Settle Your Personal Injury Claim Before A Lawsuit Is Filed

Settling your personal injury claim out of court means a swift and inexpensive resolution.

By: Donald B. Cripe, Professional Arbitrator & Mediator; Retired Trial Attorney; AAA, AHLA, CDPIE, CAOC, SCMA, ACR

As a retired lawyer who handled many personal injury cases (both as a defense lawyer and for plaintiffs), an Arbitrator and Mediator who has handled many, many more, some things become ever more obvious as the years pass. Resolving most personal injury cases before a lawsuit is filed (or at least before the defense files an answer) accomplishes most of the objectives of the parties more quickly and efficiently than after.

Costs and Delays

Even without hiring a lawyer, the cost of suing in the Superior Court can be an expensive proposition. There are court levels where one may sue. However, most matters are filed in the unlimited jurisdiction of the superior courts. The filing fee for such a case is approximately $450 per party (plaintiffs are typically seen as one party). After the case is filed the plaintiff must then locate the defendant(s) to have them personally served with the lawsuit. A plaintiff can expect to pay approximately $100 per defendant to have them served if they are easily located. If the plaintiff cannot locate and serve the defendant, the case cannot go forward. For most personal injury cases in California the statute of limitations is two years from the date of the incident. Some types of personal injury matters still retain the one year statute. If a lawsuit is not filed within the appropriate period of time the plaintiff can never recover damages for his injuries.

Some say, “well then, I’ll just hire a lawyer.” One should always be prepared to engage the assistance of an attorney once it becomes necessary. An unfortunate fact in personal injury law these days is that personal injury lawyers are more selective than ever about the cases they will accept. A claimant in a personal injury matter should know that unless his provable, reasonable and necessary (a term of art employed by insurance companies) medical expenses exceed $10,000 it may be difficult to find an attorney. Nevertheless, while persons with relatively modest damages should seek compensation for their injuries, the problem is economics. Unless the law firm hired handles such small cases as “cookie-cutter” cases, a small case will cost the law firm as much to prosecute as one that is many times larger. Since the attorney is paid a percentage of the client’s financial recovery, plus advanced costs, his fee from a $10,000 lawsuit would range from $3000-$4000, depending upon the fee arrangement. Add an additional $600 (Only at the outset. This will rise dramatically as the case proceeds.) for cost reimbursement to the attorney and subtract that total from the $10,000 recovery will leave the client, at best, $5400-$6400 before the doctors or health insurance company received the reimbursement for their bills.

There are very complicated special rules regarding the recovery of medical expense. Basically, a claimant can recover all of the expenses paid for medical care directly related to the injury. One thing that claimants frequently do not understand is that just because a healthcare provider bills a certain amount does not mean that is what insurance or Medicare, for example, would pay for that treatment. If a doctor charges a patient $1000 for treatment and bills the patient’s insurance company for which the insurance company reimburses the physician only $200, the claimant can only recover $200 for that treatment. So the claimant may enter negotiations to settle a claim with an insurance adjuster (sometimes referred to as a claims representative) thinking there is $10,000 in medical expenses only to discover that after the adjustment (frequently referred to as “Howell” adjustments) she has recoverable damages of only about $2000. This directly affects financial recovery the claimant can expect. No matter how intelligent or clever the claimant may believe he is, negotiating the resolution of a personal injury claim with a trained and experienced insurance adjuster can be very frustrating and daunting.

The fact is that stingy as insurance companies may seem while you are trying to negotiate your claim, the adjusters really want to settle cases and move on. Sometimes the insurance company may dispute fault in which case litigation may be necessary. But in the vast majority of personal injury (traffic accident or other forms) cases, the insurance company wishes to settle. One of my mentors when I first became interested in being a mediator was a judge who had worked for an insurance company before he became a lawyer. He always reminded the plaintiffs in his courtroom that [paraphrase] it is not the job of insurance companies to pay claims, but to collect premiums. This interesting philosophy is not altogether accurate.

Even though the insurance adjuster with whom the claimant negotiates may want to settle, that adjuster is well trained with significant experience negotiating with unrepresented parties. Notwithstanding their desire to settle cases, those professionals will exercise all of their charm and wiles to settle the at the lowest possible number. Since the claimant has no way to know how the adjuster concluded how the offer made during these informal negotiations was determined it is very difficult for the lay claimant to argue.

Demanding more money just because the claimant believes her case is worth more than the adjuster is seldom successful. At this point the claimant often turns to the plaintiff’s bar for representation at which time the expenses mount. Not only is the client “out” the money he will pay for the contingency fee, most contingency clients do not realize that most firms hold the client responsible for all costs advanced on behalf of the client whether the case is won or lost. Another factor that personal injury clients frequently do not understand is the necessity to employ medical and sometimes other experts to testify on her behalf.

