Car Accident Settlement Value

Colossus

Most of the top insurance companies use a software system called Colossus (or something like it) to determine car accident settlement value.  Insurance companies believed to use Colossus include Aetna, Allstate, CNA, Erie, Farmers, Metropolitan, Ohio Casualty, The Hartford, MetLife, Travelers, USAA and Zurich. And many of the other insurance companies use some other form of injury valuation software. You won't be able to use the Colossus system, but you have to know that it exists and how it works in order to discuss settlement with the insurance claims adjuster. Click here to learn much more about Colossus.

Multiple of Specials

To determine accident settlement vlaue, you add these elements of damage together . . .

1. Medical bills.

2. Lost income.

3. Pain and suffering damages.

The insurance company may challenge the amount of medical bills and lost income that you claim. They may claim that some of your medical bills were for unnecessary treatment or that the charges are unreasonably high, or they may contend that your claim for lost income is excessive or not supported by the medical records. Usually, these defense claims are weak. If you got the treatment recommended by your health care providers and missed only the work that your doctors said you needed to miss, you should be able to recover all of your medical bills and lost income. The much more difficult question to answer is . . . how much are you entitled to recover for your pain and suffering?

One common method of estimating the unknown -- pain and suffering damages -- is to multiply the known -- the out-of-pocket expenses for medical bills and lost income -- times an arbitrary multiple. The out-of-pocket expenses are called "special damages" or "specials." In a case that does not involve serious or permanent injuries, and where fault is reasonably clear, accident settlement value is determined under this system by multiplying "specials" by somewhere between 1 1/2 and 4, depending on the circumstances of your case.

For example, if you received a neck injury in your car accident, incurred medical bills of $2,500 and missed a week of work, which cost you $1,000, your "specials" are $3,500. Depending on the other facts in the case, the accident settlement value of your claim is somewhere between $5,250 (1 1/2 times specials) and $14,000 (4 times specials).

How do you choose the multiplier?

The multiplier that is used is a judgment that is made after considering all of the evidence in the case. These are some of the factors that affect the multiplier . . .

Whether there are any aggravating circumstances in the accident, such as drunk driving or driving under the influence of drugs. If there are aggravating circumstances, use a higher multiplier.

The seriousness of your injuries. Obviously, more serious injuries demand more compensation than less serious ones. For example, broken bones are considered more serious than soft tissue injuries. (My experience, however, is that soft tissue injuries (sprains and strains) can be quite serious, causing significant long term problems. Don't let insurance adjusters scoff that you "only have soft tissue injuries" if there is nothing "only" about your injuries.)

How long your recovery took. For example, a 6 month recuperation normally entitles you to more than a 2 month recovery.

Whether you recovered completely. If you will have permanent consequences, you are entitled to more. In fact, if you have a permanent injury of any significance, I recommend that you consult with a car accident lawyer about your case.

Finally, before deciding on the most reasonable multiplier to use to calculate your accident settlement value, take a common sense look at the case. If the out-of-pocket monetary expenses are particularly high compared to the injuries, use a lower multiple. An example is someone who is taken to an emergency room from the accident scene and receives a great deal of diagnostic treatment, and incurs large medical bills, only to ultimately have relatively minor injuries. In this case, the multiplier should be lower. On the other hand, if the out-of-pocket expenses are low compared to the injuries, use a higher multiple.

An example is someone who suffers a broken rib. Broken ribs don't require much treatment, so medical expenses are low, but they can cause great pain with every breath. A high multiplier should be used in this case to determine accident settlement value.

Per Diem

Another way to determine accident settlement value is to value your pain and suffering by giving it a " per diem" (per day) value and adding that value to your "special damages." Let's use the same example. You had medical out-of-pocket expenses of $2,500 and lost income of $1,000, or total specials of $3,500. Assume further that you received treatment for a neck injury for 3 months and that, even after you completed your treatment, you continued to have pain and stiffness in your neck for another 2 months. After that, you were fine. Using the per diem method for calculating accident settlement value, you assign an amount to each day (or week or month) that you suffered from your injuries.

While insurance companies will fight you on this, I recommend that you use $3,000 per month as compensation while your injuries were being treated. According to the U.S. Census Bureau, as of 2006, this was the approximate median income for U.S. males. Your reasoning, therefore, is that dealing with pain from your injury while it was acute was at least as difficult as doing the average job in this country. After you complete treatment, but still suffer from symptoms, I recommend that you use $1,000 per month as compensation. As I write this, the federal minimum wage is $5.85 per hour, which extrapolates to approximately $1,000 per month. Your reasoning is that dealing with your symptoms after treatment ended is at least as difficult as the most menial jobs, the ones for which we pay the minimum wage.

In the example that I gave, where there were 3 months of treatment and then 2 more months of symptoms, the total pain and suffering amount under the per diem system that I recommend is $11,000, and, when the out-of-pocket expenses are added, the total accident settlement value is about $14,500.

Another way of using a per diem approach is to use your actual income figures as a measure of damages for the time you were in active treatment, reasoning that dealing with your injury was at least as difficult as the job that you normally do. I prefer this method of determining accident settlement value for several reasons. First, it gives you a reasonable answer to the question "how did you get that figure for pain and suffering?" Second, it is a method of valuation that you can use if your case goes to court.

In court, the multiplier approach and Colossus are not formally recognized. You can't stand in front of a judge or jury and tell them you want 3 times your special damages. At least judges and juries are not supposed to calculate damages that way. Instead, they are supposed to award the amount that they decide is reasonable, fair and adequate for each compenent of damages -- medical bills, lost income and pain and suffering. Therefore, you can use this system to explain to a judge or jury what you claim and why you claim it.

What are the arguments against the per diem method of valuation?

You might be confronted with the argument that recovery is a process so that this system awards too much for later in the recovery period when you are almost recovered. Your response is that it awards too little for the earlier, acute stage of your injury and that, on average, this approach is reasonable. You should also point out that your calculations are based on an 8 hour day although you dealt with your injuries every waking hour, or if your pain woke you from sleep at night, 24/7. Viewed from that perspective, this approach is very conservative.

Your adversary might also argue that your figures are arbitrary. Yes, they are, but at least they are tied to something real -- the duration of your pain. On the other hand, the multiple of specials approach is arbitrary and tied to something -- special damages -- which does not necessarily reflect the seriousness of your injuries or the severity of your pain. Here, also, the per diem system is more "real."

Putting It All Together

My advise is to evaluate your claim both ways -- multiple of specials and per diem -- apply common sense and determine what, under your particular facts, is a reasonable accident settlement value.

How does liability figure into the calculation?

Finally, after you determine the amount you think is a reasonable accident settlement value, you must factor in the strength of your liabilty case. In the most common kind of accident -- a rear-end collision that was obviously caused by the careless driver of the following vehicle -- you should seek your full accident settlement value. On the other hand, if liability is less clear, you have to consider that fact in your evaluation.

If you are in a comparative negligence state, you should reduce your evaluation by the percentage that you think you contributed to causing the accident. Let's return to the example above. If you decided that a multiple of 3 is the most reasonable to use, you would evaluate your claim at about $10,500. However, if you think that you were 25% responsible for causing the accident, you should reduce your accident settlement value goal by that percentage, to about $7,875. Once you've completed your evaluation, you're ready to begin settlement negotiations.

Do these settlement value systems apply in no-fault states?

As you have probably already figured out, these methods of determining accident settlement value do not apply to no-fault systems which do not compensate for pain and suffering.

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