Generally, never take the first offer of a car accident settlement. In most cases, such an offer is not in your best interests.
Sometimes the deal might be tempting, especially if the medical bills are piling and probably you cannot resume working yet. Any promise of finances might sound like a relief.
Unfortunately, accepting the offer closes the case, meaning you cannot pursue the claim further. If you have not healed completely, you would have to meet additional medical expenses out-of-pocket. Moreover, there would be no way to recover future lost wages.
As such, you should be cautious of the first settlement offer the insurance company sends you. Instead, view it as the first step in settlement negotiations.
In practice, the first offer from the insurance company is usually way too low and hardly enough to cater to your damages fully.
The insurance provider might offer a low settlement because:
- They think you have a weak case hence wants to intimidate you into settling for less
- The adjuster simply wants to minimize their employer’s liability
Ideally, as much as insurance companies know they have a contractual mandate to compensate third-parties who get injured in a crash caused by their client, being for-profit corporations, they benefit more from lowball payouts. That is why they hire expertly trained negotiators (adjusters) to handle car accident claims, especially personal injury cases, which are more complicated than property damage claims.
What to Do After Receiving the First Settlement Offer
Whether the offer comes in before or after sending a demand letter, you should go over it with an attorney and prepare a counter demand. Generally, you should not send the counter demand until you establish the cost of your injuries and their impact on your life.
If the injuries are severe and you anticipate ongoing treatment, you should wait until the doctor indicates you have attained maximum medical improvement (MMI). At this point, you can make an accurate estimate of additional treatment costs and future expenses.
After recovery, you can judge when you will resume working, making it easier to calculate lost wages. In cases of severe accidents that leave you incapacitated and unable to perform your former duties, you may need to claim damages for lost earning capacity. All these and more details (see later sections) are essential when preparing the demand letter.
Generally, receiving an offer is a good sign, which shows the insurance company admits their client’s (driver) fault. Though it may be too low, it creates an opening for negotiation, allowing you to fight for a settlement you deserve.
However, the steps you take after the initial offer are crucial to getting fair compensation. Here is a rundown of what you need to do.
#1. Hire an Attorney
If you have not hired a car accident attorney yet, you should consider doing so immediately. Usually, personal injury lawyers charge their fee on a contingency basis, so they may not require you to pay upfront charges. Most attorneys also offer free consultations. Hence, you can take advantage of their free case evaluation offer to know your claim potential.
The benefits of hiring an attorney are vast. First, they can help you evaluate the offer, determine whether it is fair, and give an appropriate response to the insurance company. The attorney can also compute a reasonable compensation to cover your damages and send the counter demand.
Again, an attorney experienced in handling car accident claim settlements understands the negotiation tactics that insurance adjusters employ, which sometimes the victim might find too hard to process. For instance, a claim that your injuries existed before the accident might embitter and disorient you. But on the contrary, the attorney would take all the allegations in their stride and provide appropriate responses, giving evidence to support your claim.
#2. Compile Evidence
Your ability to counter the adjuster’s offer and get a better settlement depends heavily on the evidence you have. Hoping you have photos of the accident and your injuries, you should prepare copies to attach to your demand letter. If there were CCTV cameras near the area (private or public), your lawyer could request their retrieval, as they can provide clear evidence of how the accident happened.
You should also provide copies of all your medical reports and bills and any other associated costs you have incurred during treatment. If you are undergoing psychological therapy to combat trauma and the resulting stress (which is vital), attach records proving the same.
On the same evidence file, provide proof for your absence from work and any relevant reports to show your loss of earning capacity if the injuries led to partial disability. Note that in case of total disability, where the victim cannot work again, one should include a computation of future wages (calculated as the annual wage multiplied by the remaining years to retirement).
Finally, you should include the value of the vehicle repair costs and provide the necessary documents to support the expense. If the car is totaled, attach the figure for the car’s market value, i.e., the value at the time of the accident (difference between the purchase price and depreciation).
#3. Negotiate the Offer
After receiving the first offer, it is essential to remain calm, as, in most cases, the amount might seem ridiculous, tempting you to file a lawsuit immediately. However, this may be too early for legal action, and with the lawyer’s expertise, you have room to bargain for a worthy settlement.
At this point, you should respond to the offer, asking the adjuster to justify it. While they may keep the offer low to make a profit for their employer, it could also be because they are unaware of any evidence, thereby concluding you have a weak case.
While sending back your rejection, accompany it with evidence that demonstrates the extent of your damages (as explained above). The adjuster might not agree to your demand amount even after seeing the evidence, but if they are bargaining in good faith, they will most likely increase their offer. Always remember, if the insurance company demonstrates bad faith in the negotiations, you have a right to sue it.
