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Difference Between an Insurance Claim Vs. A Lawsuit

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Jeff Sevey

If you’ve been injured through the negligence of another person, there are two separate ways that you can recover money for the damages you suffered:

  • You can file an insurance claim and try to obtain a settlement; and/or
  • You can file a lawsuit against the negligent party and try to obtain a settlement or a  judgment in court.

Which path you choose depends on several factors, including the circumstances surrounding your accident and the nature of your injuries. It should be noted that neither of these methods is mutually exclusive. In some cases, filing an insurance claim is enough to settle the matter. In others, filing a lawsuit may be the only way to bring the responsible party, and his or her insurer, to the settlement table. In this article, we’ll look at the steps involved in both processes to bring an injury claim to a successful conclusion.

Filing an Insurance Claim

Filing an insurance claim is often the first line of offense in a personal injury case. In general, an insurer will not be willing to enter into settlement discussions until they have had an opportunity to look at the evidence surrounding the accident in question and the injuries that resulted. While every insurer’s claim process is different, the steps involved are roughly similar. These steps include:

  • Filing the requisite paperwork to initiate the claim;
  • The insurer opens the claim and begins investigation;
  • The insurer requests documentation regarding the accident and injuries;
  • The injured party sends a demand letter to the insurer containing a settlement amount;
  • The insurer considers the demand and either accepts the settlement demand, rejects it or counteroffers a settlement amount;
  • The injured party accepts the counteroffer or rejects it;
  • The case settles or proceeds to lawsuit.

It should be noted, that some insurers require any claims made against their policies be filed within a specific timeframe - usually within 24 or 48 hours of an accident. In an ideal situation, you will have obtained the name of the negligent party’s insurer. That insurer will have an 800 number or online form that can be used to initiate the claim process.

Once the claim is made, it is assigned a claim number and assigned to an insurance adjuster who will investigate the circumstances surrounding the accident.

The Insurance Company Investigation

No insurer will settle a claim without first conducting an investigation to establish:

  • Whether their insured caused the accident in question; and
  • Whether your injuries were caused by that accident.

In general, the investigation will, at minimum, include:

  • Examination of medical records and bills for treatment;
  • Review of the police report of the accident
  • Review of any photos or video of the accident; and
  • Interviewing you and any other witnesses to the accident.

When dealing with the insurance company, it is important to remember that they are a potential adversary. The adjuster's job is to try and minimize the exposure of his or her employer to any potential liability. If they can minimize the value of your claim, or eliminate it altogether, they will. This means that while you need to be completely honest when talking to an adjuster, you also need to remember that anything you say can and will be used against you if possible. This is why we recommend that you do not talk to the insurer of the party who caused your injuries until you have had a chance to consult with a lawyer.

The Demand Letter

A demand letter is a document sent to the negligent party’s insurer that lists the facts that support that party’s liability for the injuries in question. It also itemizes all of the damages caused by accident in question, both economic and non-economic. Finally, it sets a monetary figure that the injured party feels they are entitled to, based on these facts.

The adjuster assigned to the claim will review the information contained in the demand letter, as well as the information gleaned during the investigation. He or she will then decide to deny the claim, settle the claim for the full amount in the demand letter or offer a sum of money somewhere between these two points.

It should be noted that a demand letter should not be sent until the injured party has neared the end of their medical treatment for the injuries suffered in the accident. By doing so, the amount of money demanded of the insurer in the letter will accurately reflect the cost of those injuries.

Furthermore, the amount asked for in the demand letter can be used to limit the amount of damages you may try and claim in the future, should the insurer reject your claim or should you reject the insurer’s offer of settlement. Therefore, it is recommended that you consult with an attorney before sending any demand to the insurance company.

Negotiating a Settlement

Once the insurance company has received the demand letter and has made a settlement counter offer, negotiating a settlement that satisfies all the parties becomes possible.

It is important to remember that a settlement is a compromise. All trials are risky. No attorney, no matter how experienced, can predict what a jury will do once they begin deliberating. Both parties to a settlement are aware of this fact. Therefore, in certain circumstances, it may be wiser to accept less money through settlement in order to avoid the risk of recovering less money, or no money at all, at trial. In addition, trials can be expensive and they take time. By accepting a settlement, an injured party gets compensated for their injuries immediately and avoids the additional costs associated with a trial.

In the end, the unique circumstances surrounding your case, as well as the advice of your lawyer, will dictate whether to accept an offered settlement or not. If the settlement is rejected, then the next step is filing a personal injury lawsuit.

A Personal Injury Lawsuit

To begin with, every lawsuit is controlled by an extensive set of rules. It is very easy for a layperson to quickly get in over their head when attempting to bring suit by themselves. Therefore, you should never file a lawsuit without first hiring an experienced personal injury attorney to represent you.

Typically, lawsuits are filed after settlement negotiations break down. Ironically, however, the vast majority of lawsuits settle before going to trial. This is because the process of building a case to present to a jury is much more rigorous than the investigative process involved in filing an insurance claim. The evidence gathered during the discovery phase of a lawsuit can often change the way an insurer looks at a case. Remember, the insurer also understands the risks of going to trial.

Even though most cases will settle after the suit is filed, but before trial, it is still a battle of wills. An experienced personal injury attorney does not take the lawsuit process lightly. Even though the case may settle, they will prepare for trial as if settlement is not a possibility.

If you’ve suffered injuries due to an accident that wasn’t your fault, the most intelligent move you can make is to consult with an experienced personal injury attorney. Their decades of experience mean that you receive legal representation by someone who is an authority and an expert in personal injury law. Contact our office today for a free consultation.

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