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How personal injury settlements are calculated

On Behalf of | May 2, 2024 | Personal Injury |

When someone gets hurt and seeks compensation, the process of figuring out how much money they should receive in a personal injury settlement involves several factors.

It is helpful to understand how attorneys and insurance companies calculate these amounts.

Medical expenses

The foundation of a personal injury claim is the cost of medical treatment. This includes expenses for hospital stays, doctor visits, physical therapy and any ongoing medical treatments needed because of the injury. The more severe the injury, the higher the medical costs, which directly influence the settlement amount.

Lost wages and earning capacity

If the injury causes the victim to miss work, the settlement may include compensation for lost wages. This is the amount of money the person would have earned if uninjured. In severe cases where the injury affects the person’s ability to work in the future, the calculation may also include loss of earning capacity, which considers the potential earnings lost over a lifetime.

Pain and suffering

Calculating compensation for pain and suffering is more subjective. It depends on the severity of the injury, the pain endured and how the injury affects the person’s daily life and mental health. Lawyers and insurers use different methods to quantify these damages, sometimes involving multipliers of the actual financial losses or per diem rates.

Property damage

If the incident also resulted in property damage, such as in a car accident, the cost to repair or replace the property would be part of the settlement.

Punitive damages

In cases where the defendant’s actions were particularly harmful or reckless, the court might award punitive damages. These are not linked directly to the type of injury or the costs incurred but punish the wrongdoer and deter similar actions in the future.

Settlement negotiations

The negotiation process itself can affect the settlement amount. Both sides may agree to a number that is less than what might be awarded at trial to avoid the uncertainty of a jury decision.

Understanding these components helps in predicting the potential outcome of a personal injury case. Legal professionals consider all these factors to ensure fair compensation for the injured party.