When negotiating with insurers, injury victims often feel as if they have no way of possibly guessing what their insurer will offer. Predicting this amount 100% accurately is indeed impossible since insurers do not know it themselves until close to the last minute, but at the same time, there is a reliable formula one can use to estimate this amount.
This formula, known as a Damages and Compensation formula, is often used by insurers to craft a ballpark estimate for a personal injury claim. Their estimate will have several variables, and it will also respond to the context of ongoing negotiations, but it nevertheless allows plaintiffs and insurers to make an educated guess as to what the insurer’s settlement offer will be.
To learn more about this formula and how it is calculated, read on:
What Insurance Settlements Typically Cover
For a severe injury, an insurance settlement must usually include:
- Costs of medical care and related expenses
- Lost income and missed work
- Pain, discomfort, and suffering
- Permanent disability or notable disfigurement
- Temporary or permanent loss of companionship and an inability to participate in certain social, familial or educational experiences
- Emotional distress related to the above
How the Damages and Compensation Formula Is Calculated for Personal Injury Claims
Since only a minor part of this list includes concrete, measurable costs, insurers must use the Damages and Compensation formula to assess the remainder. To do so, they assess the costs of the injury into two categories: special damages and general damages.
Special damages or “medical specials” are the dollar amount direct costs of medical care, including related expenses like travel, medication, rehabilitation, assistive devices and more. The remaining, more difficult-to-quantify damages are known as “general damages.”
To calculate the total settlement amount, insurers will multiply the special damages by a variable from 1.5 to 5 or higher that corresponds to the perceived severity of the injury. Then, the actual value of lost income is added in at the end.
Examples of the Damages Formula
If Sammy had a leg fracture that required him to wear a leg cast for a few months and miss out a handful of social opportunities during that time but that also did not result in any permanent disability, the insurer might multiply the medical specials by 1.5 times.
So, if Sammy’s total cost of hospital bills, follow-up visits, rehab and related expenses totaled $12,300, then the combination of special and general damages would be $18,450, which would then be added to the amount of lost income.
In another example, Sandra received multiple leg fractures, in addition, a crushed foot. She had to undergo multiple surgeries and must walk with a cane for the rest of her life. Her foot is also permanently disfigured, meaning she cannot wear open-toed shoes without revealing her past injury. Her total medical expenses were $120,500.
Since this injury is more intense, an insurer may multiply her medical expenses by 3 to create a total of $361,500 in total damages plus her amount of lost wages.
Note that these numbers are hypothetical and not related to actual real-world figures.
Defending Your Insurance Claim with Personal Injury Lawyer
Even with a set formula estimate, there are still many variables that can affect the insurer’s perception of your injury or their willingness to pay the full amount calculated by the formula. To assert your case with evidence and avoid negotiating mistakes that hurt your ability to recover damages, you can entrust a New Jersey personal injury lawyer.
Contact the Law Offices of Peter N. Davis today to receive a free case evaluation and to potentially start strengthening your injury claim today.