Once we have agreed to settle with the negligent party’s insurance company we address the settlement proceeds. Here we deal with potential subrogation interests of our client’s insurance company. In a personal injury case a subrogation interest arises when our client’s insurance company has made payments for accident related expenses.

Components of Case Value. To understand subrogation we must recognize a personal injury case recovery is usually based on different components that added together equal case value. These components include our client’s past and future medical bills, past and future economic loss, and general damages (disability, pain and suffering, loss of enjoyment of life and disfigurement). The components that may give rise to a subrogation interest are past medical bills and past wage loss.

If our client’s insurance company has made payments for medical bills and/or wage loss it will make a subrogation claim for the return of of its payments from the case recovery. It is not automatic our client’s insurance company will have an enforceable subrogation interest.

Made Whole Doctrine. First our client must be “made whole” before a right of subrogation arises. This means our client must receive the full value of all case components that are unique to her alone. These are the general damage components. To illustrate if our client’s case has a total value of $150,000 with past medical bills of $30,000 and lost wages of $15,000 this means the combination of future medical, future wage loss and general damages total $105,000. If the negligent party has only $100,000 in insurance coverage there is insufficient insurance to pay the $105,000 necessary to “make our client whole.” When this happens there is often no subrogation right for our client’s insurer.

Insurer Stands in Shoes of Client. The subrogation right of our client’s insurance company can be no better then our client’s right of recovery against the negligent party’s insurer. When our client’s recovery is reduced by the comparative negligence percentage of our client then the subrogation amount must be reduced by the same percentage.

PIP IME. Often our client’s auto insurance company has done a PIP IME. When the PIP IME doctor states our client received medical care that was unnecessary and/or not accident related then we use the IME against our client’s insurance company. We discount its subrogation interest by all amounts its IME doctor states were not necessary for treatment.

ERISA. The Employment Income Security Act (ERISA) is federal law that often gives absolute subrogation rights to the client’s health insurance company. Before agreeing a ERISA plan has absolute subrogation rights we get the plan language. We read the plan to see if the made whole doctrine applies under the plan, or if there is language allowing a credit for attorneys spent by our client. Even when there is a rock solid ERISA plan allowing for complete recovery of the subrogation interest we request the plan review our case and agree to payment of attorney’s fees.

Attorney’s Fees. Washington and many other states require the insurance company with a subrogation interest to pay a portion of the client’s attorney’s fees. This translates to a discount of about one third of the subrogation interest. We pass this discount to our client so she receives a greater recovery. In all cases our goal is to maximize the net recovery to our client. This can only be done by thoroughly dealing with the subrogation claim of our client’s insurance company.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Settling a personal injury case requires understanding how an insurance company views a personal injury risk. This is what I have learned in dealing with insurance companies

Two Values. A personal injury case has two values. One, the most the insurance company will pay for the case. Two, the amount a jury will award for the case. When we settle a personal injury case we make sure our client receives the most the insurance company will pay for the case short of a jury verdict.

How the Insurance Company Decides Value. Most insurance companies evaluate case value like they set premiums-based on statistics and risk. They evaluate the injured person. The more solid and appealing the person the better the case. They evaluate the mechanism of the injury. The more clear cut and understandable the better the case. They evaluate past and future medical treatment. The more medical doctor treatment and clear future treatment the better the case. They evaluate economic past and future loss looking for documentation that supports the loss. Most insurance companies have a more difficult time with general damages such as pain and suffering, disability, loss of enjoyment and disfigurement. This is why the lawyer is important.

The Lawyer. The insurance company evaluates the lawyer who has the case. The more likely the lawyer is to try a case the more risk the insurance company sees. A trial lawyer presents risk-the risk a jury will like the case with a verdict more than the mean result.

Offering Mean Value. Based on their evaluation, the insurance company arrives at a bell curve value. The bell curve is the result of insurance calculations on the range within which the jury will award the majority of the time. There is low range and high range value within this bell curve. The insurance adjuster is given authority to settle within this range and this is where the final offer will be. The first offer will be low and the negotiation goes from there.

