Auto Accident Settlement Formulas - The Basics

Here's everything you need to know to arrive at a dollar value for your car accident claim.

Car accident settlement compensation value depends on two things: the strength of your liability claim and the extent of your damages. This article explains these two key facets of a car accident case, to give you an idea of the settlement value of your claim. (When finished reading this article, use our Car Accident Calculator to get a ballpark idea on what your accident is worth)

Strength of Liability Claim

Unless you are in a no-fault state, you cannot recover money damages unless "liability" exists. The legal term for what you have to show is "negligence," which means carelessness. In the context of driving, examples of negligence are:

  • not seeing another vehicle that should have been seen
  • following too closely
  • driving too fast for the circumstances (weather, visibility)
  • making an unsafe turn
  • disobeying traffic signals or signs, and
  • talking on the phone/texting while driving

In the most common type of accident, a rear-ender, the tailing driver is usually deemed negligent because he or she wasn't paying sufficient attention and didn't keep a safe distance between vehicles. Hopefully you carried out the proper steps after a car accident.

What if the other driver was negligent, but you were too? If the other driver was negligent, but you were also driving in a careless manner, your claim is completely defeated (in some states) or at least reduced (in most states). To understand how the different rules work, and how your claim might be affected, read about Comparative and Contributory Negligence.

Extent of your Damages

Assuming that liability exists, the only remaining question is, how much are you entitled to recover as compensation for your injuries? There are three commonly used methods of determining accident settlement value in routine car accident cases:

1. Colossus

2. Multiple of specials

3. Per diem


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.

Multiple of Specials

Under this method, to determine accident settlement value, 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. (Learn more about successfully negotiating with insurance adjusters) 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?

A note on 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. To understand how no-fault rules work, see No-Fault Car Insurance and State Laws: The Basics.

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