Introduction to the Negotiation Process for Personal Injury Settlements

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The following basic overview of the negotiation process should help you decide if you're up to the challenge of negotiating your own personal injury settlement.

In our example, we imagine you're the victim of a car accident. You were injured, and your car and its contents were damaged. You file a claim against the at-fault driver and his insurance company. You're now ready to plan and implement your strategy for negotiating a settlement.

Evaluate Your Claim

Before starting negotiations, you must figure out what your claim is worth. There are several ways to calculate the overall value. The main formulas used by insurance companies and attorneys are:

  • Multiply your medical bills (also called specials) by a number between 1.5 and 5x

  • Study jury verdict amounts in your area for similar cases (go to

  • Multiply the number of months spent in treatment for injuries by $2,000.00

  • A combination of any of the above

Make Your Initial Demand

Once you know what your claim is worth, the next step is to make a demand to the insurance company. Your demand is based mostly on the documentation of your medical treatment and bills, out-of-pocket expenses, and proof of lost wages.

You'll gather all your documentation and prepare what's referred to in the insurance business as your Settlement Demand Packet. Sending your packet to the claims adjuster officially begins the negotiation process.

Your Settlement Demand Packet should include copies of:

  1. A demand letter summarizing the facts of the case. It also lists your damages, which include your medical bills, out-of-pocket expenses, lost wages, and an amount for the pain and suffering you've endured.

  2. The police report or incident report.

  3. Your medical, chiropractic, and therapy bills.

  4. Your medical records.

  5. Verification of your lost wages.

  6. Photographs, witness statements, and contact information for everyone involved.

  7. Your observations, drawings, or anything else that helps prove your case.

Expect Contact from the Claims Adjuster

The claims adjuster's job is to settle your claim for as little as possible, as quickly as possible. She'll be looking for any gaps and unsupported statements that show weakness in your case. The more she can find, the smaller her settlement offer will be.

Claims adjusters are just people doing their jobs, and each one has a different personality and style. Some adjusters try to be intimidating. Others are condescending. Some don't appear very interested in doing their jobs. You may even find your adjuster is pleasant and easy to work with.

Remember, this is a business matter. Your goal is to settle your claim, not become friends with the adjuster. Remain calm, cool, and polite regardless of the adjuster's attitude.

Reservation of Rights Letter

Anywhere from a few days to a couple of weeks after you've sent your demand packet, you'll receive a Reservation of Rights letter from the claims adjuster. This is a legal tool insurance companies use to protect themselves. It's standard procedure, so don't be alarmed.

The letter basically says the insurance company has agreed to discuss settling the claim with you. It states their decision to discuss a settlement does not mean they're accepting liability on the part of their insured. In other words, if they decide their insured is not liable at any time before the case is settled, they reserve the right to stop negotiating.

Prepare for the Negotiation Process

The Drop Dead Amount

The drop dead amount is the minimum settlement you will accept. Before negotiations begin, establish your drop dead amount. Never tell the adjuster this amount; hopefully you'll never get to that point. If the adjuster's offers never get above your drop dead amount, your next step will be to file a lawsuit.

The Counteroffer

Not too long after you receive the reservation of rights letter, you'll get the adjuster's counteroffer to your original demand. In support of her counteroffer, the adjuster will tell you that after reviewing the claim, she believes the amount you're asking for is too much, and will list the reasons for her decision.

Common reasons a claims adjuster may use to diminish your claim:

  • Her insured is not 100 percent liable for your injuries.

  • Your injuries aren't new, they're just an exacerbation of a previous injury.

  • The length and cost of your medical or chiropractic treatment is unreasonable.

  • The time you took off from work was excessive for the type of injuries you sustained.

  • The amount you're asking for pain and suffering is too high.

In addition to those reasons, the adjuster may discuss her Authority. This is the maximum amount of money a claims adjuster is allowed to settle a claim for. Any higher amount must be authorized by a supervisor.

The adjuster may say the amount you're asking for is beyond her authority, or even that she's already gone to her supervisor and gotten permission to offer you a certain amount.

The adjuster's counteroffer is not the end of negotiations. Don't give up or feel insulted. It's just part of the process. Thank the adjuster and let her know you don't think it's enough to cover your losses. Tell her you'll weigh the offer and get back with her in a few days.

Your Response

Get the adjuster to justify her counteroffer. She'll want to continue the negotiations from the low amount she just offered. It's a common negotiation tactic, so be ready and don't go along with it. Instead, go back to your original demand and negotiate down from there.

Ask the adjuster to give a breakdown of each reason she used to determine the amount of her counteroffer. Write each reason down. If she talks faster than you write, ask her to repeat or slow down. This is serious business and everything is important. Then tell her you need a few days to review the reasons.

Your next step is to prepare a rebuttal and respond to each of the reasons.

Stress the fact that you never asked for this. You didn't ask to be hurt or have your car damaged, or be forced to miss time from work while going back and forth to medical treatment. Tell her your pain and suffering is real, and you aren't going to be taken advantage of.

As part of your response, lower your demand slightly. Remember, you are negotiating from your demand and not the adjuster's counteroffer. Don't lower your demand very much. Lowering it by small increments is the proper way to negotiate. As long as you're willing to compromise, the adjuster has to continue negotiating.

Once you've lowered your demand, don't call the adjuster back right away and lower it again. Wait until she responds. If you drop your demand before the adjuster has a chance to respond, you're negotiating against yourself.

The Final Settlement

Don't settle unless you're fully recovered, or the settlement amount is enough to cover all your future treatment. If you settle and later need additional treatment, you cannot reopen the claim or ask for more money. Once you sign the release form and endorse the check, your case outcome is final.

Important Points to Remember

  1. The claims adjuster wants to settle your claim.

  2. She knows what the case is worth, and if you've done your homework, so do you.

  3. You may go through several counteroffers before you and the adjuster finally reach an amount you're both happy with.

  4. Be firm but open to compromise - that's the key to success.

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