Condensed from How Insurance Companies Settle Cases by David Frangiamore
Personal injury attorneys fight hard for their clients and strive to deliver value. In a sense, each attorney is a sales professional, selling the value of an injury claim. Typically, they “pitch” a value to an insurance company representative or claims adjuster. Lawyers want to deliver value by leveraging the highest possible settlements for their clients.
One way to do this is by avoiding common negotiating pitfalls into which attorneys sometimes stumble. Let’s examine some of the most common negotiating mistakes made by personal injury attorneys, as seen through the eyes of a claims adjuster.
- Failure to Read Medical File Closely
Attorneys often want to talk money. Insurance claim adjusters want to talk facts. Adjusters are typically eager to get copies of the claimant’s medical records. While some adjusters fail to review these carefully or use them as “credenza decoration,” many review the records with an eagle-eyed attention to detail. Adjusters will cull through the medical records, seeking a history of drug use, prior injuries, and other features that may impact the insurer’s exposure.
To persuade the adjuster before litigation, the attorney must know the medical file and anticipate and address any perceived weaknesses in the file that could limit the value of the case. If the adjuster still insists that the medical file does not support the claimed damages, plaintiff’s counsel needs to be prepared to retain a qualified medical expert to support plaintiff’s arguments.
In their zeal to build a case and cover their caseloads, some personal injury attorneys may overlook key medical record tidbits. In one case, the attorney settled for a simple lumbar bulge when his client actually had a herniated disk. He overlooked the more serious injury and compromised the value of his client’s recovery.
Other examples from actual claim files include:
- Drugs unrelated to the treatment or injury included in the demand.
- Extensive diagnostic testing that runs up medical bills and adds no value to the claim in the adjuster’s eyes.
- Loss of earning capacity claims when the claimant has little or no work history.
- Low-impact car accidents with very high specials, including articles from “experts” opining that people can be hurt very badly in low speed accidents.
- A demand package on an orthopedic injury that includes records and medical bills for OB-GYN treatment.
- A demand package that includes veterinary medications for the family dog
Submit something like this to the adjuster, and plaintiff’s negotiating credibility plummets. Because contingent fee lawyers’ goal is to do as little work on a file as possible and get maximum financial return, some attorneys seem to have the idea that they can throw unsupported monetary demands against the wall and see what sticks. Claim professionals will pick up on this. It is a “red flag” to them in searching out vulnerable areas of the case. The adjuster’s feeling—right or wrong—is that if these “nuggets” are in the medical records, there is likely to be more “softness” in the claimed damages. Moral: Closely read the medical records and sweat the details!
- Overpricing Claim Value
One of the biggest mistakes that plaintiff’s counsel can make is not knowing the value of his/her case, thus giving a ridiculously high demand that forces to defense to gear up. The size of the demand prompts the defense side to invest heavily in case defense. It can result in lengthy discovery that involves lots of depositions, interrogatories, document production, and so forth.
By the time cooler heads prevail and you realize the case value is lower, the defense side may balk at making any offer, thinking it has front-loaded too much in defense costs to waste that money now on settlement. The insurance adjuster and defense attorney may view these as “sunk costs” and an investment to be recouped by fighting the case all the way to trial and verdict. In fact, if adjusters settle such cases later, their higher ups might chastise them for spending all that money to defend a claim, only to settle it at the end. No insurance claims adjuster wants to tagged as a “soft touch” within the Claims Department. To blunt such criticism, the heavy investment in defense (triggered by a ridiculously high demand) might foreclose settlement options.
Remedy: Think carefully about your opening demand. Make it low enough to entice the other side to make an offer. Make it high enough so that when/if you get a “low ball” offer, you have plenty of wiggle room in which to bring in the settlement at your desired value range.
- Lack of Objectivity
Some attorneys are so close to their cases that they don’t see how the other side could win. While this is often the perspective of a neophyte, more grizzled veterans can also succumb to this pitfall. Becoming too personally or emotionally invested in an injury claim to evaluate settlement objectively is a problem. To be sure, personal injury attorneys are not the only ones to fall prey to this. Insurance claim adjusters can succumb as well.
- Fuzzy Demands, Using a Value Range
Another common problem arises when an attorney makes a fuzzy demand using a value range, such as “between $50,000 and $75,000.” The main problem with this is that the plaintiff will hear only the higher number and the adjuster will hear only the lower one. The best policy is to avoid fuzzy demands or offers because once a number is mentioned, no matter what the context, it is usually considered on the table. Therefore, don’t mention a number in negotiation unless you are willing to abide by it.
