Personal Injury

How Will Insurance Policy Limits Affect Your Personal Injury Settlement?

Your personal injury case could hinge on whether the at-fault party has adequate insurance coverage. Here's why.

You've sustained injuries in an accident where someone else was at fault. You know the at-fault party has insurance, but you don't know how much. Although your injuries are serious and your treating doctors have agreed to provide testimony on your behalf, you would prefer to settle your personal injury claim with the insurance company rather than go through a prolonged court proceeding. But can a reasonable settlement be reached?

The potential for achieving a reasonable pre-suit personal injury settlement will typically depend on two main factors: 1) the nature and extent of your injuries, and 2) the amount of insurance available to compensate you for those injuries.

How Significant Are the Claimant's Damages?

In personal injury cases, the claimant's damages consist of medical expenses, lost earnings and pain and suffering.

The more serious the injuries, the more you are likely to incur significant medical expenses and the more likely you are to be unable to work for a period of time. In addition, there is usually a direct relationship between the severity of your injuries and the amount of pain and suffering damages you can recover.

As an example, a person who slips and falls on a wet grocery store floor and suffers a sprained wrist might incur medical bills for an emergency room visit and some follow up care, and would probably not miss any work. Another claimant who was rear-ended by someone going 45 miles per hour, and who suffered multiple fractures and a closed head injury would be expected to incur medical bills for an extended hospital stay and miss a significant amount of work. When these two cases are contrasted, it becomes apparent that the pain and suffering damages sustained by the auto accident victim are far greater than those sustained by the victim of the slip and fall.

Learn more about Personal Injury Damages.

How Much Insurance Coverage Is There?

Even though the slip and fall victim has far less in damages than the auto accident victim in the above example, their respective settlements may well be affected by the amount of insurance coverage maintained by the grocery store's owner and the driver of the at-fault vehicle.

Insurance companies are only on the hook for the dollar limits of their policies, and the company has no obligation to pay catastrophically injured parties large sums of damages if the insurance limits are low. To further explore this by way of the above example, let's assume that a reasonable settlement value of the slip and fall victim's claim is $25,000, and the grocery store's insurance limits are $1,000,000 per claim. Under these circumstances, it is likely that the claim will be settled in the area of $25,000 because there are ample insurance funds available. In the case of the auto accident victim, a reasonable settlement value might be $500,000, but the at-fault driver only has $20,000 in insurance coverage. In this scenario, a "reasonable" settlement with the insurance company will be $20,000, because that sum represents the limit of the insurer's liability.

While it may seem unfair that the person with the broken wrist receives a larger insurance settlement than the much more badly injured auto accident victim, this result demonstrates how insurance policy limits can affect your personal injury settlement. Although the auto accident victim is not required to accept the insurance company's offer of policy limits and may choose to go after the offending driver directly by initiating court proceedings, the likelihood of an ultimate recovery beyond the insurance policy limits will depend on whether the offending driver has assets sufficient to satisfy a judgment.

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