He Who Speaks First Loses. After the insurance adjuster has evaluated the claim and received his authority he contacts the plaintiff lawyer with the insurance company’s first offer. This is often low and it is  less than the insurance company will ultimately pay. This is where the negotiation starts- the high of great day jury value against the low of  a minimal jury result. In negotiating with the adjuster we know the reasonable settlement value of the claim. Reasonable settlement value is the amount a jury will most often award for the case. The key is to get all of the adjuster’s authority (which is the most the insurance company will pay) and then determine if this is within the average jury range.

In getting there remember the maxim-He Who Speaks First Loses. Put simply when negotiating always remain silent after presenting an offer or counter offer. Resist all temptation to keep talking after giving your number. Do not say anything until the adjuster gives his next number.

Decline the Low Ball. Some insurance companies, particularly in a difficult economic climate, will never get to a fair settlement proposal. Often these companies have a corporate policy of using an impersonal computer evaluation that dictates a low ball offer the adjuster is stuck with. Knowing fair settlement-the amount a jury will usually pay-allows for recognition of a low ball unacceptable offer. When this occurs we advise our client to decline the offer and try the case.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

The next posts under the topic “How I Practice Law” discuss the settlement of a personal injury case.

Be Able to Try the Case. An insurance adjuster has little motivation to settle a personal injury case for fair value unless he knows the lawyer can and will take the case to trial. This is because an experienced personal injury lawyer who is prepared to try the case presents a risk to the insurance company. Settlement allows the insurance company to contain the case at a level it is willing to pay. This is why the injured party needs an experienced trial lawyer to get fair value for his case.

Minimum Policy Limits. In Washington State minimum liability policy limits are $25,000 single injury and $50,000 aggregate. This means no one injured person can collect more then $25,000 and the insurer is not obligated to pay more then $50,000 total for all occupants injured by the driver of the insured vehicle. In Washington, we know an insured driver has policy limits of at least $25,000/$50,000.

Determining Policy Limits. As soon as we know we have a case with a value of $25,000 or more we contact the adjuster and tell him we believe we have a case that exceeds his limits. Assuming we know our case has a value of $25,000 to $50,000 we can tell the adjuster if he has $50,000 or $25,000 we will send him a limits demand. We will wait only if he has $100,000 or more. Usually the adjuster will respond by showing his limits hand or enough of his hand for us to determine the range of the third party limits.

Prompt Settlement Demand. In a limits case we send the settlement demand  as soon as we have the medical records, reports and/or economic loss documentation to demonstrate case value. In a case where limits exceed case value we send the demand as soon as treatment is complete and we have the value documentation we would have at trial. In a limits case we notify our client’s automobile insurer and have it open an under-insured motorist claim. We send the insurer the settlement demand we send the third party carrier.

Content of Demand Package. The demand package begins with the demand letter. The letter has the following sections: Summary of Exhibits. This is the table of contents. Background. This is the section were our plaintiff is described. We cover education, family, employment and physical activities before injury. Facts of Injury. Here the mechanism of injury is set forth. Investigation. Discussion of police report accident investigation. Property Damage. For instance in an automobile collision case the amount of damage to vehicles. Injuries. A general outline of injuries without an ad nauseam blow by blow repeat of the records. Medical Specials Summary.  Amounts totaled by provider. Plaintiff Today. Impact of injuries on client’s life. Evaluation and Demand. Summary of why case has value and amount of demand. The exhibits follow which include police report, property damage statements, medical records, tax returns and pay information, and expert reports.

Amount of Demand. We demand the same amount we will ask the jury for at trial. This is the maximum case value. No addition to the maximum case value. This is a credibility matter. The plaintiff graveyard is littered with plaintiff lawyers who ask too much for a case. If it’s too much to ask a jury it’s too much to ask the adjuster. We base case value on our experience (my partners and I have more then 100 years collective experience), on jury and settlement results and on the unique aspects of the case. This is discussed with client and we have client authority for demand.

In the next post we discuss negotiation and settlement.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.