Different studies show that most car accident claims settle through insurance claims and that’s why keep going back to insurance companies. Unfortunately, insurance companies are in the business of making profits and not helping people, as they claim–meaning you should know the value of your claim before beginning the process. Car accident lawyers and insurance adjusters do not just use guesswork to estimate the value of a car accident claim.
In Alaska, you’re likely to be shortchanged if you pursue an insurance claim without legal representation. Why? Because insurance companies are notorious for avoiding or reducing the value of their client’s claims. For that reason, it would be in your best interest to consult a lawyer for a car accident in Alaska before filing an insurance claim.
Special and General Damages
Knowing the type of damages awarded to car accident victims is the first step towards understanding the multiplier method of calculating compensation for car accident claims. Compensation for a loss resulting from a car accident can be grouped into two– financial or non-financial damages.
1. Financial (Special) Damages
Special damages refer to financial compensation for losses incurred by the plaintiff after a car, including:
- Past, present, and future medical costs related to the accident;
- Cost of repairing damaged property; and
- Lost wages and lost earning capacity.
2. Non-financial (General) Damages
General damages compensate the plaintiff for non-monetary losses and they’re typically subjective and hence, hard to quantify and attach a financial value. Non-financial compensation can include:
- Damages for pain and suffering;
- Damages for emotional distress;
- Damages for loss of enjoyment.
The Multiplier Method of Calculating Damages
According to the United Nations, road accidents are responsible for 1.3 million annual fatalities and over 50 million injuries globally. With such statistics, you would expect a universal formula for calculating the value of car accidents claims to be in existence, but that’s not the case. Why?
Insurance companies do not use a universal formula because the facts of each claim are unique. In other words, no two accident claims are alike or similar. Instead, insurance companies use the multiplier method to calculate the value of car accident claims and initiate settlement negotiations.
Application of the Multiplier Method Formula
In this method, the value of a car accident claim is calculated in the following three steps:
#STEP 1: Add the medical bills of the claimant;
#STEP 2: Multiply the results of step 1 by a factor (multipliers) between 1 and 5 to get the general damages;
#STEP 3: Add the financial damages to deduce the value of a car accident claim.
Illustration of the Application of the Multiplier Method
Suppose you’re on your way to the office and you’re involved in a rear-end accident. Your hands and legs are injured and you undergo a reconstruction surgery costing $10,000. Since your injuries are not so severe, the other driver’s insurance uses a multiplier of 2.5 to calculate the non-financial (general) damages. This means that the general damages will amount to $25,000 ($10,000*2.5). You missed work for 4 days as you recovered and thus, your lost wages amount to $2,000.
Your total estimated damages would then be: $10,000 (medical expenses) + $10,000 (estimated non-financial damages) + $2,500 (lost wages), amounting to $22,500. The adjuster’s initial offer will likely be way below the calculated amount. Insurance companies use the multiplier method to find out how much you’re likely to recover if the case goes to trial–and not to calculate the amount that you’ll be offered.
Factors Affecting the Multiplier
The multiplier ranges between 1 and 5 as aforementioned and settling on the right multiplier can cause a disagreement between the claimant and the insurance company or adjuster. You’ll probably be aiming at a multiplier of 4 0r 5 while the other party will be pushing for a 1 or 2. So, what’s the solution? This challenge can be solved by considering the factors that can affect the multiplier, including:
- The severity of injuries;
- The total cost of medical bills;
- Strength of your evidence;
- Your contribution to the accident;
- The other driver’s rate of responsibility;
- The recovery period and your doctor’s opinion.
Questions to Expect from Insurance Companies/Adjusters
The following are some of the questions you should expect when settling your claim through an insurance company:
- Is the injury related to the accident?
- Did you have a prior injury that was merely aggravated by the accident?
- Did you report the accident immediately?
- Did you seek medical help immediately after the accident?
- Did you go to follow your doctor’s advice?
- Do you have evidence to link the insured to your injuries?
- Have you engaged in activities that could aggravate your injuries?
The multiplier method can be used to calculate the value of a car accident claim. Insurance companies and adjusters use this formula for the wrong reasons but you shouldn’t worry. Involving a personal injury lawyer is the first step toward fair recovery.
