Before you can think about the value of your case, you need to figure out its legal category and if it has any value at all. Your goal is to achieve a recovery whether by judgment or settlement. But not every case is worth pursuing. Although every case is different, certain general principles apply.
Liability, Damages, Causation: The 3-Legged Stool
The first inquiry is whether the defendant has committed a wrongful act. If the defendant is not liable, that is, responsible, the defendant cannot be ordered to pay any money.
Second, just because the defendant committed a wrongful act doesn’t mean the defendant caused any harm. This harm is called damages. Without proof of damages, there is nothing to compensate. Special damages are actual out-of-pocket expenses paid or to be paid by someone, often the plaintiff’s health insurer. Attorneys and insurance people often refer to special damages simply as “specials.” The most common special damages are medical expenses and lost earnings. Invoices and records of past earnings are commonly used as evidence of special damages. Gathering proof of your actual medical expenses and lost earnings is critical. No meaningful evaluation can occur without this information.
There is no documentary evidence of general damages. General damages are compensation for pain and suffering, mental anguish, emotional distress. You may have physical manifestation of emotional distress, such as headaches, stomach acid, or languor. You may have contemporaneously told others about your pain who can testify about it. But there is no objective measurement of your pain. A plaintiff suing for wrongful death or emotional distress caused to a bystander may not have special damages- only general damages. Plaintiffs who themselves suffered a physical injury almost always have both kinds of damages.
Third, the plaintiff must show it was the defendant’s wrongful act that caused the damages the plaintiff is seeking compensation for. Think of causation as a bridge between liability and damages. For example, in a medical malpractice case, the doctor may have made a mistake and the patient died. The plaintiff seeking compensation for a wrongful death must show it was the mistake that caused or was one of the causes of the death. If the death is attributable only to the underlying condition, there may be no recovery.
Theoretically, to succeed, a plaintiff must prove all three elements. But juries can be unpredictable. Lawyers have a saying “Big damages make liability.” When injuries are catastrophic, cases settle because the risk of going to trial is unacceptable. Most cases settle without the defendant admitting liability.
Unless there is a source of compensation for your injury, there is usually little point in pursuing a legal remedy. Thankfully, liability insurance is usually available for most personal injury cases. Large corporations and governmental entities may be self-insured. If your claim is against an uninsured individual or small business, it may not be financially feasible to pursue your claim.
All states require mandatory vehicle insurance. At the time this was written, the required minimum coverage for bodily injury to a single person ranged from $10,000 in Florida to $50,000 in Wisconsin. If the defendant was uninsured or you were struck by a hit-and-run driver, you may qualify for compensation under the uninsured motorist coverage of your own policy. If your damages exceed the defendant’s insurance, you may qualify for compensation under your own policy’s underinsured coverage. You must have purchased uninsured or underinsured motorist coverage in advance for this fund to be available.
Before litigation, you or your lawyers will deal with a claim professional called an adjuster. Insurance companies employ adjusters. Insurers may also use adjusters employed by outside companies known as Third Party Administrators or “TPAs”. Self-insured companies and some smaller insurers also use Third Party Administrators.
Claims are assigned to adjusters according to several factors. Adjusters handle claims based on the type of case, claim size, and experience of the adjuster. An adjuster may specialize in claims of one defendant. The biggest, most complex cases are usually handled by the most experienced adjusters.
“Authority” is the maximum amount of money an adjuster can offer to settle a case. Everyone has a boss, and an adjuster may have to go through multiple levels of approval to get enough authority to settle your case. Adjusters handling complex cases typically have more settlement authority than lower level adjusters before they have to bump the case to a supervisor. An adjuster for a Third Party Administrator not only has to go through the protocols of the adjuster’s company, but also someone must go to the insurer or self-insured. To understand some of the responses you may get in litigation you need to figure out if you are dealing with an employee of the company that will pay the money or an intermediary.
Defendant’s liability may be unquestionable and your damages substantial with no doubt about causation. But your recovery may be significantly limited by the defendant’s insurance policy limits.
Let’s say you must undergo multiple surgeries due to injuries suffered in a collision. The medical bills exceed $100,000. However, the defendant only paid for the $25,000 minimum insurance required by the state, and you don’t have underinsurance coverage. That’s not enough to cover these bills, let alone cover the lost earnings and pain and suffering. In most cases, the defendant does not have personal assets to pay the difference. If liability and causation are clear, the insurer is likely to pay the policy limits fairly promptly for a release of their insured. This is true not just for minimum policies but any time the coverage is clearly inadequate.
But what if liability isn’t so clear? What if the defendant’s insurance company takes the position that you were at fault? Litigation is expensive. The insurance company is in the business of defending cases; it has the means and resources to keep you in litigation for years. You probably do not.