Most often the fees charged by these experts in even the least serious injury case exceed the fees charged by the attorneys. Most of the time (even though there is a mechanism that may help with this) the fees of expert witnesses are not recoverable from the opposing side. In some cases, if the claimant (now referred to as a plaintiff) does not prevail at trial (which also has differing and technical meetings), the plaintiff may have to pay for the expert witnesses hired by the defendant.   It is very difficult for a plaintiff’s lawyer to explain to a client who might have bona fide injuries that even though the jury found in his favor, he still must reimburse the other side for its costs.

This analysis can be technical so I will not go into greater detail for this article. Suffice to say that the cost of litigating a case (going to court) is something that must be carefully considered by a claimant in a personal injury matter. Additionally, the claimant must remember that once a case is filed, the fact of insurance is irrelevant and cannot be mentioned at trial. So at trial it is only the plaintiff against the individual defendant.

“So,” you may ask, “how can I maximize my recovery and minimize my costs?”

The simple answer is prelitigation mediation or engaging in mediated settlement negotiations before the claimant hires an attorney or sues.

The claimant will usually have made several telephone calls to the insurance adjuster and will probably have given a statement and authority for the insurance adjuster to obtain medical bills related to the injuries. (remember that since the claimant is alleging injuries due to this claim, the insurance company can gather records from all of his healthcare providers for many years past. The deeper the claimant gets into litigation the more his privacy is invaded.) The adjuster and the claimant will each calculate the recoverable medical expenses and other recoverable damages (i.e., the loss of personal property, lost income, etc.) and they will each conclude how much the case is worth for settlement. Most often there is a significant gap in opinion. That gap must be closed. All too often, doing so requires the claimant to make far greater compromises than will the insurance adjuster. Usually this self-negotiated settlement brings a recovery to the claimant that may be substantially less than the case is really worth. Yet, if the claimant is forced to hire an attorney the expenses she will incur most often results in less money in her pocket after settlement.

We recommend that when a claimant negotiating directly with an adjuster comes to an impasse the claimant should ask the adjuster if he will mediate the matter. Seldom do claims adjusters refuse. The cost of mediating a case is so much less than litigating that the insurance company will frequently agree to pay the mediator’s fee. In the vast majority of cases mediated before litigation the claimant’s recovery will increase while the costs are minimal. In my 16 years of mediation experience I have found that the actual money that ends up in a claimant/plaintiff’s pocket after litigation is most often less than if she had settled for a lesser amount early on through mediation. The process of mediation is private and efficient. The parties can resolve the case within a few weeks rather than the years it will take in the court system. The claimant/plaintiff can move on with her life and focus upon the future rather than upon the past–which is another difference between mediation and litigation. Litigation almost always focuses upon what was while mediation focuses upon what can be while also giving recognition to what is past. Statistically and in real terms when parties mediate a case to settlement they are overwhelmingly more satisfied and happier than those who pursue their case in the court system.

Some cases must be litigated and taken to trial. However, since over 95% of all cases filed in the United States settled before trial it seems prudent for the claimant to do everything he or she can do early to avoid litigation. Even if it costs the claimant a few hundred dollars to mediate, the chances of resolution are substantial. Except for the cost, the parties have nothing to lose. The mediation process is confidential. Nothing said or that transpires during the mediation process is admissible in court; none of the offers or demands can be revealed nor can any of the negotiations. The mediator cannot be called as a witness nor can his or her files or notes be subpoenaed for trial. Therefore, mediating a case can be a win/win situation from the outset. If the parties have nothing to lose while having an excellent opportunity to resolve a case completely with the best possible results, the party will have every reason to request mediation before hiring an attorney or suing. Additionally, over 70% of mediated cases that do not settle on the day of mediation do so before trial.

If you, a friend or family member has suffered a personal injury in an auto or other type of accident, we hope that you will discuss prelitigation mediation with the insurance adjuster. We are certain that a formally trained mediator who is well experienced in this area of law will effectively help you settle your case quickly and for significantly more than the injured party can do on his or her own.

Nothing in this article should be taken to be a criticism of lawyers. Lawyers are important to our society and have carved out of a rather plaintiff-hostile early common law system many of the rights and protections consumers currently enjoy. Without those lawyers, we suggest that formal mediation would not even be an alternative way to resolve even those cases that made it into the courthouse.

Donald Cripe is a Dispute Resolution Professional and co-founder of California Arbitration and Mediation Services. His biography and other details can be found on the C.A.M.S. website, staging.violet-park.flywheelsites.com and Don can be reached directly at doncripe@camsmediation.com.