Whether they arise from automobile accidents, defective products, construction site accidents, medical malpractice, or fall-down injuries, all claims for personal injuries or death are claims for compensation in money damages. Most often the compensation is paid by the insurer for the at-fault person or corporation. Common to all types of personal injury claims is the way that insurers handle the settlement process.
Initially when informed of an injury claim, insurers gather information relating to the injury suffered and potential liability for that injury. The fact that the insurer asks for information, including information concerning the injuries suffered, does not mean that the insurer has agreed that there is liability for those injuries or that they are willing to settle the claim.
Indeed, insurers are required to investigate claims by Massachusetts General Laws, Chapter 176D. Section 3 (9) defines the responsibility of insurers in handling claims. The sections that relate most frequently to personal injury or wrongful death claims are:
“(9) Unfair claim settlement practices: An unfair claim settlement practice shall consist of any of the following acts or omissions:
(b) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
(d) Refusing to pay claims without conducting a reasonable investigation based upon all available information;
(f) Failing to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;
(g) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;
(n) Failing to provide promptly a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement."
Enforcement of these responsibilities is typically left to private litigation between claimants and insurers. (The mechanism for this will be the subject of a future blog.)
After an insurer completes its investigation of an injury claim, the insurer makes a decision about whether to attempt settlement of the claim. This decision can be made by an individual or committee depending on the size of the claim. It’s important to understand that the claimant’s leverage on the insurer is the potential of a court judgment against the at-fault person or corporation. If the insurer decides not to attempt to settle the claim, the only alternative is a court (or in certain cases, arbitration) trial of the personal injury claim.
Once the insurer decides to attempt settlement of a claim, most often it requests a ‘demand’ from the claimant’s attorney. This is a dollar amount the claimant is asking the insurer to pay. This ‘demand’ is often made in a letter which presents the insurer with documents, photos and other material supporting the claim.
The custom following the demand is for the insurer to make an ‘offer’. There is no set time within which the insurer must respond with an offer or even that it must make any offer. The only requirement is that the insurer responds within a reasonable time. If there is an injury compensation offer made, it is virtually always much less than the ‘demand’ amount. Typically, there follows a back and forth negotiation in which the claimant’s demand amount is lowered in steps in response to increases in the insurer’s compensation offer. If an agreement is reached, there’s a settlement. If not, litigation and ultimately a trial follows.
Once an agreement is reached for an injury settlement, the claimant usually is asked to sign a release giving up his or her claims, and the insurer then pays the agreed compensation. In practice, few settlements end so neatly. Most personal injury cases have a ‘lien’ for medical bills paid by a health insurer, Medicare or Medicaid (MassHealth) which must be satisfied from the agreed settlement amount. Further, the insurer is required to check with the Massachusetts Department of Revenue to see if there are outstanding taxes or child support payments due. These are required to be paid from the settlement before any money is given to the claimant.
For every injury or wrongful death claim, the guidance of an attorney experienced in representing victims is essential, whether the claim is settled with an insurance company without a trial or whether the claim proceed to trial or arbitration.