In the section entitled “Claim Value”, the elements upon which an injured person is entitled to seek recovery are discussed. The purpose of this section is to discuss more remote factors affecting the value of a claim because of the potential involvement of juries in the process.
Injury tort claims are either resolved by settlement through negotiation, or failing that, a lawsuit filed by the injured person against a third party who caused the injury. Sometimes the claim is resolved by alternative processes, such as if the source of the recovery is underinsured motorist coverage. However, even these recoveries are based on the wrongful act of a third party.
If a lawsuit is filed in court that fails to be resolved by settlement, a jury of 6-12 people will decide if there is a recovery and how much money will be awarded in compensation. Most of the time the compensation is paid by an insurance company that insures against the wrongful conduct of the third party who has caused the injury. Prior to the filing of the lawsuit, any attempts to resolve the claim are through negotiation with the insurance company that insured the third party.
Insurance companies make purely economic decisions in deciding whether to settle and for what amount. If an insurance company could pay nothing on a claim it would. The reason that insurance companies settle claims is to avoid having the injured person file a lawsuit that costs the insurance company money to defend and in damages to the injured person following the verdict. If there were no threats of lawsuits, there would be no settlements.
That is not to suggest that insurance companies settle lawsuits simply to avoid getting sued. Rather, it is to say that insurance companies will settle to avoid having to pay more money than the injured person would be likely to recover by filing a lawsuit and going to trial, where the amount to be paid is determined by a jury. Therefore, insurance companies are at most only willing to pay in settlement what they think that a jury is likely to award if a lawsuit is filed and the case is resolved by trial.
Insurance companies are in trial every day defending lawsuits that did not settle. That much experience with cases in trial gives insurance companies a sense of what a jury might award on a given claim. If you are represented by a competent, experienced injury attorney, your attorney will similarly have a better sense of what a jury might award as compensation for your injury. However predicting what a jury might award in any given case is nevertheless speculative and imprecise.
Furthermore, insurance carriers tend to view potential jury awards very conservatively because they can afford to do so. Because insurance companies are in court so often, bad jury results for their cases average out against good results for the insurance company. That is not true for the injured person. The injured person only has one case. If the result in that case is bad, the result does not average out against any good results for the injured person. Therefore, the bargaining power of the insurance company is greater in a given case than it is for the person who is injured.
The thing to understand is that the only thing that causes insurance companies to settle is what they forcast the probable jury verdict will be if the claim is filed as a lawsuit that is resolved by a jury verdict. Probably something like less than 1% of all claims are decided by a jury. However, the jury verdict that the parties forecast for a given case is what makes all a claim settle even though no lawsuit is ever filed. Therefore what juries think as manifested in the verdicts that are rendered in many similar cases becomes a huge factor in how claims are valued although no lawsuit is ever filed.
So let’s start out by considering what a prospective jury would look like. If you are an injured person, think of your friends, family and neighbors, except imagine that they don’t even know you. They will be the jury that will decide your case. How do you think that they might view your injury claim? How do you think that they might feel about awarding money to compensate you for your injury? What factors might influence them if they don’t even know you?
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