Innovative Conflict Resolution

Continuing my thoughts on how to negotiate your own personal injury claim, in this post I will provide some practical tips and tricks (actually, more like advice than tricks, but I went with alliteration) in handling and negotiating your own personal injury claim.  Much of what I say here will also be applicable to all insurance claims, but PI claims, as I’ve explained elsewhere, have the large, unknown, General Damages element and so deserve some specific attention.  First, a few points to consider during the pre-negotiation phase of your claim:

• Begin with a reasonable expectation. Assuming that you don’t believe that an insurance claim is a “get rich quick” scheme, the best thing you can do is to have a reasonable expectation.  If you total your Toyota, the insurance company won’t replace it with a Rolls Royce. Likewise, if your claim is for a stiff neck, you probably won’t settle for anything close to $1 million.

The claims person is legally, contractually and ethically obligated not to overpay your claim.  Overpaying a claim cheats the company and its stockholders, the insurance agent who sold the policy, and the insured.  General Damages are not “profit”; they are meant to be of equal value to your injuries.  Besides, exaggerating a claim is fraud.  Most companies have departments to deal with fraudulent or suspicious claims, and you don’t want your claim to be transferred into that department.

• Lay your groundwork. It is not the claims person’s job to prove your claim.  Gather enough evidence (receipts, reports, etc.) to prove your claim. Make periodic notes on how your injuries feel and how they are impacting your life.  Remember, your job is to make the claims person’s job easier; that is, make it easy for he or she to agree to an appropriate settlement.

• Understand the process. While there are certain payments that an insurance company can make throughout the life of the claim, typically you will not receive any money until you can settle your complete PI claim and agree to a release of any further claims.  You may need to work out some arrangement with doctors in the meantime, but understand that you are primarily responsible for your bills.

• You may owe some of your settlement to others. If, for example, your health insurance has paid your medical bills, they have a right to be reimbursed for that amount if you collect from another source.  Make sure you know who else wants to be paid.

• There are other factors that could impact the amount you will recover. The most common factor is comparative or contributory liability.  In some states, if you are determined to have been 50% at fault, you can only recover 50% of your bills and general damages.  In other states, if you are determined to be 50% responsible, you will receive nothing.  For a discussion of the four different types of negligence laws in the United States, go here.

• Another potential limitation to what you can recover is the applicable policy limits. If, for example, a person only has $15,000 of liability coverage, that is the maximum amount available from the insurance company.  You have the right to seek reimbursement from the policyholder, but he or she may not have any means to pay your claim.  Also keep in mind that if you settle with an insurance carrier and sign a release, you have no further right to seek money from the policyholder.  If policy limits are an issue, you may wish to seek the advice of an attorney.

• If there is no coverage for the claim, the insurance company owes you nothing. The policyholder may, however, still owe your claim, and it may be necessary to file a lawsuit or seek to mediate your claim directly with that person. If there is no coverage, the insurance company will cease to be involved. Depending on the nature of your claim, denial of coverage is a situation in which you may wish to consult an attorney.

• In some states, the insurance company cannot reveal the details of the policy to you. They should have to tell you if the applicable policy limits are not sufficient to cover your claim, but otherwise an insurance policy is a private contract between the Company and the policyholder.  Typically the insurance company doesn’t have to tell you why they may have denied coverage to their Insured, just that they did. (These laws vary from state to state.)

• The insurance company may also conclude their policyholder did not cause your injuries, and deny your claim on that basis. The Insurer is not bound by a police report or your own insurance company’s analysis. However, should they deny liability, it is within your rights to file suit against the policyholder directly (although most likely you will continue to deal with the insurance company). In the event the court agrees with you, the insurance company is bound by that determination. (The Insuring Agreement typically says something to the effect of “We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies.”)
• Collaborate first, negotiate second. Remember my concept of the Shared Goal; both you and the adjuster want to resolve the claim, with as little hassle as possible.  You can even approach the adjuster with, “I know that your goal is the same as mine …,” which will let the adjuster step into a collaborative role.