When the cost to pursue your case is disproportionate to any likely recovery, it may be wise at some point to abandon it.
Liens are another reason you may not receive compensation for what appears to be the value of your claim. Liens arise when a contract or statute entitles the lienholder to reimbursement out of your recovery. Usually a lienholder has been paying your expenses or making payments directly to you during the pendency of your case. At the conclusion of the case, the lienholder is entitled to payment.
Lienholders send notice of their liens to plaintiffs and their attorneys and to defendants. People who ignore liens can become personally liable to pay them.
The lienholder may not get 100% reimbursement. A statute may limit the percentage the lienholder can receive. There may be a reduction to account for the lienholder’s share of expenses to achieve the recovery. If a lienholder demands so much that the plaintiff will be inadequately compensated, the plaintiff may lose interest in pursuing the claim to the detriment of both. Plaintiffs typically will negotiate with lienholders to avoid hardship. Smart lienholders compromise, because some reimbursement is better than nothing. Here are some common types of liens.
If you have suffered an injury at work, you are entitled to workers compensation benefits. You may also have a claim against someone other than your employer. For example, you may have been injured while using a defective product or while driving on company business. Your employer is required to provide medical care for work-related injuries. However, if someone else is also responsible for that injury, the employer can seek reimbursement or a credit against future payments at the time a related personal injury case closes.
The Medicare Secondary Payer Act is a federal law designed to prevent “double-dipping.” The law says that Medicare is always a secondary payer. If another entity is responsible for those medical bills, such as a defendant, Medicare considers that entity the primary payer. Medicare will pay your medical bills as incurred, but when you recover money from a settlement or judgment which compensates those same bills, Medicare has a right to reimbursement. Federal law includes provisions for compromise of Medicare’s right of recovery.
Medicaid, called Medi-Cal in California, pays medical expenses for people without health insurance according to the laws of their state. When Medicaid has paid a hospital, doctor, or other care provider, the bill will show Medicaid as the payer. When a case concludes, Medicaid is entitled to recoup what it paid. Medicaid bills are often compromised for a small fraction of the amount Medicaid has spent. People who are beneficiaries of both Medicare and Medicaid are called “dual eligible” or “Medi-Medi”; both entities could have liens.
Health insurance payments
Whether you get health insurance from your employer or buy it on your own, the insurance contract probably provides the insurer a right of reimbursement if you receive compensation for your medical bills from a third party. When a health insurer bill reviewer sees that the medical bills are for an injury caused by an accident, it may send you a form for you to acknowledge that the health insurer has a lien against any recovery compensating the related medical bills.
Disability insurance payments
Like the health insurer, an insurance company that has paid income replacement benefits will want reimbursement. The contract of insurance governs. A policy provided as an employment benefit is subject to federal ERISA law. A policy you purchase on your own is subject to state law. A lien for health or disability insurance payments made pursuant to an ERISA (employer-provided) policy is generally harder to compromise than one for payments from a policy you purchased directly.
Treatment on a lien
Some attorneys refer their clients to specific doctors who wait for payment until the end of the case. The doctors are open to compromise of their lien. Insurers generally consider these doctors suspicious; going to them rather than your regular physician can raise a red flag about the veracity of your claim.
Plaintiffs in dire need of money during the pendency of their cases can apply for a loan against the eventual recovery. The fees and interest charges are exorbitant. These lenders rarely compromise their lien.
Approximately 97% of all personal injury cases settle without trial. People settle cases for many reasons. New facts may emerge in the course of litigation which make recovery uncertain. Because policy limits cap potential recovery, it might make sense to accept a settlement substantially less than the policy limits regardless of your evaluation of your case. Trials are expensive. Litigation can cost so much, employees of the U.S. Department of Justice have stated that sometimes “we can’t afford to win a case.” If trial expenses would eat up the difference between a settlement offer and what you can expect to win at trial, the better practice is to take the offer and avoid further delay.
Here’s an example. Let’s say Defendant has offered $300,000 to settle. After $100,000 in attorney fees and $100,000 in costs and expenses up to the time of the offer, the plaintiff will net $100,000. Going to trial is expensive. Each side must pay to prepare exhibits and for experts’ time. Assume that plaintiff can likely get a verdict of $500,000, but costs and expenses to get that result will require an additional $300,000, a total of $400,000. After a one-third attorney fee of $166,666.66, going to trial will produce a net recovery to plaintiff of $33,333.34. You may also sell your structured settlement on Washington Accord however certain rules apply.
The value of your case will guide whether to try or settle it. Whether you work with an attorney or represent yourself, proper case evaluation is critical to achieving a satisfactory conclusion.