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Is there a set formula that insurance companies use to come up with a settlement amount in personal injury cases?

New Orleans, LA |

I'm in the middle of the settlement process, and am just curious as to whether there are set formulas or amounts that are used when they calculate settlement amounts?


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Attorney answers 6


There may be formulas, but only the insurers know what they are. You are at a great disadvantage negotiating with an insurance company. This is your only case and you have never done it before. They handle thousands of cases and have huge resources. You need your own lawyer if you don't have one already.

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Some insurers use a program called Colussus, but they each enter their own value ranges. Some insurers actually adjust claims with human beings.

My responses to questions on Avvo are never intended as legal advice and must not be relied upon as legal advice. I give legal advice only in the course of an attorney-client relationship. Exchange of information through Avvo's Questions forum does not establish an attorney-client relationship with me. That relationship is established only by individual consultation and execution of a written agreement for legal services.


Your not providing much information for an attorney to evaluate. In most personal injury cases, the recoverable damages are past and future medical bills, past and future lost income and past and future pain and suffering sustained as a result of the wrongful conduct of another. It used to be that in a typical auto personal injury case, attorneys and insurance companies alike would use the "three times" formula as a starting point in negotiations. That formula has been expressed in different ways by different people, but the way I used it was three times the medical specials plus wage loss.

The "three times" forumula is still used by attorneys as a guide in some cases, but most insurance companies will not admit that they use a formula and will expressly disavow the three times formula. The truth is that they are using computer programs to arrive at settlement values in the typical case. These programs are designed to lower the settlement values of large numbers of cases, and are not based on the specific factors in your case.

Many times the settlement value placed on an individual case by an insurance company before a lawsuit is filed is not fair. It is often necessary to file a lawsuit to get closer to what is fair. You should consult an experienced personal injury attorney to see if it would be worth while filing a lawsuit in your case.

Good luck.


The short answer is "Yes"

The long answer is ".. but it depends!"

Generally, insurance companies start with two main things: Liability and Damages.

Liability is basically "Who's at fault?" - If the other driver, insured by the insurance company evaluating the claim, is clearly at fault, then liability should not be disputed and the insurer should "accept liability" without any discount on damages. And then be ready to move on to evaluating DAMAGES.
But - if liability is in dispute - say, if both drivers dispute who had the green light or one was speeding the other improperly merged, then the insurance company may refuse to pay, (conveniently) believing their own driver, even if the story sounds blatantly bogus/unbelievable, or may try to "split the baby" - discount the injured claimant's claim - and pay only a percentage of the "damages" - or value of the claim.

As to DAMAGES, this typically is calculated by looking at the extent of the "special" damages - those harms that can be "specified" or calculated "specifically" - such as medical bills, lost wages, property damages, etc. PLUS "general" damages - those harms that are intangible - "pain and suffering" damages, mental anguish, etc., which depend on (1) how severe they are and (2) how long they last (i.e., their duration). Some injuries have a serious value - a prominent scar to a child's face not expected to heal well; while others less - a scar to a grown man's heal that few will ever notice. This is a "sliding scale," obviously.

Important: Intoxicated Drivers = Punitive Damages (even if No Conviction or Arrest!): An important subset of damages that applies in auto accidents is when the other driver was reckless enough to put the community members lives at risk and get behind the wheel intoxicated on alcohol or drugs (illegal, prescription or any other drugs that impair safe driving). Special laws on the books in Louisiana meant to discourage people from DWI driving allow for stiff penalties - including allowing damages awards that insurance companies often are held accountable for. This is to punish the behavior of anyone who chooses to get behind the wheel while intoxicated and put lives at stake, and not to reward those who play Russian Driving Roulette and - on any one occasion - get lucky and manage to only slightly injure someone. So stiff damages penalties may apply.

So, the "formula" insurance companies use is to look at liability, and determine how clear cut it is. Then they look at all of the special damages in the case - and whether the person asserting a claim is even finished with treatment or not. Then they look at how severe the general damages are, the duration, as well as whether there are compounding - or mitigating - factors (not enough time or space to cover everything here) - such as scarring, DWI, etc., and then they put a value on it.

HOWEVER, on this topic, here's something the general public doesn't know, and what insurance companies really don't want you to know:

WithOUT an attorney, studies have proven that the typical amounts offered/paid to personal injury claimants is typically a very small fraction of what will be paid for the very same claims when an attorney is involved. This is positively true. And you don't need an attorney to tell you, that, what that means, is after fees are taken out, those represented by counsel are far more likely to come out with way more free and clear in their pockets.

If you'd like more information about how claims adjusting work, please visit my website Or call me at 504-433-5550.

Best of luck to you, and I hope you are feeling better, ASAP.

John W. Redmann


No, but rest assured that the insurance company's goal is to pay you nothing or as little as possible. If your accident occurred in the state of Louisiana, I suggest you obtain an attorney as soon as possible, as the statute of limitations for torts in Louisiana is one of the shortest in the country.

Legal Disclaimer:

If this information has been helpful, please indicate below.

Mr. Lundeen is licensed to practice law in Florida and Vermont. The response herein is not legal advice and does not create an attorney/client relationship. The response is in the form of legal education and is intended to provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that, if known, could significantly change the reply and make it unsuitable. Mr. Lundeen strongly advises the questioner to confer with an attorney in your state in order to ensure proper advice is received.


YES. The answer is ZERO. The insurance companies
are in the business to MAKE money . . . NOT PAY out
money. They will pay you as LITTLE as possible to make
you go away. Whatever their 'set amount' is, its NOT
ENOUGH. The only way to settle with these companies
is either with a lawsuit or the THREAT of a lawsuit.
Talk to a local personal injury attorney to DISCUSS
your options. Don't get SHORTCHANGED. Good luck!