The Negotiation Process

Once you have submitted all of your claim documents and have given the adjuster a reasonable period in which to review and evaluate them (at minimum, 7-10 working days), you are ready to begin negotiations (even in a collaborative setting you will have differences of opinion, and some negotiation is to be expected).  Following are some tips in how to negotiate your claim:

1. As you are the claimant, it is appropriate for you to give the claims person your Settlement Demand. However, the claims person is more experienced at evaluating claims, so it is also appropriate for you to ask the claims person to first make you a Settlement Offer.  If they have evaluated your claim, they will be prepared to make an offer.
2. Recall that a claims person will have a settlement range within which to negotiate. The offer is most likely at the bottom of that range (however, it should not be below that range, what is often called a “low-ball” offer).   It is appropriate for you to ask for some time to consider that offer. Don’t ever feel pressured to respond right away.
3. In considering how to respond to the offer, consider where you’d like to eventually settle – your target number – then pick a demand sufficiently above this to allow for some room to negotiate.  Don’t pick an unreasonably high number, unless you feel that the adjuster’s offer is unreasonably low.  For example, if the offer is $15,000 and you’d like to settle at $20,000, a counter-demand of $25,000 is reasonable, and will probably signal to the adjust your target number.
4. Countering too high – with something like $50,000 – will signal that you are unreasonable, and you’ll probably get a counter-offer from the adjuster of something like $15,100, and you’ll just slow down the process.
5. However, if your own honest evaluation is in the $50,000 range, then by all means make that demand. Don’t let the adjuster’s offers control your demands.   If an adjuster’s evaluation is very close to yours, you can expect to settle at some point mid-range for both of you.  At times, the adjuster will be low, and you might be high; in this case, expect that you both will have to re-evaluate, and settle outside of both of your original ranges.
6. It is completely appropriate to ask that an adjuster explain the reasoning for the offer being made; this can be of great assistance in crafting your response, as you may be able to put some aspect of your claim in new light. You may also ask that they put their analysis in writing.
7. If you believe your claim is worth in excess of the available policy limits, you may either make a Policy Limit Demand – simply asking for all of the available limits to settle your claim – or make a demand above the policy limits.  If the latter, the insurance company will have to either negotiate the claim down, or seek contribution from their insured.
8. If the company offers you the Policy Limits, accepting it will mean releasing the policyholder from any further liability.
9. Don’t focus on trying to get the maximum settlement from the company. Focus instead on getting what you think is fair. You’ll never know if the insurer would have paid more, but that’s not the point. If you decided prior to the negotiation that you’d be happy with $20,000, then be happy with $20,000.
10. Keep in mind that making a counter-demand is also a rejection of the latest offer. However, “one time only” offers are extremely rare, and are almost never seen in the early days of a claims negotiation.  Typically the “one time only” offers you will see are what is called a “cost of defense” offer, in which the carrier is willing to pay a premium today rather than spend that money retaining an attorney to defend a lawsuit tomorrow.  Theoretically, once litigation begins, that money is “off the table.”
11. Don’t be put off if the adjuster tells you they have to talk to the manager for “more authority.”  This is not a “no” – it could be a tactic, or it could be true. Either way, it’s better than “no,” and signals that negotiations may continue.
12. “No” seldom means “no;”  however, you may find that you have rejected the company’s “final offer,” which is then technically “off the table.”  At this point negotiation may need to be refocused or jump-started; if you feel negotiations are stagnating or have stalled, you can always request mediation. As long as you maintain a willingness to negotiate, there is no benefit in the Company refusing to participate. However, if you find you’ve “hit a wall,” retaining counsel is always an option.
13. Beware the Statute of Limitations: often from 1 to 3 years from the date of the accident, depending on the state, the statute of limitations tells you how long you have to settle your claim without filing a lawsuit.  If you haven’t settled or filed suit within that time, your claim is dead (as is your right to sue the responsible party directly).
14. If negotiations stall, mediation, arbitration and litigation are all options to consider.

Things Insurance Companies Don’t Want You To Know

Following are a few additional tips to assist in handling your claim, should you find that you are dealing with a claims adjuster who is unusually difficult.  Always start with the presumption that your claim will go smoothly.  However, if not, here are a few things that might help:

1. The Department of Insurance is your friend.  If you believe the claims person is not acting in good faith, you may report the claim to your State Department of Insurance.  If there are any violations, the Company may be fined.  Typically, the involvement of the DOI involves managers and upper-level executives, so a DOI report is the last thing an adjuster wants to see happen.
2. Document each conversation, including date, time, and specifics of what you talked about.  It is also not a bad idea to follow up a conversation with a letter (e-mail works as well) to the claims person documenting the call and what was discussed.  Be specific, such as, “This will confirm our conversation of this date, in which you extended an offer of $5,000. I have indicated that I need a few days to consider the offer.” But, always be honest, direct and respectful.  Remember, you catch more flies with honey than vinegar.
3. In some States, you are allowed to sue the other person’s insurance company for failing to appropriately investigate and settle your claim.  If you can document that the Company has violated your state’s Insurance Code, you can contact an attorney who specialized in “Insurance Bad Faith” law for advice.
4. The Adjuster’s most valuable resource is time.  The more of their time you use, the more they want to close (settle) your claim.   You should not only help them give you money, you should help them want to give you money.
5. The Adjuster should return phone calls within a reasonable time.  If they are not returning your calls, ask to speak with that person’s manager or the Claims Manager.  Their time is also valuable.  However, remember again to always be pleasant and respectful. Try not to “lose your cool.” You can be persistent without being obnoxious or abusive.  If you want the Claims Manager or DOI on your side, you want to come off as more professional and above board than the Adjuster.

Collaborate First, Negotiate Second

Bottom line, if you are reasonable, cooperative and direct, chances are you will not have many problems negotiating most insurance claims. If you can take a collaborative approach – work to overcome the shared goal – resolving your claim may be a rather pleasant experience, and you will not feel at risk. Many claims adjusters are just good people, who see their job as helping people.

However, there are often bumps in the road, and sometimes there’s no option but old-fashioned negotiation.  If you are uncomfortable negotiating your own claim, you can always retain an attorney. However, the more combative the process, the greater the risk to both sides.  By preparing your claim carefully and paying attention to the process, you can minimize – but perhaps never totally eliminate – the risks.  That’s life.

Next: Tips on mediating your insurance claim.

Third in the series, starting here.

In my last post, I introduced the concept of the Shared Goal: The claims person and you both have a common goal, which is to resolve the claim by having the insurance company pay you money.  I also introduced the concept that to achieve your goal, you should help the adjuster meet his or her goal, by making it easier for them to pay you money.  That’s called a “win-win” scenario.  The antithesis of this is commonly referred to as a “zero-sum” scenario, where only one side “wins.” (This latter scenario is often romanticized in books and movies, often involving a dramatic courtroom battle; however, this is largely mythological.)

The Claims Person’s Job(s)

The claims adjuster’s main job is not to save the insurance company’s money, although it can’t be denied – nor should be be – that keeping settlements and other expenses are a factor.  The claims person’s main job is to settle a claim on behalf of his or her policyholder (aka “the insured”).  We all buy insurance policies specifically so we don’t have to pay claims ourselves. Looking at it from the standpoint of the policyholder, if someone files a claim against me, I expect the insurance company to protect me, once and for all.  When the claim is over, I don’t want to ever be bothered by that person (“the claimant”) again.  This will mean that the insurance company – besides paying the claim – must get a release from the claimant, releasing me from all liability.

I also would expect that the claims person would not overpay the claim; simple logic tells me that if claims are overpaid, my premiums are going to go up.  In fact, I may prefer that the claimant get nothing at all, especially if I don’t feel if I am not liable to the claimant.  However, there are laws to protect claimants from being treated unfairly, often called “fair claims practices.”  So, the adjuster now has yet another responsibility: to pay claimants fairly.

So, the adjuster now has these responsibilities:

1. Securing a Release of the Insured
2. Controlling costs and claims payments
3. Making sure that claims are not overpaid or paid in error
4. Acting fairly to the Claimant

As you can see, the adjuster has to find the balance between these often conflicting goals; that’s where the word adjuster comes from.  In order to justify what is paid for a claim, the adjuster must do a number of things:

1. Confirm that the insurance policy provides coverage for the particular claim.  This is done by reviewing the policy, the facts of the loss, and the damages claimed.  Until coverage is confirmed, no claims settlements can be paid.
2. Establish that the Insured is legally liable for the damages claimed, by investigating the facts of the loss and determining whether the Insured owed a Duty, whether the Duty was Breached, whether the Breach was the Cause of any damages, and finally, whether the Damages claimed resulted from the Breach.
3. Provided the results of 1 and 2 resulted in a decision that the claim should be paid, establish how much the claim is worth.  This is done by reviewing all applicable records (medical records, financial records, etc.), talking to the claimant, and at times hiring experts to provide opinions on various issues. This could include retaining a doctor to examine the claimant to provide any missing information.
4. Negotiate a settlement, once the value of the claim has been reached.

A lot of time and effort goes in to evaluating a personal injury claim, and everything must be well-documented.  Once the investigation is complete, the adjuster may be required (depending upon his or her experience and the requirements of the company) to confer with a manager to get the authority to offer a certain sum of money.  Generally, a settlement range is agreed to, and the adjuster is only able to resolve a claim for an amount within that range.

