Should I Accept a Settlement Offer from the Insurance Company?
When it comes to settlement offers from an insurance company, you should only accept the right offer. Settling the case puts money into your bank account faster than going to trial. You also avoid the risk of getting an unfavorable verdict from a jury.
But what makes an offer fair? An offer should fairly compensate you for your damages. It should cover your past expenses and reasonably anticipate your future expenses.
The settlement offer should represent a fair valuation of your case based on your losses and your likelihood of success in court.
Today, we’ll discuss how insurers investigate and settle claims so that you can make an informed decision about accepting a settlement offer from the insurance company.
Liability and Insurance
A liability represents a legal obligation. Tort law determines when a party bears liability for causing another party’s injury.
Liability for a defective product might fall on the manufacturer. Liability for a pedestrian accident may fall on a driver. Liability for a slip and fall accident could fall on the business occupying the premises.
Liability for an injury creates an obligation to pay damages associated with that injury. In a typical case, compensation will include both economic and non-economic damages.
Economic damages represent all of the ways that an injury affects your finances; they can include:
- Past and future medical expenses
- Lost income
- Diminished earning capacity
You can quantify your economic damages by reviewing your medical bills and wage statements, then adding in any future costs and losses.
Non-economic damages represent all of the ways that your injury diminished your quality of life.
They can compensate you for:
- Physical pain
- Mental suffering
- Loss of activities
Economic damages compensate you for the cost of your injuries. Non-economic damages compensate you for the effects of your injuries.
For example, suppose that you suffer from post-traumatic stress disorder (PTSD) after an accident. Economic damages compensate you for the cost of treatment and medication and the income you lost on the days that panic attacks prevented you from working.
Non-economic damages compensate you for your lost sleep and inability to drive without risking a panic attack.
The Role of Insurance
Most individuals and many businesses do not have the money on hand to pay damage awards if they injure someone. An insurance policy sets out the terms of an agreement between an insurer and an insured.
Under this policy, the insurer will pay for any liability incurred by the insured within the scope of the contract.
Suppose that a tree trimming business takes out a general business liability policy. If the company’s employees accidentally drop a tree branch onto a pedestrian, the insurer — not the business — would pay the pedestrian’s damages.
Insurance companies do not do this out of altruism. Insurance contracts can provide huge profits because the insurer sets its rates based on the probability of an accident.
In this way, the insurer has the same business model as a casino. Over the long run, the insurer will profit, even if it must periodically pay claims.
For example, suppose that you start an insurance company with 20 customers. You charge each one $1,000 per year in premiums. You issue policies with $15,000 limits. You know the likelihood that your customers will get into an accident is about 1 in 20.
This means you expect to pay $15,000 in claims every year. But you collected $20,000 in premiums. Even though you had a contractual obligation to pay up to $300,000 in claims, you still expect to make $5,000 per year.
But you can make even more if you negotiate the claim down from $15,000. This represents the insurance company’s incentive to settle claims. If you take $12,000, rather than $15,000, the insurer made an extra $3,000.
Getting an Insurance Settlement Offer
All types of liability insurance function the same way, including:
- General business liability
- Property liability
- Auto liability
- Product liability
New York uses a no-fault insurance system for car accidents, so your claim will start with your no-fault auto insurer. But you can escape the no-fault system if you suffered a serious injury in your accident.
This discussion assumes your injury qualifies as a serious injury under New York law, so you can pursue compensation from the at-fault driver’s liability insurance.
The Insurance Claim Process
First, you will file a claim with the at-fault party’s liability insurance carrier. Your claim will include proof of loss documents, such as medical records, medical bills, and wage statements.
The insurer will assign a claims adjuster to investigate your claim and determine the insurer’s liability. After the insurer receives your proof of loss documents, it must accept or deny your claim within 30 days.
Claims adjusters will typically start with a low offer. New York law requires insurers to make a good faith attempt to effect a prompt, fair, and equitable settlement. So your offer will rest right on the lower edge of reasonableness.
In other words, the claims adjuster will give reasons for the low offer. But a good negotiator can probably push the claims adjuster to increase the offer.
For this reason, you will probably reject the first settlement offer from the insurance company. Instead, you and your lawyer will present evidence and arguments to persuade the claims adjuster to increase the offer.
Accepting a Fair Offer from the Insurance Company
Early in your case, you and your lawyer will discuss the damages you suffered and the range of awards you could receive from a jury. A fair offer will fall in this range. If you successfully receive a fair offer, you should accept it.
Settling your claim will avoid the delays and risks of bringing your case before a jury. No matter how confident you feel about your case, you cannot ignore the fact that juries make unpredictable decisions.
A settlement might not give you a windfall, but a fair settlement will allow you to focus on your recovery instead of waiting for the outcome of a trial.
To learn more about the value of your insurance claim and what a fair offer might include, contact Rosenbaum & Rosenbaum, P.C. for a free consultation. Our experienced attorneys can review the facts of your case and help you to negotiate with insurers to obtain the compensation that you deserve.