Insurance Companies In the Driver’s Seat: How to Level the Playing Field And Improve Your Chances Of Recovering The Damages To Which You Are Entitled

by Attorney Ronald M Papell

In years past people injured in accidents could rely on insurance companies making reasonable offers for the losses they sustained. As the saying goes, those days are gone! In the last few years the long standing rights of injured people to receive fair compensation for their losses including compensation for their medical expenses, loss of earnings and for the pain and suffering they experienced have been severely limited by our Courts and a series of decisions that have diminished the rights of victims and emboldened the insurance companies to make offers of settlement that are not merely inadequate but often insulting.

While severe injuries demand that reasonable offers of settlement be made that recognize the impact such injuries have on the lives of those who suffer them, insurance companies will often make inadequate offers that force the injured parties to file lawsuits to vindicate their rights and seek fair compensation. In the more frequent case of injuries that are significant but not of the severe or catastrophic level, insurance companies often make “nuisance value” offers that fail to reimburse the injured party for even their out of pocket expenses, much less for the pain, suffering or loss of earnings that have been experienced by victims. Broken bones, neck, back and joint injuries comprise the greatest number of injuries but now are frequently given little serious consideration by the insurance companies for the at fault parties. This frustrating development has its roots in the outcome of a series of Court cases that have held that the amount of medical bills incurred by victims is no longer relevant to determining the reasonable value of a claim.

Previous to the current series of cases that have handed insurance companies a financial windfall, the persons or companies causing the injuries were held fully accountable for the harm caused and the monetary losses incurred by those they injured. Although injured parties who purchased health insurance and other coverage could count on their bills being paid, in part, by their own insurance company, additional compensation for their pain, suffering and loss of earnings as well as other damages they might have incurred were paid by the responsible parties insurance carrier. Under this system the injured parties were “made whole” due to a combination of their own responsible conduct in purchasing insurance coverage to pay their bills and the recovery they might obtain from the insurance carriers for those who caused the injuries. While the amount of medical bills incurred was not the sole determining factor of reasonable compensation, it was a fair basis upon which to place a value on a reasonable range of compensation owed for the harm caused.

Prior to the recent series of decisions, an injured party who purchased health insurance coverage received the benefit of their thrift and financial responsibility and could rely on the at fault party’s insurance company to compensate them for their monetary losses as well as their non-monetary damages. Non-monetary damages are sometimes known collectively as “general damages” and include such items of loss as pain, suffering, fright, anxiety, fear, despair, depression, loss of enjoyment of life, inability to engage in activities of daily living or recreational pursuits and so on. The at fault party was held responsible for the full amount of the medical bills incurred by the victim together with the other classes of damages caused by their negligent conduct. As health insurance companies long ago inserted provisions in their policies that required their insureds to reimburse them for payments made should they recover from the at fault party, it was only fair that the party causing the injuries and damages pay the full amount of medical and related charges. This also had the benefit of reimbursing the injured party for attorney fees or other expenses incurred in having to pursue the responsible party, especially where litigation was necessary to obtain fair compensation.

The long standing law known as the “collateral source rule” held that the parties causing the injuries should not benefit from the injured party having purchased insurance coverage and should not therefore be entitled to limit their liability to the amount paid by the victim’s insurance, a collateral source. When the insurance companies were held fully responsible for all financial losses incurred and the injured party had their medical bills paid by their own insurance, the difference between the amount received in settlement and the amount that had to be reimbursed to health insurance companies would serve to compensate the injured for their non monetary damages. The system worked for decades and those responsible for causing injuries were held fully accountable for the harm they caused and could not limit their responsibility to the amount paid by the victims insurance company. Unfortunately, in recent ill advised decisions, our appellate courts have determined that the insurance carriers for the parties causing the injuries are no longer responsible for the amount of the bills incurred but rather only for the amount the injured parties insurance company has paid. When this amount is then reimbursed by the injured party to his or her health insurance company there is little or nothing remaining to compensate the injured party for all of the harm suffered and the financial losses incurred.

In response to these decisions liability insurance companies and specifically the mass marketing carriers such as Allstate, State Farm, Farmer’s, Mercury, Progressive and others have been able to reduce the actually incurred medical losses to a small fraction of the amount billed and are benefiting from the injured party having purchased insurance. When the injured party’s health insurance company settles a hospital bill for less than the full amount of the charges due to a contract with the hospital, the lesser amount paid is now the only amount that can be brought before a jury or considered in settlement. Basing their offers of settlement on these lesser amounts, the responsible parties insurance carriers have made offers of settlement having little relationship to the injuries caused and the true expenses incurred. By way of example, if an injured party suffered a knee injury requiring surgery and incurred medical costs of $25,000.00, a settlement offer of $35-$40,000.00 was both reasonable and appropriate. After attorney fees and costs and the reimbursement of the amount paid by the injured party’s insurance company for medical expenses, the victim received approximately one- third of the recovery to compensate for the pain, suffering and disability caused by the at fault party. In short, the outcome was both fair and appropriate. Needless to say, offers in the above amounts would only be made where parties were represented by lawyers. Those without representation would be made lesser offers knowing that they did not have the benefit of an attorney to advise them or press their claim if necessary.

Today, insurance companies for responsible parties are offering settlements that are a fraction of the medical expenses and, in the case above, might make an offer of $10-$15,000.00 which will net the injured party a few thousand dollars to compensate them for all of their damages and losses including any residual pain and limitations that they have been left with. Rather than producing a more equitable and predictable outcome, the new Court decisions have bestowed a financial windfall on insurance companies who have, predictably, not lowered their insurance rates significantly but instead have increased the compensation paid to their executives all at the expense of those injured by the negligence of others. While insurance companies’ profits soar, injured people are forced to find lawyers willing to take on cases that previously could be settled without litigation and its attendant costs. Fortunately, lawyers who specialize in representing injured parties handle such cases on a contingent fee basis, charging a percentage of the recovery, usually in the 30-35% range, while fewer lawyers are willing to take on the less serious injury cases it is imperative that those who are be sought out and retained lest the injured party be denied fair compensation. The injured must have the legal help they require to fight insurance companies and the armies of lawyers they employ to avoid paying the injured for the harm caused by their insureds.

More than ever it is imperative that those injured due to the fault of others obtain competent attorneys with extensive experience handling the claims of those suffering injuries and damages in accidents.  Whether in automobile, motorcycle, trucking, bicycle or other vehicular accidents or in workplace injuries or those occurring on the premises of others, it is absolutely essential that victims obtain qualified counsel who can not only negotiate reasonable and adequate settlements from the insurance companies but who will continue to fight for their clients by negotiating with the providers of the medical care received to reduce the amounts of outstanding medical bills as well as minimizing the amounts to be paid to the client’s own insurance companies who demand reimbursement of the amounts paid under their health insurance policies.  The injured party should always be given every benefit obtainable and should recover every dollar they are entitled to especially where the insurance companies do everything they can to avoid paying fair compensation to victims. As always, it is advisable that those suffering injuries contact an attorney before they speak to any insurance company, theirs or the those of the parties causing the accident.  You owe it to yourself to be proactive and protect your rights to fair and just compensation when you are hurt.  You should accept nothing less!