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What is the “Damages and Compensation Formula”?

Personal injury cases often involve many of the same types of damages over and over. Usually, these damages will include an amount for medical bills, pain and suffering, and property damage. Lost wages and certain general damages such as emotional distress may also be available.

Although this may be the first time you are involved in a personal injury case, the insurance adjuster that deals with your claim is likely extremely experienced and situations like yours. In fact, the insurance company probably uses a formula to determine how much your case may be worth. This method is often referred to as the “Damages and Compensation Formula.”

Why This Formula Is Important

Insurance companies use this method to value what your case is worth. The formula helps set potential recovery in terms of both settlement and what a verdict may be like at trial. The formula is really a “guesstimation” process. Both you and the insurance company should engage in this type of analysis to determine what your damages may look like in front of a jury or judge.

Predicting what your actual damages may be after an accident is tricky because many are difficult to quantify in monetary terms. For example, you may have a good idea of what your current medical expenses are, but future medical expenses may not be as apparent. Items like pain and suffering and loss of enjoyment of life are problematic to quantify. The formula provides a way for insurance adjusters and victims to predict what the damages may really be.

The Elements of the Damages and Compensation Formula

When you begin negotiating with the insurance adjuster, he or she will add up your total medical expenses related to the injury thus far. These damages are often referred to as “special damages” or the “medical special damages.” Because medical expenses are often directly related to how serious your injury may be, this number is an important one to the adjuster.

Then, the claims adjuster will multiply your medical expenses by a certain number. Usually, this number is 1.5 to 5. The more severe the injury, the higher the multiplier will be. The multiplier may also be higher if the injuries are expected to last a long time or were particularly painful.

Finally, the insurance company will then add any other quantifiable damages you may have to the number, such as lost income or property damage. The final number is used for negotiation purposes, often before a claim for personal injuries is even filed.

Factors that Influence the Formula

Generally speaking, certain types of injuries will involve a higher multiplier than others. The following factors will often result in a higher formula:

  • Painful injuries
  • Long-lasting medical treatment
  • Invasive medical care (i.e., surgeries)
  • Obvious medical evidence (evidence that can easily be explained to a jury or judge)
  • Long recovery period
  • Severe and visible permanent effects of the injury

The insurance company will generally not disclose what they think the case is worth or their “multiplier number.” Instead, it is up to you to take an educated guess on how they have valued your case based on the same factors.

Our team can help you decide what this multiplier may be depending on the unique circumstances of your case. Call 816-656-2596 to schedule a free consultation to discuss your case.


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