How Do Adjusters Value Claims?
An adjuster's job is to compensate injured people who make claims against their insured. They are encouraged to pay as little as possible to resolve the claim, while protecting their insured from lawsuits.
We've all heard the phrase "three times specials" as a formula for settlement value. That is an outdated idea when it comes to determining value! "Specials" or special damages, are out-of-pocket costs that can be proven with bills or receipts, such as medical expenses, prescriptions, lost wages, and the cost of repairing or replacing property. Some insurance companies use elaborate computer programs to determine a value, but most times the adjuster determines value on his own. He may consult with other adjusters, or his manager, especially for larger or more challenging claims. But much of the discretion is left to the individual adjuster.
These are the main factors an adjuster considers when looking at your injury claim:
One fundamental question is - who is at fault for the accident? Fault (also called "liability") is not always clear. An example of clear liability is a driver stopped at a red light, who is rear-ended by another car. The striking car is clearly at fault. However if a driver backs out of a parking space and collides with a passing car, there will almost always be some division of fault between the two drivers. This is called "comparative fault" or "comparative liability." In most states, if the injured party is partially liable, the amount of their injury settlement can be reduced accordingly.
An adjuster is always looking for ways to put some of the fault on you, the injured party. This gives him a basis to reduce his total payout on the claim.
2. Injuries and Causation
An adjuster will look at the mechanics of the accident and assess whether it could have caused the claimed injury. For example: if a person hits their knee on the dashboard it's reasonable for them to have pain and swelling in the knee, and possibly have internal knee injuries.
They also look at any other reason the injured person may have symptoms, such as pre-existing conditions, age-related conditions, participation in sports, a job with repetitive motion (such as construction or data entry) and prior accidents and injuries. Adjusters have access to databases which reveal your prior claim history, and will look at whether you had similar complaints in the past. If you have any prior claims or injuries it is very important to let your attorney know up front, so he is prepared to respond to the adjuster.
Another important issue is an adjuster considers is permanency. Did the injured person receive a disability rating? Does she have a scar? Can she continue to work? Will she need future care, or be more susceptible to injury in the future because of the injuries sustained in the accident?
The adjuster is looking to see if the claim is "built up"- in other words whether the claimant received excessive treatment to inflate the value of the claim. He will evaluate whether the providers billed reasonable amounts. Did the patient show improvement or did she treat for months and months with no change in her condition? Were the services similar or duplicative? (For example, receiving massage services at a chiropractor and also with a massage therapist at the same time). If any diagnostic tests were performed, were they needed, and done with a proper referral? If the person lost time from work, did she have an excuse note from the doctor?
4. Cost to defend
If the case does not settle, your attorney will have to file a lawsuit in order to move forward with resolving the claim. At this point the insurance company's attorneys will also get involved. The value of most litigated cases can be approximated by what juries have awarded for similar injuries in the past. Depending on how difficult it would be to fight the case, number of witnesses and experts, etc, the cost to defend may be higher than the value of the claim. This might motivate the adjuster to settle the case.
5. The injured party
Adjusters are human, and your interactions with them may have influence how your claim is resolved. Accidents are stressful, and adjusters deal with tremendous amounts of stress and anger from claimants every day. A person who is patient and cooperative will likely get more consideration from an adjuster when it comes time to settle. An adjuster also evaluates the claimant to assess their credibility and demeanor, and how well they would perform as a witness at trial. A person who does not handle themselves well with the adjuster is likely not going to make a good witness. This is another reason to hire an attorney to represent you - as a buffer between you and the adjuster.
Finally, the adjuster will take all of these factors into account and determine a settlement value for the claim. There is no formula or specific method, and every adjuster is different. But the adjuster should be able to explain the basis for his settlement offer and have facts to back it up.
Again this is when it is best to have a professional negotiator working for you, someone who can rebut the adjuster's arguments and make sure that you are getting the settlement you deserve.
Attorney Jim Sellers has been battling insurance companies his entire career, and he will fight for you, too!