A common formula for estimating how much compensation you deserve after a car accident is to:
- add your economic damages,
- choose a multiplier between 1 and 5, based on how much the accident affected your life,
- multiply your economic damages by this number to estimate your noneconomic damages, and
- add your economic and noneconomic damages together.
This is known as the multiplier method.
Your economic damages
Your economic damages, also known as special damages, are the losses you sustained from the crash that can be easily stated in a dollar amount. These are things such as your medical bills, including those for future medical care, lost income and earning capacity, and property damage.
The first step to estimating what a fair settlement offer would be is to add all of these losses together.
According to the Insurance Information Institute (III):
In 2023, the average insurance claim for a car accident involving bodily injury was for $26,501.[1]
Which multiplier to choose for auto accident settlements
The next step is to estimate your non-economic damages. Under the multiplier method, you would do this by choosing a multiplier between 1 and 5. The number is based on how much the crash impacted your life.
If you suffered minor injuries and made a full recovery in a couple of months, the multiplier would be 1 or 1.5.
If you suffered a severe and permanent disability from the crash, like a traumatic brain injury (TBI) or paralysis, it would be a higher multiplier, like 4 or 5.
Your noneconomic damages, or general damages
You would then use this number to multiply your economic damages. This estimates your noneconomic damages, also known as general damages. Your noneconomic damages are those that cannot be easily stated in a dollar amount. These are things like your physical pain and suffering, mental anguish, emotional distress from any disfigurement you suffered, your loss of enjoyment of life, and your family’s loss of consortium.
Finally, you would add this estimate of your noneconomic damages to the amount of your economic damages.
An example of the multiplier method
As an example of the multiplier method in use, imagine that you were in a truck accident. You receive emergency medical treatment and start to recover from your accident injuries. One month after the crash, you have suffered the following economic damages:
- $50,000 in medical costs,
- $5,000 in lost earnings from missing work, and
- $15,000 in property damage because your car was totaled.
You are also reasonably likely to lose the following in the future:
- another $25,000 in future medical expenses, and
- $5,000 more in lost wages.
Added together, this is $100,000 in economic damages.
To choose the multiplier number, you would judge how much your life was impacted by the crash. While doctors do not expect you to have a major disability, they predict that you will have some nerve damage in your hands, even after completing physical therapy. Based on this, a reasonable number to use might be 2.
You would then multiply your economic damages, which were $100,000, by 2 to get $200,000. This is your estimate of your noneconomic damages.
You would then add your estimate of your noneconomic damages to your economic losses and get $300,000.
This can give you a sense of how much to expect from your car accident settlement. However, the personal injury lawyers at our law firm have found that getting the insurance company to make such an offer can be difficult.
Factors that can reduce the settlement amount
There are 2 important factors that may reduce the settlement amount produced by the multiplier method. They are:
- your shared fault for the crash, and
- the amount of insurance coverage.
Each state has shared fault rules that reduces what you can recover if you were partially to blame. In many states, like California, your compensation would be reduced by the percentage of fault the jury assigns to you.[2] In some other states, your compensation would be reduced by your percentage of fault, but you would recover nothing if you were more than half at fault.[3] In a couple of states, you would recover nothing if you shared any of the blame.[4]
The insurance company will look for reasons to blame you for the crash and then reduce the settlement offers that they make.
The amount of insurance coverage can also reduce your payout, particularly in crashes that cause severe injuries. Liability insurance policies have policy limits. If your losses exceed these limits, the insurance company would pay the policy limit and no more. You would have to recover whatever was left from somewhere else. In the past, our personal injury attorneys have helped clients recover this remaining amount from:
- the driver that hit you, and/or
- your own underinsured/uninsured motorist coverage.
Punitive damages are rare in car accident settlements
Your economic and noneconomic damages are both types of compensatory damages. They are not the only type of damages that you can recover in a personal injury case. You can also recover punitive damages, which assess a penalty against the defendant for especially bad behavior.
However, punitive damages are extremely rare in car accident cases that are based on negligence. Our car accident lawyers have found that they are only likely to be available if the crash was deliberate.
Other car accident settlement formulas to use
Insurance adjusters may also use the per diem method as an auto accident settlement formula.
Under this method, you would get a daily payment for each day you experienced pain and suffering from the crash. The daily amount is based on your income. It aims to estimate your noneconomic damages, much like the number used in the multiplier method. The daily payment would be added to your economic damages.
Because there are multiple car accident settlement calculators to use, it is important to get the legal advice of a car accident attorney. They can let you know when the settlement value being offered is inadequate. If no fair offer is made, they can help you file a personal injury claim.
Legal Citations:
[1] Insurance Information Institute, “Facts and Statistics: Auto Insurance.”
[2] See Li v. Yellow Cab Co., 13 Cal.3d 804 (1975).
[3] See Texas Civil Practice and Remedies Code 33.001.
[4] See Coutlakis v. CSX Transportation, Inc., 796 S.E.2d 556 (2017) (Virginia).
