How Is a Car Accident Settlement Determined?

How courts determine an accident settlement

By Kimberly Lekman, Esq. | Last updated on July 18, 2022

Use these links to jump to different sections:

If you or a loved one has been in a car accident, you may be considering filing a claim to recover some of your medical costs and other expenses. Most car accident claims settle out of court, with one of the party’s insurance companies paying the settlement amount.

To determine the value of your auto accident claim, your attorney will usually consider two categories of damages. Your economic damages refer to the actual costs that you will need to pay as a result of the accident. Automobile repair, medical expenses, and lost wages are all economic damages.

You might also request compensation for damages that are more difficult to quantify, such as pain and suffering or mental anguish. This category of damages is called non-economic damages.

In rare cases, your attorney could consider punitive damages. However, punitive damages are reserved for accidents where there was egregious or willful conduct.

Although state laws and local practices vary, the following overview will give you a deeper understanding of how lawyers and insurance companies calculate car crash injury settlements.

Economic, or Special Damages

The first step in estimating a car accident settlement is calculating a car accident victim’s economic damages. Economic damages include:

  • Past medical costs: Your medical bills include any medical care you received for bodily injury that your accident caused. You may have accrued bills for emergency medical interventions, surgeries, medications, and hospital stays as a result of your accident. Your attorney will gather evidence of these expenses through your medical bills and records.
  • Future medical expenses: If you suffered serious injuries, you might need physical therapy or ongoing medical treatment. You can seek compensation for these medical care expenses even though you have not incurred them yet.
  • Past lost earnings: When you are recovering from an accident, you may need to miss work. Your attorney will consider how much you make and how long you had to be off work to calculate your lost earnings.
  • Future lost earnings: If you sustained an injury that will prevent you from working or decreases your earning capacity, you could seek payment for these future losses. The dollar value of your future lost earnings will depend on what you earn and your age.
  • Property damage: Your vehicle might have sustained substantial damage due to your car accident. In severe accidents, the automobile might be considered a total loss. To estimate your property damages, your lawyer will calculate the cost of automobile repair or replacement. These costs will depend on the type of car you were driving, its condition, and its age.

Your lawyer will add up all of the above costs to calculate your economic damages. Other details that will factor into your economic damages include the severity of your injuries, age, fitness, and more. For example, suppose a young piano player lost the use of their arm in a car accident. They may be entitled to greater economic damages for the loss of the arm than a retired individual who suffered the same type of injury.

Non-economic, or General Damages

The next step in estimating your settlement is to add your non-economic damages to your economic damages. Non-economic or general damages include emotional trauma or distress resulting from a car accident. These include:

  • Pain and suffering
  • Loss of enjoyment
  • Mental anguish
  • Disfigurement

As with economic damages, the amount of non-economic damages you can recover will depend on the details of your claim. In general, younger people tend to recover higher financial payouts for loss of enjoyment owing to the idea that they will probably suffer for more years than an older person. Another factor will be whether the injury will require ongoing treatment or cause disability.

The Multiplier Method

Non-economic damages are difficult to calculate by their very nature. Because they are so subjective, many lawyers and insurance companies use a multiplier method to calculate non-economic damages. When using the multiplier method, lawyers or insurance adjusters will total up your economic damages and multiply them by a certain number to get your non-economic damages. Lawyers and insurance companies come up with this number based on the outcome of similar car accident injury claims in your area. So, this number will change depending on your location, the type of injury, and other factors. Generally, insurance adjusters and lawyers use a higher multiplier for more severe injuries.

For example, a broken leg that will heal completely may be given a multiplier of one. However, a head injury that will require ongoing treatment may receive a multiplier of five. These multipliers are subject to change and vary by location.

Your state laws will also play a role in determining your settlement amount. In some states (at-fault states), the person who caused the accident is responsible for paying the damages. The at-fault driver will usually pay these damages through their insurance policy. By contrast, you can collect an insurance payment in a no-fault state even if the accident was your fault.

Further, there may be caps on non-economic damages under your state’s laws. So, it would be wise to contact an experienced car accident attorney in your area for a proper case evaluation.

How Will I Reach a Settlement in My Car Accident Claim?

Your insurance company or the at-fault party’s insurance company may reach out to you with a settlement offer soon after the accident. You should consult your lawyer before accepting any such offers. Many insurance companies attempt to give quick, low-ball insurance payouts to injured parties in hopes that they will accept and move on. To determine whether initial settlement offers are reasonable, your lawyer will calculate your economic and non-economic damages as outlined above. To prove your damages and demonstrate fault in your accident, your attorney will begin by gathering evidence such as:

  • Medical records
  • Crash scene pictures
  • Video footage
  • Police reports
  • Eye witness reports

With all of the relevant information in hand, your attorney can calculate a reasonable settlement amount. They can then advise you on the next steps after receiving any settlement offers. Most likely, you will have to negotiate back and forth a few times before you and the insurance company agree on an appropriate settlement. If you can reach a fair settlement, you will agree to drop any further legal action in exchange.

Calls from insurance companies will likely start coming in soon after the accident. So, it’s a good idea to consult a car accident lawyer as quickly as possible. Although most car accident cases resolve with an out-of-court settlement, sometimes settlement negotiations break down. So, your lawyer should be ready to take your case to court if you cannot secure reasonable compensation through a settlement.

Why Contact an Attorney?

After experiencing a car accident, you may be busy caring for injured loved ones or undergoing medical treatment. While you tend to these important matters, an experienced car accident attorney can gather evidence that illustrates the cause of your crash and the extent of your injuries. It’s essential to collect this information promptly because physical evidence disappears and eyewitness memories fade.

Further, there may be a time limit (a statute of limitation) on your ability to file a personal injury claim in your state. Car insurance policies may require prompt notification of a claim too. So, it’s essential to contact an attorney as soon as possible to preserve your legal options. Your attorney and law firm staff can track important deadlines and file paperwork for you while you recover.

Most personal injury attorneys offer a free case evaluation. At this first meeting, you can ask the attorney to estimate the value of your case. Although the attorney cannot give you an exact dollar amount, they can draw on their experience to provide you with an estimate of your claim’s value. You can also use this meeting to inquire about the attorney’s fee structure.

In most cases, personal injury lawyers operate on a contingency fee basis. With a contingency fee structure, your attorney takes a percentage of any verdict or insurance claim settlement you receive instead of charging an hourly rate. Another important consideration during your free consultation is whether you have a good rapport with your potential attorney. It would be best to select someone you like and trust to guide you through the entire claims process.

What do I do next?

Enter your location below to get connected with a qualified attorney today.
Popular attorney searches: DUI/DWI Traffic Violations Trucking Accidents

Find top lawyers with confidence

The Super Lawyers patented selection process is peer influenced and research driven, selecting the top 5% of attorneys to the Super Lawyers lists each year. We know lawyers and make it easy to connect with them.

Find a lawyer near you