Formula Used by Insurance Companies
to Determine the Value of Personal
Injury Claims.

To determine what your claim is worth, you must first know the things for which you are entitled to compensation. Usually, a person who is liable for an accident-and therefore his or her liability insurance company-must pay an injured person for: (Note: these are the same criteria that you and your lawyer will use to estimate how much your claim is worth.)

• Medical care and related expenses.
• Income lost because of the accident, because of time spent unable to work or undergoing treatment for injuries.
• Permanent physical disability or disfigurement.
• Loss of family, social, and educational experiences, including missed school or training, vacation or recreation, or a special event.
• Emotional damages, such as stress, embarrassment, depression, or strains on family relationships -- for example, the inability to take care of children, anxiety over the effects of an accident on an unborn child, or interference with sexual relations.
• Damaged property.

When determining compensation, it is usually simple to add up the money spent and money lost, but there is no precise way to put a dollar figure on pain and suffering or on missed experiences and lost opportunities. That's where an insurance company's damages formula comes in.

At the beginning of claim negotiations, an insurance adjuster adds up the total medical expenses related to the injury. These expenses are referred to as "medical special damages" or simply "specials." That's the base figure the adjuster uses to figure out how much to pay the injured person for pain, suffering and other non-monetary losses, which are called "general" damages.

When the injuries are relatively minor, the adjuster multiplies the amount of special damages by 1.5 or 2. When the injuries are particularly painful, serious, or long lasting, the adjuster multiplies the amount of special damages by up to 5. (The multiplier may be as great as 10 in extreme cases.) The adjuster then adds on any income lost as a result of the injuries.

That's all there is to the formula. However, this figure-medical specials multiplied by a number between 1.5 and 5, then added to lost income-is not a final compensation amount but only the number from which negotiations begin.

Copyright © 2006 Personal Injury Attorney Information.