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## Personal Injury Evaluation Formulas

Formulas are an old-fashioned way to evaluate cases. While many attorneys and claim professionals say they use data analysis and other sophisticated techniques to evaluate, they probably are still using formulas some of the time. Maybe it’s habit; maybe it’s unconscious. Formulas are most likely to be helpful in evaluating soft tissue injuries (sprains, strains, bruises) resulting from collisions or trip and falls. They are generally not used for fractures, dog bites or complex cases.

Formulas assume that a plaintiff’s general damages can be compensated as a multiple of special damages, specifically medical expense. To arrive at the case value, multiply the plaintiff’s past and future medical expenses by the specified multiple and then add in the actual lost earnings (loss of earnings is abbreviated LOE).

A simple case might be evaluated in a formula like this. The plaintiff incurred \$4,000 in medical bills and lost a week of work. In this example we’ll assume there are no liens. If we use a multiplier of 2 to calculate the combined medical expense and general damages, we come up with a case value of \$9,000.

 MULTIPLE OF 2 (specials x 2 + LOE) Medical expense \$4,000 Pain and suffering \$4,000 Lost earnings (one week) \$1,000 \$9,000

Using a multiplier of three results in a case value of \$13,000.

 MULTIPLE OF 3 (specials x 3 +LOE) Medical expense \$4,000 Pain and suffering \$8,000 Lost earnings (one week) \$1,000 \$13,000

If plaintiff has an attorney, the attorney’s fees come out of the bottom line number.

Traditionally, personal injury professionals calculated the medical expense by totaling the bills from medical providers such as doctors and hospitals even if a health insurer paid less and the medical provider wrote off the difference. The “collateral source rule” provided that the defendant shouldn’t get the benefit of the health insurance when it was the plaintiff or the plaintiff’s employer who paid the premiums. Now the tide is turning, and in some states a plaintiff can only show evidence of what was actually paid. In those states, the medical expense figure in the formula is the actual payment number, not the bill amount.

Sometimes defendants challenge the reasonableness and necessity of the medical expenses. Let’s say the defense claims that the plaintiff over-treated with unnecessary physical therapy treatments long after the minor injury had healed. If the defense takes the position that the reasonable and necessary medical expense was not \$4,000, but \$2,000 and it is proper to use a multiplier of two, defense would evaluate the case this way:

 MULTIPLE OF 2 Adjusted medical expense \$2,000 Pain and suffering \$2,000 Lost earnings (one week) \$1,000 \$5,000

Plaintiffs regularly argue that multipliers should be much higher. Reasons for a higher multiplier might include:

• Plaintiff treated conservatively and the bills were low
• The injury was serious
• The recovery period was lengthy
• The injury is permanent

Formulas are most helpful in simple cases with simple injuries. All information is helpful, so parties can always consider a formula result. But if the case is complex, the parties will want to turn to other evaluation methods.

## Professional Claim Evaluation

Attorneys and insurance claim representatives receive evaluation training. They increase their evaluation skills with years of experience. Your family, friends and neighbors are not professional evaluators. They lack the in-depth knowledge gained by having handled hundreds of cases.

The first professional to evaluate your case might be an insurance adjuster. When you or the defendant report an accident to an insurance company, the company will assign a claims adjuster to handle that claim. One of the first things the adjuster will do is set a “reserve.” This is a bookkeeping entry for an amount set aside which should approximate the damages. Insurance companies have rules and procedures for setting initial reserves. If nothing is known about the extent of the injury, the company might have a rule that all such cases are reserved at \$1,000 or \$2,500. At the other end of the spectrum, if the damages are obviously catastrophic, the adjuster might assign the full policy limit to the reserve. The adjuster might also send an “excess letter” to the defendant letting the defendant know that the defendant could have personal financial responsibility beyond the insurance limit the defendant purchased. Adjusters repeatedly revise reserves as new information comes in through the life of the case.

On the plaintiff’s side, the first professional evaluation occurs when the plaintiff visits an attorney to see if the attorney will represent the plaintiff. This could happen before or after the insurance adjuster’s evaluation At this point, the attorney has little to go on except gut instinct. Knowing what cases to accept or decline is an important skill. The attorney knows that the law firm will be advancing significant time and probably money to prosecute this case. The probable recovery must be large enough to cover the cost to pursue the case, appropriately compensate the attorney for the labor, pay the lienholders, and leave an amount for the plaintiff that makes this case worthwhile to pursue. If the attorney guesses wrong at the first meeting, the attorney could work for the equivalent of minimum age or even come out in the red. Plaintiff’s counsel may evaluate the case within a range of dollar values. Like the adjuster, plaintiff’s counsel should be repeatedly revising the evaluation as the case progresses.

