In the world of insurance, it's important to remember that insurance companies are primarily for-profit corporations seeking to maximize their financial interests. Consequently, insurance carriers are driven to minimize payouts and pay the least amount possible to resolve claims. When I was a young insurance defense attorney fighting against car accident attorneys, I was told by a senior attorney that it was our job to not pay a penny more than a claim is worth. This insight provides valuable context as we explore the intricacies of the claims evaluation process. Today, we will be exploring how insurance companies evaluate and devalue damages from an auto accident and personal injury claim and how you can combat these tactics.
Evaluation Brackets and Pre-Litigation Assessments:
Insurance carriers typically evaluate claims within brackets based on potential damages. These brackets encompass a range of monetary value for a case, from a low starting point for negotiations to the highest amount authorized. This initial evaluation is primarily focused on pre-litigation settlement amounts, which occur before a formal lawsuit is filed and sometimes even before an attorney has been hired to evaluate the claim on behalf of the insurance company. It's essential to understand the dynamics of pre-litigation evaluations to effectively navigate the claims process.
Many insurance carriers will initially seek to resolve claims for a "nuisance" value from $1,000 to $3,000 to receive a release and bar you from receiving any more compensation in the future. Unless you were not injured and are not planning to make a claim, we recommend that you never take this offer, especially the first one. The first offer made by the insurance company is always their lowest offer. That means that the insurance carrier has additional funds in their range to pay out on the claim and you must counter demand for a higher amount. This will usually result in the insurance carrier increasing their offer further up in the range but it will take a few times to get to the top of the authorized range for the adjuster. Whether the top of that range is worth accepting will be up to you and your claim.
Evaluation of Damages for other episodes.
When assessing a claim, insurance carriers typically consider three primary categories of damages: medical expenses, pain and suffering, and lost wages. Let's examine each of these elements in detail.
Insurance carriers often make an initial offer based on the value of your medical expenses as paid by your health insurance. They may argue that this amount represents the "actual" value of your medical damages. However, it's important to recognize that this figure is usually lower than the true value of your claim and the actual medical expense damage. In New Mexico, you are entitled to recover the full value of your medical expenses without any reduction due to health insurance payments. The true value is often higher than what most health insurance companies pay for the same procedure.
If the initial offer is denied, the insurance carrier may rely on an evaluation program that will likely reduce the medical expenses based on what they deem "reasonable and necessary." This reduction typically falls within the range of 25% to 50% and may exclude any treatments that occurred after a month-long break in your medical treatment. The carrier will then present this reduced amount as their offer for the "value" of your claim. In many cases, insurance carriers are reluctant to move from this initial offer for medical damages unless you can provide evidence/explanation on the delayed treatment (you had a cold or were unable to take time off work) or demonstrate the true value of your medical expenses (the charges were coming from a reputable medical provider like a local hospital group). It's important to note that New Mexico law mandates the collection of reasonable and necessary medical expenses, and reputable hospital groups generally receive the full value of these expenses from juries.
Thus, we recommend that you stick to your medical expenses damages and force the insurance company to explain why the medical expenses should be reduced. We recommend that you write to the insurance adjuster with this request as most insurance carriers mandate that they write you back with a response. Many insurance carriers are hesitant to write down the reasons for their unreasonable reductions as it lays the groundwork for a potential bad-faith lawsuit in the future.
Pain and Suffering:
Insurance carriers also consider the impact of pain and suffering and any other indirect damage in evaluating your claim. They may claim that this component amounts to around $1,500 or half the value of your medical damages. Additionally, they often seek to include other non-economic damages, such as loss of enjoyment of life, loss of consortium, infliction of emotional distress on your family, loss of household services, and other "soft" non-economic damages as part of this damage. However, New Mexico recognizes that physical, mental, and emotional pain and suffering from bodily injuries are separate and unique damages from how insurance companies try to combine them together with other individual damages.
An effective way to compute pain and suffering damage is to think of an appropriate and just daily amount for the time that you were in pain from the accident. Generally, this amount starts higher in the days and months after the accident when most people are in the most pain and then reduces over time. However, this time frame is unique to your case. Maybe the pain was really bad following a necessary procedure that occurred months after the accident but was caused by the accident. You will need to explain this time computation and time frame and the amount that you are seeking. Remember, the ultimate result in determining this value is what a jury of people would evaluate the amount. Thus, you must think of how the jury would evaluate your timeline and daily amount in coming to the final amount. It's crucial to recognize the broader scope of your non-economic damages and advocate for their fair evaluation.
- Lost Wages:
When assessing lost wages, the insurance adjuster will typically factor in your actual lost wages and may deduct any used vacation time. They require solid evidence of lost wages to consider this component of your claim. It's essential to provide documentation supporting your lost wages to ensure fair compensation.
In general, insurance carriers impose a cap on claims for non-represented parties that is generally lower than that of a represented party. This cap usually limits the settlement amount to around 1.5 times the medical expenses or only a few thousand above your medical expenses. For instance, if your medical expenses are deemed to be $10,000, the highest value the carrier may settle for is $15,000, although they will make every effort to keep the settlement amount below this limit. They will try to say that your insurance paid for the medical expenses so you don't need to be paid those back. Or that you only are allowed to receive your deductible. They will try to use their knowledge of the system against you. That is why we generally recommend hiring an attorney for you claim but if that is not an option, we hope that this information is helpful.
Understanding the claims evaluation process empowers you to navigate negotiations effectively and strive for a fair and just settlement. By recognizing how insurance carriers review claims, we hope to have given you the knowledge to improve your claim negotiations against the insurance companies. If you decide that you need help in your insurance claim for auto accidents, motorcycle accidents, semi-truck accidents, slip and falls, nursing home abuse, or police brutality then contact us for a free consultation at 505-226-3205.