Even though from your point of view it might seem like the adjuster is sitting by the phone spinning a large “wheel of fortune,” by the time the claims person is ready to negotiate your claim, a lot of thought has gone into evaluating your claim.

Next:  Tips and Tricks of Claims Negotiation

In my last post, I introduced the topic of how to negotiate your own insurance claim.  In this post, I’ll talk specifically about a personal/bodily injury claim, which is where some negotiation skills really come in handy.

First, a word about people

As I mentioned in the prior post, I learned to approach negotiating with the theory that both the claims adjuster and you really share the same goal: to arrive at a fair and equitable settlement.  Seriously.  I’m sure that’s your goal, right?   Most people – claimants and adjusters – are decent, honest people trying to do the right thing.  There are, of course, those folks who think their claim is their chance to get rich. There are also those who fake or exaggerate their injuries. And on the flip side, there are also a small percentage of adjusters who really are jerks, as well as those who have simply become jaded from years of dealing with fraud.

I know (because I’ve done it) that if you do a web search on negotiating with insurance companies, you’ll run into many people who will tell you how evil insurance adjusters are and tell you not to trust them and to not give them any information.  You can use this approach if you like, but what you’ll do is make your claim much harder to resolve. Being difficult will give the adjuster the impression that you are trying to hide something (which, in fact, you are).  He/she will not trust you, will start to doubt anything you say, and in general your claims experience will be miserable.  While being evasive raises red flags for the adjuster, so does being too demanding.  As it turns out, many people with fraudulent claims are overly demanding.  Just try being pleasant – it could even soften up that old, jaded adjuster.

The truth is, the vast majority of adjusters are just regular people with the very tough job of evaluating your claim, based largely on the information you give them.  You can make their job easier, or more difficult (or impossible).  Many, many people make their job difficult (unfortunately, this sometimes includes their bosses); so, most adjusters will sincerely appreciate someone who tries to make their job easier.  And remember, their job is to give you money.

The Golden Key of negotiating

I’ve just revealed the Golden Key of negotiating an insurance claim: Make it easy for the adjuster to give you money.  What a concept!  It seems so simple that most people just miss it. They are so busy trying not to be taken advantage of, they throw up barrier after barrier to their own goal.  Again, the adjuster’s goal is your goal: to arrive at a fair and equitable settlement.  In other words, the shared goal is for them to give you money.

What makes a personal injury claim different?

A personal injury claim – typically a physical injury, but this can also include things like defamation – is a unique type of claim in that there are no defined values for what is typically called “pain and suffering,” or General Damages.  Medical bills are what they are (unless they are fraudulent, which companies occasionally see), and lost earnings are usually pretty cut and dried, too, unless you are self-employed.  But emotional distress, loss of enjoyment, and other types of general damages are hard to put a dollar figure on.

This, then, becomes the problem that both you and the adjuster need to work together to resolve: how much is fair to resolve your specific claim.  And, there really are no guidelines to use, as everyone’s claim is unique.  Six months of back pain is not worth the same to everyone; people are different, and people’s pain is different.  A small facial scar is not a big deal to a longshoreman, but it is to a model.  A shoulder injury would perhaps be worth more to a tennis player than to an accountant, although without more details, you really can’t tell.  There are no books (not in the U.S., anyway) where you can look up “sprained ankle” and get a dollar value.

Attorneys, revisited

The ordinary person – you – will always be at somewhat of a disadvantage when it comes to establishing a value for general damages, because you have no frame of reference, whereas the insurance adjuster can draw on their experience plus the experience of others they work with to come up with a settlement range.

Here is one of the areas where the involvement of an attorney may have value. Experienced attorneys may also have an adequate frame of reference for judging what a claim might be worth.  If you decide to interview attorneys, make sure you ask how much experience he has representing people with your type of injury.

Next

In the next post, I will give you some idea of the adjuster’s process in evaluating general damages and preparing to negotiate your claim. This should be helpful – whether you retain an attorney or handle your claim on your own – in your own evaluation of your claim.

Americans don’t really have much of an opportunity to negotiate anymore.  When I was a kid, it was still possible to dicker over the price of many items, but good luck today trying to bargain down the price of a TV at your local electronics chain.  It’s still possible to negotiate the price of a house or car, but these aren’t exactly daily purchases; the typical American is simply inexperienced in the fine art of bargaining. Negotiation is, for most people, venturing into unknown territory and a logical source of fear and anxiety.