- Running Up Specials
It is poor technique for an attorney to artificially increase the special damages in a case in an attempt to goose up the settlement value. Insurers have little fear of trying soft tissue damage cases when the specials are high and a doctor is prepared to testify against the vast body of medical evidence in stating “permanent injuries.” Often, all the attorney does is add costs that hurt the case and make settlement tougher.
Traumatic brain injuries, such as those suffered by NFL players, are the exception. These can result in devastating brain or nerve damage that can translate into a very large verdict or settlement.
- Assuming You Know How All Insurers Value Cases
Insurers are moving away from the formulaic, “three times the specials” approach in claim evaluation. In the 1970s and 1980s, it was ubiquitous. In the twenty-first century, it is not.
- Failure to Investigate Facts
Many adjusters find instances where the claimant attorney has not interviewed witnesses, and neglected to investigate the background—medical or otherwise—of their client. In auto liability cases, many adjusters think that attorneys simply look at a police report, interview the claimant and consider that the beginning and end of the fact investigation. In addition to evaluating past medical treatment, a separate evaluation of future medical treatment should be made. In some cases, a life care plan will need to be developed.
Arrogance is at times a problem. Sometimes an attorney appears to come across as knowing it all, as being superior to the claims adjuster. The most effective personal injury attorney does his or her homework, has the facts, and courteously deals with the insurance adjuster. Remember, you may be dealing with the same adjuster again on a future case. Don’t gloat and never burn bridges!
- Loose Lips
Avoid making indiscrete comments during negotiations, or comments that are “just between us lawyers.” Some lawyers say the darndest things about their clients and their own lack of confidence in their case. In one medical device product liability case, plaintiff’s counsel confided to an adjuster that another defendant was the target and that his own client was crazy. How could he expect the adjuster to make a significant offer after having said such things? Moral: keep your ears open and your mouth shut when conversing with the claims adjuster.
- Mistaking Form for Substance in Demand Presentation
Some attorneys submit a fancy—bound and tabbed—demand package with articles and jury verdict tables on low-end cases valued under $50,000. This does not increase the claim’s value. You can spring for leather binding with gold-embossed lettering, but it won’t increase the case’s intrinsic value. In fact, an elaborate presentation in a small case may make the adjuster think you’re trying to use packaging to distract him from the merits.
- Using Warped Sounding Boards
It is a good idea to use other people as sounding boards for the value of a claim. Consider, however, the objectivity and demographics of whom you use.
Just as corporations should not evaluate cases based on the opinions of their executives, personal injury attorneys should beware of using as their sole sounding board their like-minded co-workers and acquaintances.
For example, a drug company was sued for alleged failure to warn of the adverse effects of a drug to a child who inadvertently took the medicine. The mother left the pills uncapped on the bathroom counter, a two-year old child swallowed some and became blind and brain damaged. The defense made a low six-figure offer. Plaintiff’s counsel spurned it, saying he had talked with all his partners, who assured him the case was worth millions.
The defense attorney, however, had talked with his barber, maid, and the fellow who cleaned his golf equipment. The lay people—the kinds who actually sit on juries—said the plaintiff would lose. After a lengthy trial, the jury returned a defense verdict. The court reversed it on appeal due to a contested jury instruction and—following a remand—the case settled for what the defense had offered pre-trial.
- Failure to Use Objective Experts
Before engaging an expert to assist in the case evaluation, first determine if the expert has a reputation for impartiality and objectivity. For example, an economist who has worked only for plaintiffs and never for the defense does not appear objective. The expert’s sources of income should be evaluated to see if he or she gets a disproportionate amount of income from a particular source or group of clients. Also, the expert’s publications and speaking engagements should be reviewed as part of an evaluation of possible bias.
About the Authors
David Frangiamore, J.D. is a principal of 2nd Insight, Inc., a consulting firm that provides expert witness services and testimony in a wide variety of insurance related cases. He is a former unit claims manager for Nationwide/Wausau Insurance. While at Nationwide/Wausau, Mr. Frangiamore was responsible for the supervision, litigation, and settlement of most of the major West Coast environmental claims and litigation. He also served as manager of the California construction defect unit, which handled insurance claims involving some of the largest residential construction projects throughout the State of California.
Kevin Quinley is a leading authority on claims, product liability losses and litigation management. As a senior executive for cutting edge insurance carriers, he has managed claims and litigation throughout the world. For over 30 years, Mr. Quinley has actively handled and managed a wide range of liability claims and lawsuits. He is the author of over 600 published articles and ten books on various aspects on insurance, claims, product liability, risk management and litigation.
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