Is There a Car Accident Settlement Formula?

The overwhelming majority of car accident claims settle through the insurance claim process. Before you negotiate a settlement with an insurance company, you need to figure out what you think your claim is worth. Most car accident attorneys and insurance adjusters use the "multiplier" method to get a ballpark estimate of the value of a claim.

In this article, we'll answer your questions about car accident settlement formulas, including:

• What is the multiplier method?
• How does the multiplier method work in practice?
• What factors do insurers consider when they decide which multiplier to use?

Damages Overview: Special and General Damages

To understand how the multiplier method works, you first need to understand what kinds of damages (monetary compensation for harm) are typically available after a car accident. Car accident damages can mostly be grouped as "special" (often called economic) and "general" (or non-economic). (Punitive damages are rarely available in car accident cases.)

Special Damages

Special damages are financial losses related to the accident. Common categories of special damages include:

• the cost of medical treatment (past and future)
• the cost of repairing or replacing damaged property, and
• lost wages and earning capacity.

General Damages

General damages are non-monetary losses. They tend to be much harder to calculate than special damages because they are more subjective. General damages can include:

• pain and suffering
• emotional distress, and
• lowered quality of life (loss of enjoyment).

The "Multiplier" Method

Given the insurance industry's obsession with statistics, and the fact that there were approximately 6,756,000 traffic crashes in 2019, you might assume that there's a universal formula to determine the value of a car accident claim. But no two car accident claims are exactly the same. So, instead of a universal formula, insurance adjusters rely on the multiplier method to estimate the value of a claim and kick off settlement negotiations.

The Multiplier Method Formula

In this kind of calculation, the adjuster:

• totals up the car accident claimant's medical bills stemming from the accident (sometimes called "medical special damages")
• multiplies that number by a certain factor (typically between 1 and 5) to get an estimated value of the claimant's harder-to-quantify general damages (like pain and suffering), and
• adds the medical special damages, estimated general damages, and any lost earnings and future lost income together to arrive at an overall estimate of the car accident claim.

Multiplier Method Example

Here's an example of how the multiplier method might work in the real world. Let's say you were on your way home from a party when a driver rear-ended you at a stoplight. Your face hit the steering wheel and you had to get stitches and some dental work.

Your medical and dental bills totaled $5,000. The insurance adjuster used a multiplier of 2 to estimate your general damages (see below for more on how adjusters and others decide on multipliers). So, in the adjuster's opinion at least, your general damages are worth about $10,000 ($5,000 x 2). You had to miss several days of work while you recovered and for medical appointments. Your lost income added up to $3,000.

Your ballpark estimated damages then, including pain and suffering, would be: $5,000 (medical special damages) + $10,000 (estimated general damages) + $3,000 (lost wages). But keep in mind that the adjuster probably isn't going to come close to offering you $18,000 when making a first settlement offer. What the insurance company is really trying to do here is figure out what a jury might award you if your car accident case goes to trial and settle for something less than that amount.

You can use Nolo's personal injury settlement value calculator to get a reasonable dollar amount for your claim.

Factors That Can Raise or Lower the Multiplier

As you can imagine, deciding which multiplier is right for your case will likely be a point of contention between you and the insurance adjuster. You'll argue for a higher multiplier (like a 4 or 5), while the adjuster is likely to push for a lower multiplier.

Factors that can raise or lower the multiplier in a car accident claim, include:

• the seriousness of your injuries (low medical bills tend to lead to a lower multiplier)
• clear evidence of pain and suffering documented by a medical professional
• the amount of proof that the other driver was at fault for the accident, and
• the length (and extent) of your recovery.

Adjusters will also ask:

• Was your injury completely new as a result of the car accident, or did the car accident merely aggravate a condition for which you were already being treated?
• Did you seek medical attention immediately after the car accident? Or did you first complain to your doctor about your symptoms three months after the accident?
• Was your treatment excessive? Insurance companies rarely attach the full value of medical expenses in the areas of chiropractic treatment or physical therapy if the adjuster believes the length of treatment might be excessive.

Talk to a Lawyer

If you have questions about the multiplier method, talk to a lawyer. A skilled lawyer can help you estimate the value of your case and negotiate for the best settlement possible. Learn more about how a car accident lawyer can help you.