must fairly and adequately compensate the plaintiff for the losses and injuries caused by the negligence of the defendant. Each case is different, so whether or not an offer is a good one depends on the specific circumstances of each case.

Many factors go into calculating the value of a personal injury settlement, including the severity of the injuries sustained by a plaintiff, lost earnings while recovering, long-term disabling conditions, and other factors related to the medical condition of the plaintiff. Other factors, such as the strength of the evidence and the extent to which the negligence of the plaintiff may have contributed to causing the accident or the injuries resulting from it, also play a role in distinguishing a good offer that should be accepted from one that requires further negotiating.

Relying on the representation and legal advice of an experienced personal injury attorney is the best way to know the value of your claim and whether an offer fairly and adequately compensates you for the losses you incurred and the pain and suffering that you endured because of the negligent behavior of the defendants. The information that follows explains the process of determining the value of a personal injury case, negotiating for a fair settlement, and evaluating settlement offers to identify one to accept.

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Key Takeaways

Some of the key takeaways for identifying a settlement offer as a “good” one include:

  • A good settlement offer fairly compensates a plaintiff for the injuries and losses caused by a defendant.
  • What is fair depends on the circumstances of each case.
  • Many factors go into calculating the value of a claim and, therefore, the amount of a good settlement offer, including the amount of damages, the strength of the evidence, the cost of litigation, and the extent to which the plaintiff contributed to causing the accident or the injuries.

As you read through these takeaways and the material that follows, keep in mind that the ultimate decision about accepting a settlement offer rests with the injured person with guidance and advice from their personal injury lawyer.

What is a good settlement offer?

The primary goal of a settlement in a personal injury lawsuit is to restore you to where you were both medically and financially before you were injured in an accident. A good settlement provides you with an amount of money that compensates you for the following financial losses:

  • Costs related to medical treatment related to the injuries both now and in the future.
  • Wages lost while recovering from the injuries and the lost or diminished future earning capacity from disabilities resulting from your injuries.
  • Expenses related to prescription medications and specialized medical equipment, such as walkers and wheelchairs.
  • Costs associated with home health care or housekeeping services required now and in the future.

In addition to these financial losses, which personal injury laws refer to as economic damages, there are the damages you incur that cannot be as easily assigned a dollar value because they are more subjective in nature. These include:

  • Physical and emotional pain and suffering.
  • Diminished quality of life.
  • Loss of consortium and companionship.
  • Emotional trauma and mental anguish.

Although they cannot be proven with a bill or invoice, non-compensatory damages are as real and take as great a toll on a person injured in an accident as do medical expenses and other types of compensatory damages and must be taken into account when evaluating a settlement offer.

The best way to prepare for the start of settlement negotiations with an insurance adjuster is with the assistance of a personal injury attorney with the experience and skills to achieve a settlement agreement that fairly compensates you for your losses. To accomplish that goal, your lawyer must determine what your claim is worth and how much you might receive from a jury after it hears and considers all of the evidence in the case.

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How To Calculate The Value Of A Personal Injury Claim

It should now be clear that a good settlement offer compensates you, the injured party, for your losses. That would be easy if the only losses you had were economic damages. Your lawyer could add up the medical bills, receipts, and invoices and ask your employer for your payroll records to easily determine what it would take to compensate you.

Take for example an accident where a car backing out of a parking space crashes into another car. No one is injured, so only property damage is at issue. The owner of the car would be entitled to recover the cost to repair the vehicle.

The owner gets an estimate from a repair shop for the cost of repairs and presents it to the insurance company for the negligent driver. The insurance adjuster handling the claim may ask to inspect the damage to make an independent estimate of the cost of repairs and present a counter offer. The settlement process is relatively simple because damages can easily be determined.

The settlement process becomes more difficult when there are personal injuries and the plaintiff makes a claim for non-compensatory damages, which cannot be calculated by simply adding invoices, receipts, and bills. Insurance adjusters and personal injury lawyers have methods they use to put a value on pain and suffering endured by a plaintiff or the inability of an injured person to play with their children or engage in activities they enjoyed before being injured.