The defense attorney may be the last professional to evaluate your case before it goes to a jury. Defense attorneys are typically not called in until a lawsuit has been filed. After that point, they are the front line soldiers in investigating the value of your case. They are a filter for the information they pass along to their client. If the defense attorney reports that the plaintiff will make a poor witness in her own behalf, the defendant is likely to authorize less money to settle the case than if the report painted a picture of an articulate, attractive witness. Defense litigation handling guidelines typically require counsel to re-evaluate with each report of a new development. So every time the defense counsel reports on the plaintiff’s response to discovery or the content of subpoenaed records, counsel should be providing a new evaluation of the case or stating why the prior evaluation remains unchanged.

## What can I do with my structured settlement?

A lot of our readers ask us if it is possible to sell structured settlement payments, the answer is yes, you have to be careful and choose the right structured settlement company to sell your payments to and make sure you don’t get ripped off by low cash offers or hidden fees, you may want to read about the pros and cons of selling your structured settlements.

### Gut Instinct

All of us use our gut from time to time to make judgments when we don’t have complete information. Our life experience informs those decisions. Experienced lawyers and insurance claim personnel use their accumulated knowledge, their gut instinct, every day in evaluating personal injury cases. In general, the more experienced the evaluator, the better the evaluation.

Gut instinct in this context comprises judgment calls in several areas, including knowing what the variables are. It’s not enough to know what juries generally award for, say, a broken arm in this jurisdiction. Attorneys are also looking at how well the plaintiff can tell the case story—how articulate is this plaintiff? Studies show that attractive plaintiffs get bigger awards than unattractive ones. Is the pool of likely jurors sympathetic or hostile to the plaintiff’s ethnicity? Some information may not be known until the case is tried and the jury foreperson reads the verdict. Examples include the jury’s reaction to the parties’ stories and unpredictable rulings by the judge. Even if the attorney does not mention non-financial factors like these, they play a part in the overall case evaluation.

The problem with gut instinct is it’s often wrong. By definition, it’s a judgment made without reliance on all the facts. Sometimes, people feel so emotionally tied to their early case assessment they cling to it even after the evidence points elsewhere. This is a common negotiating mistake. Nonetheless, adjusters and attorneys are likely to rely on their gut instinct at some time during the ongoing evaluation continuum. The best way to challenge a gut instinct evaluation is with a more reasoned approach.

#### Mediation and Non-Binding Arbitration

Mediation and non-binding arbitration are two types of alternative dispute resolution. “Alternative to what?” you may ask. The answer: to a court proceeding. Use of an alternative dispute mechanism is not really a method of evaluation. Rather, the parties should have evaluated their case before showing up for mediation. Alternative dispute resolution is a way to test your evaluation.

##### Mediation

Mediation is facilitated negotiation. The parties negotiate with the help of a neutral person, the mediator, who is trained to help people work out their differences. In some states the court may require you to attend a mediation, but no one can force you into a deal you don’t want. Private mediation is always an option for settling your case. In private mediation, the parties choose their mediator. Usually, they split the responsibility for paying the mediator’s fees.

Mediation is confidential. Typically, parties meet and then separate so each side groups in a separate room, called a caucus room. The mediator shuttles between the rooms. Disclosures to the mediator are not subject to discovery, and the mediator cannot be subpoenaed. You can tell the mediator the weaknesses of your case as well as the strengths to get help resolving the case. You control what information the mediator shares with the other side.

Mediation may be the first place you hear the other side’s evaluation of your case including the reasoning they used to reach that number. Because the mediator has probably seen many cases like yours, the mediator can help you figure out if you and your opponent can come to a compromise.

Non-binding arbitration

Arbitration is an evidentiary proceeding, not a negotiation. Like mediation, it is private and the parties are usually responsible for compensating the mediator. Rules of evidence are usually relaxed, and this saves time compared to a court proceeding. At the conclusion of the arbitration, the arbitrator makes a ruling, called an “award.” In binding arbitration, the parties are as bound to the result as they would be with a court judgement. Unlike a court judgment, there is no appeal.

Non-binding arbitration can be a mulligan. With non-binding arbitration, any party who does not like the result can reject it and go to trial.