Why Insurance Companies are Making it More Difficult to Settle Claims

By :Douglas A. Petho

If you speak to any attorney in North Carolina who handles  personal injury claims  they will tell you that settling claims with liability insurance companies has become much more difficult than in years past.  There are a variety of reasons why insurance companies are becoming more unreasonable and offering less to settle claims. As a result,  more claimants are being forced into litigation to seek fair compensation. There are a number of reasons for this trend.


Public sentiment about lawyers and increasing lawyer advertisement.  Let’s face it, there has been a dramatic increase in the amount of solicitation by attorneys  for personal injury clients  over the years. Since the North Carolina State Bar has approved direct mail solicitation, anyone involved in an accident will likely have their mailbox flooded with letters from attorneys seeking new clients with sometimes tasteless advertisements. This type of aggressive advertising ultimately damages the public’s perception of the profession of law. Unfortunately the same recipients of this unwanted solicitation may one day find themselves  on a jury. I have personally had countless experiences questioning jurors  who expressed dismay, skepticism and even hostility in personal injury trials  because of nothing more than their experience with direct-mail solicitation.


Small verdicts in trials. Insurance companies like any other company are in the business of making money for their stockholders. Aside from increasing insurance premiums, lowering the amount paid  to claimants is the easiest way to increase their profits. Insurance companies will evaluate the claim on a variety of factors  such as  the extent of the harm caused, economic damages incurred etc. Ultimately what an insurance company will pay to settle a claim  is really only based on what they believe could happen  if the case were tried to a jury. There’s no question  that jurors are generally conservative  when it comes to awarding money for things like pain-and-suffering  and other non-economic damages. Insurance companies pay attention to these verdicts  and adjust their settlement ranges accordingly.


Tort reform. Law firms, like insurance companies are in business to make money. When faced with a low settlement offer  a lawyer must decide whether or not it makes economic sense  to settle or try a case  in court. Aside from being time-consuming, a jury trial can get expensive with court costs, deposition fees, expert witness fees .  In a small claim, a case could end up costing more to pursue than it is worth. In North Carolina,  there are laws that  allow  attorneys  successful in pursuing  small claims to recover attorneys fees  in addition to the amount of money awarded by a  jury. In recent years  the legislature made it much more difficult to recover these costs and limited the attorney’s fees  that can be recovered. The net result  is fewer cases are being filed and  tried. The reduced threat of having to pay attorneys fees and costs has meant that the insurance company have become more conservative their settlement offers.


Increasing number of attorneys. Every year more and more attorneys graduate and pass the Bar. As the number of attorneys practicing insurance defense law increases, so does the competition  among firms vying to represent insurance companies. The increase competition has resulted in many firms moving to a ”flat fee”  structure in the way they handle cases. This reduces the cost of defending insurance claims. When insurance companies  are weighing the cost benefit of either settling a claim or going to trial, the cheaper it is to try, the more likely the insurance carriers are to roll the dice.
While the above reasons may help to explain the trend and lower insurance settlement offers, no two cases are identical. Even against this backdrop I believe most jurors  will try to do what they believe is fair. The decision whether to settle  or to try a case must ultimately rests on the evaluation of the facts of each case. Speaking with an experienced trial attorney  is essential in in making this decision.