One of the methods used to determine the value of a case and the demand and first offer made by the respective parties is the multiplier method. An attorney or claims adjuster using this method starts by adding up all of the economic damages. The plaintiff’s lawyer has the medical bills, receipts, and invoices obtained from the plaintiff and medical providers. Insurance company representatives obtain the information during the discovery process after a lawsuit is filed by an injured party, or the information may be provided by the plaintiff’s lawyer with a demand letter to expedite negotiations in the case.

Once the total economic damages have been determined, a multiplier is used to calculate non-economic damages. A multiplier ranging from 1.5 to 5 is common, but each person using the multiplier method makes the decision about the multiplier based on their years of experience negotiating similar cases. Some of the factors taken into consideration in selecting a multiplier include:

  • Defendant’s fault: A strong case with evidence that clearly establishes fault on the part of the defendant would be a factor favoring a higher multiplier than might be chosen in a case where fault was not as clear or where the plaintiff may have been partially at fault.
  • Severity of the injuries: Severe injuries justify a higher multiplier than do minor, non-disabling or life-threatening injuries.
  • Availability of proof of pain and suffering: Although pain is subjective, the existence of documentation that a plaintiff exhibited pain and suffering, such as a physician observing signs of pain while examining the plaintiff, may warrant a higher multiplier.
  • Extended recovery period: A longer recovery period may call for a higher multiplier than one chosen in a case in which the plaintiff makes a rapid and complete recovery from their injuries.

The multiplier in a case where the plaintiff has only minor injuries that completely healed in a short period of time without any lingering disability may only be 1.5, but a 5 or even higher multiplier may be chosen in a case where the plaintiff has severe, life-altering injuries that involve a long recovery period and result in a long-term disability.

If, for instance, a plaintiff has incurred $180,000 in economic losses with severe injuries with disfigurement requiring extensive scar-revision surgery now and in the future, a personal injury attorney using the multiplier method might choose 5 as a multiplier. The settlement value the lawyer would come up with is $1,080,000 achieved by multiplying the economic damages by the multiplier and adding it to them to arrive at the amount to demand to begin negotiations.

From the perspective of the defense, the cost to defend the lawsuit filed on behalf of a plaintiff must be taken into consideration in determining what to offer in order to settle it before it goes to trial. The insurance company for the defendant uses the multiplier or another method to calculate the value of the claim, but its adjuster assigned to handle the insurance claim must keep in mind that going to trial to defeat the claim requires payment by the insurance company of attorney fees and litigation costs. A good settlement offer for the insurance company takes into account the litigation costs saved by ending the lawsuit sooner rather than later.

How Much Should You Ask for To Settle A Lawsuit?

The multiplier and other methods used to place a value on an insurance claim for personal injuries can only offer an estimate because of the subjective nature of non-economic losses. The other thing to consider about the calculation is that it gives you the value of the case that a jury might be expected to award to a successful plaintiff. A decision still must be made about how much should be demanded or offered to settle it sooner. This comes down to the extensive experience of your personal injury attorney and the insurance adjuster.

As the plaintiff, you want to get the best possible settlement offer from the insurance company as quickly as possible without risking the uncertainty of a trial. The fault party’s insurance adjuster wants to pay as little as possible to settle the claim while keeping in mind how much it will cost in attorney fees and litigation costs should negotiations fail and the case continues to make its way through the courts. The adjuster probably shares your attorney’s concerns about how jurors may respond to the evidence and the uncertainty of how much they might award you in damages.

Depending on the strength of the evidence proving that the other party was at fault and the severity of your injuries, your lawyer may start negotiations by demanding a settlement equal to the amount determined by the multiplier or other method used to calculate its value. A common tactic used by some insurance adjusters is to respond to a demand with a low-ball offer to see if a plaintiff will give in to the financial pressures of mounting medical bills and being out of work and accept it.

Resist the temptation to take the first offer just to settle quickly, particularly when you are experiencing financial hardship. Rely on your attorney to protect your legal rights and provide you with sound advice regarding any settlement offer in the case.

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When you have been injured in a car crash or other type of accident caused by the negligence of someone else, a good settlement offer fairly and adequately compensates you for the financial losses and pain and suffering that you were forced to endure. A good settlement in a personal injury case usually leaves both sides in the case feeling as though compromised to achieve a better result than they would have gotten had the lawsuit gone to trial. The best way to know when a settlement offer is a good one is by relying on the experience, knowledge and skills of a personal injury lawyer.

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