Most personal injury cases are settled as a result of endless and frustrating conversations, with the insurance company gradually increasing its offer in small bites. Attorneys who understand the inner workings of insurance companies, how they delegate authority to their adjusters and attorneys and the nature of the paperwork involved in settlement authority, are in a far better position to deal with this frustration and obtain the best possible settlement of their cases. The trick is to remain patient and to understand the behind-the-scenes activities which are taking place. The fundamental principle is that insurance companies, like all big organizations, hesitate to give authority to their employees. The result is that the authority is layered and the means of extending settlement authority is structured.
Adjusters and claims personnel are usually given authority on a managerial or local level, and within individual offices there are various layers of authority. This means that the most impassioned plea, describing the uniqueness of a particular case, may fall on relatively deaf ears and be passed on to one or more supervisors in one sentence abbreviated requests for additional authority. The plaintiff's attorney, on the other hand, usually has client control and can pretty much drop to the bottom line immediately. For example, if the current offer is $50,000 and the plaintiff's demand is $200,000, even thought the case may ultimately settle for $125,000 and even though the particular claims adjuster may want to eventually reach that level, he usually must submit a written request to his superior, who in turn may have to submit a written request to a higher level, all of which results in gradual increases in authority. The potential threat of bad faith exposure, particularly in clear cut liability cases with big damages, reduces this game playing to some extent, but since the Supreme Court has essentially dismantled bad faith, it is back to business as usual. The most erroneous assumption plaintiff's attorneys make is that, because they can cut to the bottom line at any time, the adjuster can do so also. The plaintiff's attorney must patiently be willing to engage in this endless parade of discussions.
Part of the problem is the fact that insurance companies love printed forms and a request for authority usually involves filling out some form which gives little room for explanation. It's like every government document you have ever seen which gives you a 1/4 inch line to fill in your home address and 1/2 inch for your life history. The ultimate authority is provided by someone who is usually remote from the action and is reading some extremely brief explanation which primarily emphasizes "specials."
The other problem is that each adjuster is attempting to protect his own rear end. Everything is veiled in diplomacy and attempts to avoid responsibility for some ultimate catastrophe or criticism for spending too much of the company's money. Because authority is usually extended by supervisory personnel in relatively small increments, many argue that one should hold back on critical information in order to provide the adjuster with new ammunition to get increasingly higher authority.
It is a fundamental mistake to negotiate against yourself, which means, plaintiff should never reduce his demand unless it is in response to a serious increase in the defendant's offer. Sometimes, experienced claims handlers will suggest to the plaintiff's attorney that they "might" be able to get a certain amount of money and ask the sucker question "Would you take x-dollars if I could get it?" Even if the x-dollars represents the plaintiff's secret bottom line, it is a major mistake to answer in the affirmative because the net result will be that the adjuster will come back with a "I tried but I couldn't get it" response. More importantly, the form that the adjuster fills out to obtain authority will simply list the "would you take" demand figure as a reduced demand and the person who extends authority will then extend a lower figure. Adjusters are almost always dealing with the authority that has been extended at that particular time and a somewhat lower figure which they use as a negotiating tool.
The mistake that many inexperienced plaintiff's attorneys make is assuming that some magic number has been determined as the insurance company's position in advance and they are simply playing games trying to avoid reaching that figure. The fact is that the amount of money authorized to be paid on a particular file changes during the course of the pendency of the case. In an easily understood case, where liability and damages are clear, the plaintiff, from the very beginning, usually has a pretty good idea what he wants to settle the case. Insurance companies simply do not operate that way. Therefore, you must not be impatient to get down to your bottom line because, if you do, you will be clearly negotiating against yourself. The result is that the plaintiff must operate in much the same way as the insurance company and lower his demand in gradual amounts over time, allowing the insurance company and its inner workings time to gradually increase the price.
There is always a schizophrenic confusion in the minds of plaintiff's attorneys as to whether to provide critical information or to hold back. If the case is destined to go to trial, obviously the object is to hold back as much important information as you can within the rules of discovery. On the other hand, if the case is typical, regardless of size, and it will probably settle sooner or later, the plaintiff's attorney must be mindful of the fact that the insurance company needs time to adjust its reserves and obtain more authority. This is particularly true when the numbers are such that local authority will be exceeded and regional or even national authority is required. It is therefore important for the plaintiff's attorney to make sure that the defense attorney, and therefore the insurance company, is given sufficient information to evaluate the case at a level consistent with what will be seen at trial, well in advance of the MSC and well in advance of trial.
There is nothing more frustrating than having a claims adjuster and defense attorney wiling to pay the price that plaintiff will accept and simply not having sufficient time to be able to offer that at the MSC or before the trial commences. It is far better to provide information to the defense, with the obvious exception of critical impeachment, months in advance of the mandatory or mediation in order to give the excruciatingly slow bureaucratic wheels of most insurance companies time to bring the carrier's thinking up to a level consistent with that of the plaintiff's attorney. You can argue a blue streak with the defense attorney or the adjuster at a settlement conference, but if the people who control the purse strings haven't been sufficiently educated well in advance, they are never going to pay the right figure.
All settlements are a compromise and, statistically, if plaintiff's attorneys try every single case then, looking at it from the big picture, the total payout would be substantially higher. On an individual case basis, however, there are plaintiffs who would lose particular cases. Therefore, even the most successful plaintiff's trial lawyers, handling the largest cases, sooner or later settle most of them. It is only necessary to understand the way in which insurance companies operate to be able to play the system for the maximum result and go to trial only when necessary and only when the offer is simply not at a level reasonably close to the potential value.