In any personal injury case, from a car accident to a slip and fall case, there are two main categories of “damages” available to the injured person (“damages” is just a legalese term for losses that the at-fault party must compensate you for). These are your economic or “special” damages, and your non-economic or “general” damages.
Special damages are all of the easily calculable losses stemming from your accident or injury — your medical bills, your lost income because of time missed at work, your property damage, and any other out-of-pocket losses. General damages include things like pain and suffering, which means discomfort and physical pain, but also emotional distress, anxiety, and stress that is linked to the accident and your injuries.
In a personal injury case, the compensation awarded to a winning plaintiff after a trial is based on these types of damages. It follows that a settlement reached out of court should be based on similar factors, but how do you put a dollar value on your pain?
It is not easy to pin a dollar amount on general damages. But there are a number of approaches that insurance companies take when calculating pain and suffering as part of an injury settlement. The two most common are the multiplier method and the “per diem” (daily rate) method. Try out the calculator below to compare both methods.
The most common approach is to add up all the special damages (remember, those are your easily calculable economic losses) and multiply those by a number between 1.5 on the low end, and 4 or 5 on the high end.
This second number (called a “multiplier”) will depend on a number of factors related to your case, including the seriousness of your injuries, your prospects for a quick and complete recovery, the impact of your injuries on your day-to-day-life, and whether or not the other party was clearly at fault for the underlying accident.
The multiplier method is used in AllLaw’s Injury Settlement Calculator, because it’s believed to be the calculation most frequently used by insurance companies. The sticking point in settlement negotiations is going to be the multiplier used. You are going to argue for a higher multiplier while the defendant, or more specifically their insurer, will want to use a lower multiplier. See this list of factors to help you determine the appropriate multiplier.
Another approach to calculating pain and suffering is called the “per diem” method. “Per Diem” is just Latin for “per day”, and the idea is to demand a certain dollar amount for every day you had to live with the pain caused by your accident.
The slippery part of this approach is justifying the daily rate you use. A good way to make sure your daily rate is “reasonable” is to use your actual, daily earnings. The argument here is that having to deal with the pain caused by your injuries every day is at least comparable to the effort of going to work each day.
Let’s illustrate the “per diem” method with an example. Imagine you were rear-ended and suffered a moderate neck strain — whiplash. You are forced to wear a neck brace and take pain pills for two months. You continue to suffer pain for another three months, for a total of five months (roughly 150 days) of pain and discomfort. At your current or most recent job, you earn $45,000 per year – that’s $180 per day when you divide your salary by 250 working days per year.
To get to a pain and suffering settlement in this case, just multiply your $180 daily rate by 150 days of pain, and you arrive at $27,000.
This method falls apart with permanent or long-term injuries, but in those cases you’ll want a lawyer, and your settlement would be based off of related verdicts and settlements in your jurisdiction — data which only lawyers subscribing to expensive services have access to.
It’s always a good idea to use both methods to start, and then adjust your demand from within that range. You may get wildly different numbers, and that’s okay – it all boils down to a negotiation dance at the end. If you were hit by a drunk driver that ran a red light (a slam-dunk case, so to speak) and have a bunch of medical bills, start on the highest end of your settlement range. If you slipped on some ice or snow on front of a private residence, and liability is not so clear, you’re settlement will be closer to the lower end. Every case is unique, but the idea is that you want to start at some reasonable number that you can justify in your demand letter.
When it comes to general damages, when you are receiving medical treatment, it is important to be very thorough in your communication with health care professionals. Report any pain and discomfort you are experiencing.
One reason for this is that an insurance adjuster will often accept your report of pain and discomfort as true when the doctor writes it down and it becomes part of your medical records, but an adjuster may well dispute the very same report of pain and discomfort if it comes only from you as part of your injury claim. Your attorney should be able to help you make the best possible case given the evidence you have available.