The Injury Defense Industry in New Jersey v. You – Part I
November 22, 2019
BY: Domhnall O'Cathain
“Insurance companies will never let your case go to trial; they always settle,” your uncle announced to everyone in the room.
But that didn’t happen in your case.
Three years after you were injured in the truck crash, you had to spend two weeks in Court with a judge and eight jurors. After the lawyers finished the closing statement, the judge spoke to the jury for about 45 minutes and then gave them a verdict sheet. They came back three hours later.
You looked over at the defendant’s lawyer, who has made you feel small since this case started. He was white as a ghost. And you were just relieved. The jury came back with an amount higher than what you and your lawyer demanded before trial. And much higher than the defense lawyer’s last offer.
The jury’s verdict was a drop in the ocean for the insurance company. Why did the defense lawyer look so worried?
Injury Defense Industry in New Jersey
The insurance industry is built on a simple model: bring in as much money as possible from premiums paid by customers and pay out as little as possible in claims to victims. It is a competitive business (look at all those commercials during sports games) and highly lucrative (the net worth of State Farm at the end of 2018 was $100.9 billion dollars).
We buy insurance in case something bad happens in our lives. It is a business built on risk. Therefore, when the insurance company gets notice of an injury lawsuit, it needs to evaluate the lawsuit and set a reserve of money in case it needs to pay the victim one day. This needs to be done with all lawsuits so that the insurance company can estimate its overall risk.
That “reserve” controls the insurance lawyer’s ability to negotiate with the plaintiff’s lawyer. The insurance defense lawyer will not negotiate above that number because that would throw off the insurance company’s accounting method to assess its risk.
If a jury comes back with a number that is above the “reserve,” the insurance company has a problem. And who will take the heat? The lawyer and whoever in the insurance company set the reserve. The insurance company might pull all its cases from the lawyer or the person who set the reserve might get passed over for a bonus.
The reserve is not a number that the insurance company or insurance lawyer tells the plaintiff’s lawyer. However, in many cases, the plaintiff’s lawyer can make an educated guess as to what the reserve number is.
These are some of the things that the insurance company looks at in setting its reserves on your personal injury lawsuit:
- What are the policy limits of the insurance?
- How bad is the injury?
- Did the plaintiff have surgery?
- What is the economic loss, such as medical bills and time lost from work?
- Did the plaintiff have some fault in causing the crash?
- What has the insurance company paid in similar cases in that area?
The policy limits are crucial. If the crash was caused by a commercial truck, there is usually significant coverage and there will a lot of money to fight over if there is a bad injury. On the other hand, if the defendant driver had a minimum policy but the plaintiff had a bad injury, the case should resolve quickly. In that case, we will hope that the plaintiff purchased good underinsured motorist coverage.
If there is a big policy with bad injuries, the insurance company will set a higher reserve. That does not automatically mean that there will be a quick, big settlement. The insurance company wants to save as much as it can from the reserve because every penny not paid is a bonus for it.
If the case is going to settle, the job of the plaintiff’s lawyer is to force the insurance company to set a high reserve and to settle the case at or close to that number.
Why do Cases go to Trial?
Cases go to trial when either the plaintiff or insurance company believes that they will do better from a jury than what the other side is offering.
Before trial, the insurance company is still controlled by the “reserve.” However, by the time it gets close to trial, there are more people at the insurance company re-evaluating the case which often leads to an increase in the offer. That is why many cases settle when the jury is being selected.
If the two sides cannot agree, the case goes ahead. The jury will never know what either side was willing to offer. The jury will never hear about a “reserve” or “policy limits.” The jury will not even know whether or not the defendant is insured!
Somebody is going to lose when the jury comes back. If the insurance company loses, it is almost certain that they will bring motions to take away the jury’s verdict.
Next Week – Part II
By reading this much, you now have a better understanding of how the insurance defense industry in New Jersey works in a personal injury lawsuit. It might feel like David v. The Goliath Insurance Company. However, with the next blog post, we will explain how you and your lawyer can turn the tide in your favor.