How Are Car Accident Settlements Calculated?

Car accidents give rise to many questions: how to pay for medical expenses, how to recoup missed work wages, how to repair the cars involved, and how to pay for other property damage. Generally, an insurance company will offer you a settlement for all four questions, however every case is unique. You also may choose to pursue a personal injury claim to pay for economic damages and pain and suffering.

Insurance companies and law firms use similar formulas to calculate a settlement. The type of accident you are involved in might play a part in the settlement as well. For example, according to the Austin accident attorneys Briggle & Polan, PLLC insurance companies routinely deny claims to rear-end accidents. Learn how they might calculate yours.

What’s in a Settlement?

Car accident claims comprised two types of settlements (also referred to as “damages”):

• Special or economic damages. This type is the easiest to calculate. It includes your medical bills, missed wages, and any other expenses associated with your rehabilitation or recovery. Your insurance agent or lawyer might ask for copies of your bills, prescriptions, or pay stubs to help calculate these damages.
• General Damages. This type includes emotional damages, loss of consortium, and “pain and suffering.” These losses address the intangible costs associated with an accident.

Calculating General Damages

It may seem difficult to put a dollar amount on a person’s pain and suffering – and it’s true. To determine a fair settlement, insurance companies and attorneys draw from one of three formulas. Below is a breakdown of each of them:

#1. The Multiplier Method

The method most commonly used by car insurance companies is referred to as “the multiplier method.” This equation adds up all of your special damages and multiplies by a number between 1.5 and 5. The idea is the multiplier will accurately reflect your degree of pain and suffering. Your multiplier is also based on a number of other factors, including the impact on your quality of life, your likelihood of making a complete and speedy recovery, and your degree of shared fault, if applicable.

Special damages are hard to disagree with. There is generally ample evidence to illustrate how an accident victim has suffered economically.

The multiplier, which is based on more subjective evidence, is often a sticking point in negotiations. An insurance company will always tread toward a lower multiplier. A personal injury attorney will want a multiplier that is truly commensurate with your degree of suffering.

#2. The “Per Diem” Method

The second approach isn’t as common, but some law firms still use it in practice. A “per diem,” or daily rate method, requires you (the injured party) to “Pin a compensation cost to each day and multiply this figure by the number of days you've been injured.”, as discussed by the DMV. Generally, the jumping off point is a number comparable to your daily work earnings, as the law presumes your suffering is comparable to the amount of effort your put into going to work each day.

For example, imagine you were in a car accident and experienced whiplash. You wore a neck brace for eight weeks, and required two additional weeks of rehabilitation. You suffered, in total, for 70 days. Your job pays $50,000 annually, or $200 a day based on a standard workweek. Your per diem suffering rate would be $14,000. Keep in mind, your economic damages are then added to this amount.

#3. The Estimation Method

This process simply involves taking all of the factors of the accident, and lumping everything into one ballpark figure. This could potentially be the way to go if your claim in the case is difficult to prove tangibly.

This method might prove to be the hardest to get approved by the court with, unless you have doctor’s bills, prescription receipts, and other proof of the expenses that have been required because of the injury. The more proof and justification for your claim, the greater of chances that you will achieve the dollar amount that you are striving for.

Choosing the Right Method for Your Case

Insurance companies will almost always use a multiplier method to determine the amount of your car accident settlement, while a personal injury attorney may use the per diem method. In some cases, a personal injury attorney will run all scenarios in order to see which yields a better result.

A car accident settlement amount is only a starting point – it’s often open for negotiation. If you think the insurance company is presenting a low-ball offer, make sure you have as much consult a personal injury lawyer to discuss the options for your case.

This article has been provided courtesy of the Austin personal injury attorney team at Briggle & Polan, PLLC. They will work tirelessly to make sure that you receive compensation for your personal injuries. Offering the areas of car accidents, motorcycle accidents, wrongful death, medical malpractice and more. Contact them today for a free consultation. 512-472-1926

Feature image courtesy of Ryan Weisgerber