Generally, once you compile your losses, you should set the range you expect and keep it at the back of your mind. For instance, if you estimate a fair settlement to be $300,000, the range could be between $300,000 and $500,000. But do not forget to check the policy for information on the limit and the damages it covers.
So, while sending the demand, the attorney might probably quote the highest amount, in this case, $500,000, and offer strong evidence to support the claim. In the following offers and counter demands, you can keep lowering the amount (to demonstrate good faith), as long as you do not drop below what you consider fair compensation.
But if the adjuster plays hardball and declines to offer you a fair settlement, then you may proceed to a lawsuit.
#4. File a Lawsuit
Filing a lawsuit does not necessarily lead to trial. Many claims still settle before the trial, even after lodging a lawsuit. This is because the process opens more opportunities for negotiations, and the parties might agree to a settlement before the jury decides the case.
Once you file the lawsuit, the case goes through the discovery phase. This involves several legal proceedings aimed at unraveling the opposing party’s evidence to refine one’s strategies. By doing so, the opposing party also assesses the strength of the rival’s case to gauge what the trial outcome might be.
In most cases, if the insurance adjuster discovers you have strong evidence that might attract a favorable ruling, they may end up offering a better settlement. Ideally, the discovery phase might involve legal actions such as depositions, request for document production, interrogatories, request for admissions, etc.
If the discovery does not compel the insurance company to offer a better settlement, the claim will enter the mediation stage. During mediation, a third party will mediate between you and the defendant (represented by their insurer). The mediator will listen to your arguments, consider your evidence, and generally oversee the process as you exchange offers and demands
If you finally agree on a settlement, which happens in most cases, the insurance will write you a check, and you will sign the necessary papers agreeing to close the case.
At this point, the insurer might provide a settlement close to the total value of the claim to avoid the possible unfavorable decision of the court. Otherwise, the court can even award you more than what you initially demanded, which would be a greater loss for the company. Moreover, this would be in addition to footing the trial costs.
Note that accepting the settlement at the mediation stage might also be in your best interests as the trial ruling could favor the defendant instead. However, if you think the compensation offered is unfair, and you believe you have adequate evidence to table before the jury, you may reject the offer and wait for the trial.
Do Not Forget the Statute of Limitations
Personal injury cases have a deadline within which you should file a claim. As you exchange letters with the insurer, you should be cautious not to drag the out-of-court negotiations past the deadline and miss out on recovering your money, should the insurer fail to provide a fair settlement.
The statute of limitations ranges from one to six years, depending on your state. Note that the deadline for filing a personal injury claim differs from property damage in some states. However, the limit for property damage is normally higher than personal injury in those states.
If you have an attorney aiding the process, they should guide you on your state’s statute of limitations so that you do not lock yourself out. Generally, when you file the lawsuit past the deadline, the court nullifies it, except in a few circumstances, such as the plaintiff being a minor. In such a case, the deadline starts ticking once they reach 18.
What Damages Should the Settlement Cover?
Ideally, the types of damages you incur will determine the settlement. For instance, if you did not suffer any injuries from the accident, but your car was damaged, you may only recover the repair costs. However, if you sustained severe injuries leading to hospitalization, the settlement will cater to all the associated costs, including nursing care where applicable.
Not only do you receive the quantifiable damages, but you may qualify for compensation even on the damage that you cannot put a dollar amount to, such as emotional distress.
Generally, the damages will fall into two categories–economic and non-economic. Under these categories, you may claim:
- Medical expenses – Ongoing and future costs (emergency room costs, doctor appointment fees, prescription expenses, travel expenses to and from the hospital, nursing care, rehabilitation, etc.)
- Lost wages – Current and lost future pay, including loss of earning capacity, such as missed promotions or inability to perform former duties
- Property damage – The cost of repairs or vehicle replacement
- Pain and suffering – Depends on your extent of injuries and the length of recovery
- Emotional distress – Based on how the accident affects your life
Wrongful Death Damages
If you are seeking compensation for a loved one who died in a car accident, the settlement amount may include damages such as:
- Pre-death medical expenses
- Funeral and burial costs
- Support for dependents
- Compensation for emotional distress
Talk to a Car Accident Lawyer Before Signing Anything
Should you take the first offer of a car accident settlement? Our answer is—you should not accept it before evaluating it to determine whether it is fair. Once you analyze the offer against your damages (current and future costs), you can decide.
In most cases, the deal might be too low, but receiving it opens a door for negotiations. As long as you have concrete evidence to support your claim, you stand a better chance of receiving the settlement you deserve.
However, it’s still wise to hire an experienced car accident attorney to help you develop the evidence and benefit from their negotiation experience.
The insurance adjuster is an expert negotiator whose sole duty is negotiating accident claims for their employer. Having dealt with them before, the lawyer understands their negotiation tactics and would know how to best counter their lowball offers and allegations with solid evidence.