It’s even worse when you have to negotiate with a professional; insurance claims adjusters are, among other things, professional negotiators. Depending on the types of claims they handle, they may negotiate anywhere from one or two claims a week to several a day. This can make negotiating an insurance claim quite intimidating, as adjusters clearly have the advantage of experience. However, there are things you can do to level out the playing field a bit. While some people are more natural negotiators than others, negotiation is a skill that can be learned.  And as with most things, the more you understand about the process the better.

The Attorney Factor

The fear of dealing with an insurance company drives many people to hire attorneys.  Depending on the type of claim you have, this might be a wise decision, but it shouldn’t necessarily be your first option. Attorneys can be helpful, but they are expensive, usually charging 25-30% of your gross settlement (stop a moment and do some math.) Also, attorneys are not always great negotiators.  Some attorneys operate on what I call the Wal-Mart principle: low profit, high volume.  They don’t count on getting the “top dollar” for all of their cases, as they make their profit on settling as many cases as they can.  However, there are also very good, ethical attorneys who handle every case like it was their only one.  If you’re planning on hiring an attorney, interview more than one, and among other things, find out how many cases they personally handle.

Now I’ll tell you a little secret:  While many people assume that insurance companies are intimidated by attorneys and therefore pay larger settlements if an attorney does the negotiating, the truth is that most insurance adjusters prefer dealing with attorneys than with unrepresented claimants (what I used to call “real people”). This is because attorneys understand the process, they have a better idea about the dollar value of a claim, and they are more objective. Even more importantly, it usually turns out to be less work for the adjusters in the long run. (Another little secret: “Less work” is a key factor for insurance adjusters, who are typically over-worked.  More on this later.)

Unless you are having some specific difficulties negotiating your claim, it usually doesn’t pay to hire an attorney for property damage claims, such as an auto total loss, or a home fire loss.  The reason for this is because insurance companies will not pay you enough to cover the additional cost of your attorney.  In most if not all jurisdictions, you can’t get general damages (i.e. “pain and suffering”) for a property loss. So, if it costs $75,000 to repair your home, that’s typically all you can expect to get in settlement, with nothing left over to pay your attorney (or, leaving you 30% short of what you need to repair your home).  It’s up to you to research what types of damages are available to you in your jurisdiction, and to decide whether hiring an attorney is cost-effective.

In Part 2 of this article, I will focus on negotiating personal injury claims, providing insights into the issues driving insurance companies and adjusters, which will help you better understand the negotiation process.  I will also give you some tips to make handling your insurance claim smoother.  My theory of conflict resolution and settling claims – how I approached things for twenty-two years – is that the insurance adjuster has the same goal you do: to resolve your claim in a fair and equitable manner.  By being wise, you can help the adjuster reach his goal, and reach yours at the same time.

In the 1950 movie Harvey, Jimmy Stewart, playing the main character Elwood P. Dowd, makes the comment

“An element of conflict in any discussion is a very good thing. Shows everybody’s taking part, and nobody left out. “

What makes the line so humorous is that while it first strikes us as somewhat incongruent, we also realize that as odd as it sounds, the statement is quite true.  A conversation about the weather (“My it’s warm today.” “Yes, it certainly is.”) is not only boring, the reason that people talk about the weather is that they don’t really have to be “present;” there is very little engagement required to agree that it’s warm, or that it is raining.

However, if you consider that due to the fact that we each have different frames of reference due to our sex, age, religious beliefs, ethnicity, political ideas and so on, we can see that two people will almost never agree totally on any issue.  To be really “present” and participating in a conversation, we will uncover some amount of disagreement or conflict, as with this exchange:

“My, it’s warm today.”

“Yes, but I really like it warm, as long as it’s not too humid.  And, after last winter, I appreciate a bit of heat.”

Of the two, which do you think represents a more honest and intimate exchange?  While there are many types of conflict which are not enjoyable or productive, when people disagree with you, you at least know that they have heard and processed what you have said.  In this way, conflict is actually a compliment; it is evidence that either the relationship or the topic is worth some investment.  Agreement doesn’t always mean that you are right – it may simply mean that the other party doesn’t care enough to get involved.

Of course, there are always those who love to argue about any topic, but if you consider the people you know and interact with, I think you’d find that the “arguers” are fairly rare; most people dislike conflict, so to actively engage in discussion is really something positive.

So, next time you find someone disagreeing with you, consider the words of Elwood P. Dowd, and realize what a blessing it can be to have a bit of conflict.