Will Insurance Companies Give Me A Fair Settlement Offer The First Time Around?
Insurance companies may occasionally make fair offers the first time around, but I am always skeptical. It’s important to understand that the “first offers” from insurance companies usually come after a demand for a certain amount has been made by your attorney. Therefore, in most cases, what the insurance company poses as an initial offer is actually a counteroffer to the initial demand.
Often, this first offer (or, more accurately, counteroffer) is just an opportunity for the insurance company to see what you really think that the case is worth. If you make a big demand and they return a lowball offer, they will watch how you respond to the lowball offer. If you start entertaining or considering the lowball offer, they’re going to use that to gauge your range in terms of how much money you might accept.
For this reason, it is important for personal injury attorneys to be careful about the beginning parts of the settlement negotiation, and that they know not to show your hand too soon. If you make too big of a move down, the insurance company is going to know you’ll probably accept substantially less.
For example, let’s say your initial demand is $250,000. If the defense’s first initial counteroffer is $10,000, and you return with your own counteroffer of $80,000, they will notice how substantially you dropped between your initial demand and your first counteroffer. Based on this information, they will know that you will accept substantially less than you initially demand.
I should also note that in my experience, insurance companies rarely factor in or consider the cost of defending the case when making an initial settlement offer. In other words, they aren’t approaching the initial offer as a serious calculation of what they can offer to stop the case from going to court. They aren’t thinking in terms of how much it will cost them to litigate the case. If the case might cost them, say, $30,000 to defend, they aren’t thinking about that sum when they make their initial offer.
I think part of the reason behind this is that they are using the initial offer and these first negotiation stages to see if you are actually serious about your demands. There are a lot of personal injury attorneys out there who are essentially bluffing. During these first stages, they will work a case up, trying to get their demands as high as possible. Eventually, though, they will settle for whatever amount the insurance company is willing to offer.
Insurance companies know this. In fact, they track every personal injury attorney and they know what kind of initial demands they make, as well as the type of demands they make when they’re negotiating, and the type of settlements they ultimately accept. They use that information to evaluate what an offer might actually mean at any given stage in the process. They also look at other factors, such as the attorney’s experience level, both generally and in terms of how many trials they’ve taken to verdict.
These evaluations give them a general idea of whether or not an attorney is serious or truthful when they say that an offer is not going to be enough for their client. If an attorney is a settlement machine that says one thing and does something completely different, they will also take that into consideration.
Sometimes, insurance companies do give a fair offer the first time around. However, more likely than not, they’re not going to give you a fair offer at that point. In fact, oftentimes when they do give a fair offer, my “Spidey sense” kind of tingles a little bit, because I almost think that maybe they’re missing something. At the end of the day, they’re a business. They’re not going to try to lose money on a deal. So if they make an initial offer that seems actually commensurate with what my client is owed, I start to wonder why. These are some of the things I look at when I’m evaluating a first offer and whether it’s fair or not.
When An Insurance Company Comes Back With A Lowball Offer, Or Denies A Claim Altogether, What Are The Next Steps?
When we get a lowball offer, the first thing we try to find out is why. I have a conversation with the insurance adjuster, and usually they make clear one or several reasons why the lowball offer was made.
At first, some of the typical reasons they give me include things like the client having a preexisting condition or a gap in treatment, or like the accident not causing a lot of visible property damage. These are the typical run-of-the-mill defenses that we see in every single case, so at that point I usually dig deeper to find out the real reason why the lowball offer was made, and specifically how they arrived at the sum they offered. Understanding the logic used to arrive at the initial offer is a very important part of this whole process. Sometimes their reasons may be legitimate, which is also thing I take another look at.
To this end, I sometimes utilize a focus group. This is where we bring in random people from the community and present the case to them in a way that is as neutral and unbiased as possible. Then we try to get their take on it as if they’re sitting as jurors. The feedback we get from these focus groups sometimes confirms our initial ideas about a case, but sometimes the group offers a challenge. Sometimes the participants believe we’re spot-on in our evaluation of the worth of the claim, but sometimes they believe we are over-evaluating or under-evaluating a claim. The way the case looks to the average person who might serve on a jury is obviously important, so we take this information seriously.
We also really work on teaching the other side this idea, the concept of the fair exchange of value. That’s really what we’re talking about as far as the value of a claim. How do you value something that can’t ever be replaced? Those are things that we really try to educate the participants in these focus groups about, and we use what we learn to educate the jurors about it if there is a trial.
To say more about this, we focus on the importance of a person’s quality of life, and on ending the belittling of pain. Pain causes lost value. There’s value in the fact that a healthy person can go to the movies and sit and enjoy it without interruption. If an accident causes pain that no longer allows a person to do that, the value of that experience has been taken from them. The same is true for all experiences hindered, warped, or denied in full to people because of accident-derived pain or immobility.
This is true whether or not a person is fully disabled. For instance, working on the above example, an injured person may be able to go to the movies, but they cannot sit for too long before the pain becomes distracting and doesn’t allow them to fully enjoy or focus on the film they’re watching. As another example, they may still be able to go on vacation, but when their kids want to play with them on the beach, they have to decide between not playing with their children or paying for it the next day in pain caused by their injury. Explaining that concept to the adjuster or the jury really helps them understand where we’re coming from when we describe the value of a case.
For us, this initial negotiation process is about trying to see if we can get to an agreement that reflects this understanding of value and loss. Sometimes we decide that it’s not even worth trying to get through to an insurance company or an insurance adjuster on a given case, and we send it into litigation rather quickly.
Put another way, what I’m really doing during negotiation is trying to sell the case to the insurance company, and they’re trying to buy the case. I want to sell for as high as possible, and they want to buy for as low as possible. But in any transaction, if we can’t have a meeting of the minds, we will go try to sell our case to someone else. If I can’t sell the case and the understanding of the value of what has been lost to the adjuster, I’ll sell it to the jury.
Of course, in some cases, the problem might be that I’m valuating the price of what I’m selling wrong. To this end, before we decide to “sell our wares to a different buyer” in litigation, we really try to make sure that we’re in line with what the true value of the claim actually is. If we feel confident that we’re in line, then we try our case and see what happens. I’ve had cases where insurance companies made very small initial offers, and then we eventually got 10, 15, 20 times that amount a couple of months later in litigation.
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