Basic Strategy Guide to Negotiate and Settle a Personal Injury Claim
If you have been injured by someone else who was negligent or careless, you have a legal right to seek compensation for your losses. Once you have made contact with the Defendant, you will want to discuss the potential of settlement long before you consider preparing for a trial. In many cases, you should be thinking about settlement even before you file a legal claim. Negotiation is an essential component to any personal injury claim. Knowing how to negotiate (before you start negotiating) is critical to the outcome of your injury claim.
Before You Negotiate
You can’t negotiate anything unless you know what you are negotiating for. We will walk you through the commonly claimed categories of damages which people pursue during settlement discussions for an injury claim. However, calculating your damages can only be done if your medical condition is sufficiently knowable, and the outlook for your recovery is clear. Lawyers aren’t doctors. While we have experience dealing with personal injury law on a daily basis, we take a deep look at your medical records to see what your doctors have to say about your injuries, treatment, and prognosis. Without this essential information, there’s no clear way to determine how much money you should expect as a settlement for your injury claim.
Once you and your doctor are comfortable with your recovery and future medical outlook, you (and your lawyer if you have one) can enter into settlement discussions. We have listed the basic steps to follow below:
Step One: Calculate Special Damages
First, you must calculate what are called special damages. Special damages (also known as economic losses) are damages for which money is only a comparable substitute for what was lost. Special damages can include:
- lost wages
- future wage loss or diminished earning capacity
- medical expenses
- funeral and burial expenses, and
- property damage.
You’ll note that these damages can be grouped into two categories: past losses and future losses. Past losses should be fairly simple to calculate, so long as you have pay stubs, receipts, and bills to justify the amounts.
Future economic losses, however, take some extra work to assess. How do you properly assess your future medical bills or the income that you would have earned had it not been for the accident? Calculating these future damages depends heavily on the facts of your particular case. Generally, you are best to consult with a lawyer to determine the value of the future economic losses. These losses can be significant. It is very important that you properly assess the full value of lost earnings and care. Failure to calculate the full value of future losses could leave you with medical bills which you cannot cover from settlement funds and expenses which you can’t afford because your earning inability wasn’t fully appreciated.
When assessing future wage loss, the calculation considers the difference between what you actual earnings are and your projected earnings. Of course, it’s usually impossible to know with a high degree of certainty what one’s future earnings will be based on market conditions, the performance of your employer’s business, career advancement, and family circumstances. Various discounts must be applied to take into account various factors which could compromise your ability to earn (ie. disability, life expectancy, job loss, expected retirement age, etc.). An expert accountant or actuary will assess the various factors and income information to determine a value your expected future economic losses.
Step Two: Calculate General Damages
Now that you have calculated the special damages which are most replaceable with money, we now shift to general damages. General damages are non-economic losses for which money is not a clear substitute. As you’ll see below, it isn’t easy to assign a value to pain or distress. Money cannot replace a loss of function, or fix new lifelong limitations because of an unfortunate accident.
Lawyers usually assign a value to the following headings for general damages:
- pain and suffering
- embarrassment/ humiliation
- mental anguish
- reputational damage
- loss of companionship
- emotional distress
Step Three: Adjust the Value of Your Claim
Now that you have set a future for the special damages and general damages, add those two numbers together. Next, you must consider raising or reducing your total settlement number based on your assessment of various factors which impact the value of your claim. Consider the issues below:
- Liability. If it is clear that you are completely not responsible for the accident, there is no need to discount your damages valuation. However, if you are partially at fault, you should decrease your valuation by the % of your responsibility for the accident. For example, if you 25% to blame for the accident, you would reduce your valuation by 25%, the amount of your contributory negligence (the amount you ‘contributed’ to the accident).
- Multiple Defendants. If there are 2 or more people who are responsible, there may be an argument as to how much each Defendant is responsible for the accident. We often suggest not apportioning fault, but instead advancing one proposal and letting the defendants sort out how much each one should pay.
- The Plaintiff’s profile. Your own characteristics will influence the value of the settlement. Someone who is younger will have more earning years, while someone older may have a more secure occupation. One’s medical history will also affect the value of a settlement. A healthier person will generally be expected to work longer and live longer. The goal of the injury claim is to put the Plaintiff back to the place where he or she was directly before the accident. To accurately assess a claim, the Defendant will need to know details about the victim’s life before the accident so they can know just how much they will have to offer to settle the claim.
- The jurisdiction. Judges in Canada award smaller sums for injury victims than judges in the United States. It also happens that Atlantic Canadian judges seem to award lower sums to victims than judges in Central and Western Canada. When assessing claims, it is important to know how much the court in your jurisdiction generally pays for comparable injuries and losses. Failing to appreciate the trends in your jurisdiction may lead you to misvalue the claim.
- Efforts to Mitigate Damages. All plaintiffs have a duty to ‘mitigate their losses’. This means that a victim has to attempt to reduce the extent of their losses as much as reasonably possible. In an injury context, for example, the plaintiff would be expected to seek out medical care, follow a healthcare provider’s treatment plan, and attempt to return to work when able. Failure to mitigate will lead to a reduction in the damages that would be awarded by the court. The argument will be made that the victim could have returned to work earlier had they listened to their doctor, or recovered more quickly had they fully participated in a treatment plan. If the case proceeds to court a judge would assess the efforts made by the plaintiff and reduce the award to reflect the extent of the failure to mitigate.
Step Four: Make Your Settlement Offer
Now that you have made any adjustments to your assessment of damages, you are now ready to draft a settlement proposal to be sent to the defendant. In most cases, you will be dealing with the insurance company for the course of the claim. The proposal should be directed to the adjuster or lawyer handling the claim for the insurance company, as opposed to their customer (the at-fault party).
The settlement proposal is usually the action that will kick off negotiations towards settlement. The proposal will be the framework from which you negotiate. A well-crafted settlement proposal should lay out key issues relating to liability and damages so the insurance company can appreciate your offer to settle.
Settlement discussions with the insurance company don’t happen overnight. Be prepared to engage in a multi-week or month negotiation. If, however, if negotiations don’t go as planned you must be prepared to move forward with litigation.