Negotiating is part of the entire personal injury claim process. It starts when you report your injury and file a claim, and ends in the final settlement agreement between you and the insurance company’s claims adjuster.
There are no mandatory rules or checklists for negotiating, but there are some general guidelines that will help you make the most out of an unfamiliar process. Empower yourself by becoming familiar with the basic negotiation steps outlined here.
Overview of Negotiations
The negotiation process is deliberate, moving slowly but surely towards a mutually agreeable solution. It requires preparation, patience and persistence. In fact, having some time pass between offers and counteroffers can be an advantage. Take it as an opportunity to reflect on your progress and plan your next step.
Aside from mindlessly signing a form that says “RELEASE” at the top of it, or blindly cashing the insurance company’s check, there aren’t many life-altering mistakes you can make during negotiations. If you do mess up, it can most likely be remedied with little harm to your claim, just be prepared for some pushback from the adjuster.
If you simply say, “I misspoke,” it should be enough to put settlement negotiations back on the right course. Don’t waste time worrying about something you said or didn’t say.
Patience is a truly a virtue in settlement negotiations. Although you may need the money now, never give the impression of wanting to hurry through the process.
The claims adjuster is trained to sense your anxiety. When he does, he’ll change his focus away from the settlement, and on to your weakness. The adjuster will then base his counteroffers on your anxiety, rather than the facts of the claim. Staying calm and businesslike keeps the focus of the negotiation where it belongs – on the facts.
Does the adjuster have to treat you fairly?
In short, no. The claims adjuster is not bound by law to treat you fairly. While there are some honest adjusters out there, who will do everything possible to treat you well, there are just as many who will take advantage of your inexperience and naiveté. While you should always be wary of bad faith practices, offering less than you deserve is allowed by law.
The Basic Negotiation Steps
1. The Notification Letter
Your personal injury claim begins when you send a notification letter to the at-fault party’s insurance company. The letter makes it clear you suffered injuries and other damages due to the negligent acts of their insured, and you will be seeking compensation for those damages. This letter effectively begins the negotiation process.
2. The Reservation of Rights Letter
You’ll receive a form letter from the insurance company in response to your notification. The Reservation of Rights letter basically says they’re reviewing your claim, and agree to discuss it with you, but by doing so they are not admitting to any liability on behalf of their insured.
3. The Demand Letter
After completing medical treatment and therapy, the next step is sending your demand letter to the adjuster. The letter lays out the basic facts of your claim, along with all your damages, including medical bills, out-of-pocket expenses, and lost wages. These are known as your “special damages” or “specials.”
For most minor injury claims, you can multiply the total medical bills by a number between two and five. This reflects your pain and suffering, otherwise known as “general damages.” The combined amount of your special and general damages will be your total settlement demand.
4. The Adjuster’s Response
The adjuster will eventually respond to your demand. This is when the real negotiations begin. Depending on his personality and style, the adjuster will in some way communicate that your claim has little or no value. He may throw out statistics and terms to try and convince you that he has superior knowledge and expertise.
In short, the adjuster won’t agree with your demand amount.
He may act like his counteroffer is a kindness, or try to justify it by saying your demand exceeds his “authority.” He may say your specials are too high for the type of injuries you sustained. He may even go so far as to say that if you don’t accept the offer right away, he’s not sure if he can make it again.
The adjuster is testing you to see if:
- You really understand how the settlement process works
- You’re impatient enough to jump at a ridiculously low offer
- You believe him when he says his authority is limited
- You’re intimidated enough to give in to his rebuttals
- You’re serious, and just how far you’ll go – including filing a lawsuit
5. Your Response to the Adjuster’s Counteroffer
The most effective way to stop the adjuster in his tracks, and let him know you’re not intimidated, is to calmly and politely thank him for his counteroffer. Then tell him you don’t agree with the amount. Say that your injuries were real, and your treatment was ordered by your doctor and absolutely necessary.
You can tell him you might consider reducing your demand based on his points, but not by much. Thank him again and tell him you’ll get back to him after reviewing the offer.
6. The Bartering Process
Negotiations resume when you reduce your demand amount slightly. Don’t get frustrated if the adjuster doesn’t respond right away. He’s waiting for you to get impatient and call him, which is a mistake. Calling before you have a firm counteroffer can put you in a position where you’re negotiating against yourself.
The process will continue with offers and counteroffers between you and the adjuster. You’ll continue to defend your position and the adjuster will do the same. Eventually you’ll both come to a figure you can live with and hopefully will settle the claim.
Your “Drop Dead” Figure
Your Drop Dead figure is the lowest amount you’ll accept to settle your claim. If you can’t settle the claim for at least that amount, you must be prepared to file a lawsuit. Never tell the adjuster this amount. Hopefully, you’ll do a good job negotiating and settle for an amount well above your drop dead figure.
7. The Final Negotiating Step
Although it’s in the best interest of both sides to settle the claim, keep in mind the possibility of a stalemate. If that occurs, you must be prepared for litigation.
If your claim is minor ($5,000 or less in most U.S. states), you can file a lawsuit yourself in small claims court. Check your local small claims jurisdictional limits to confirm the monetary cap. If your demand for compensation exceeds the limit, you’ll need to retain an attorney and file suit in a higher court.
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