The procedure for calculating damages following an auto accident can be complex and confusing. However, understanding this procedure and the formula used can assist you in evaluating your case and giving you an idea of the settlement amount you can expect in your auto accident personal injury case. This will ensure that you are not taken advantage of. This blog discusses the formula used to calculate damages in auto accident personal injury cases and how it works.

What Does a Settlement Formula Mean?

An auto crash settlement formula refers to a computation that estimates the compensation amount an injured person should recover for the damage they suffered in a vehicle collision. Insurers devised this formula based on the results of thousands of previous vehicle accident cases. The formula foretells the amount of money an insurer or jury would grant an accident victim.

The formula considers various factors in determining the compensation value, such as economic and non-economic damages. Apart from the economic and non-economic damages, the formula considers subjective elements like how severe the injuries suffered in the accident are and to what extent they have affected the victim's normal life. Other factors can be considered, too, like who was to blame for the crash or whether the victim contributed to the collision. After all the factors are considered, a multiplier is applied.

The formula then gives a dollar value that the victim may receive to help them cover the expenses of healing their injuries. However, it is worth noting that the formula does not warrant that a victim will receive a specific compensation amount. It only acts as a guideline for the amount that could be granted under the circumstances.

Lastly, it is worth remembering that no two auto accident cases are the same, and this formula is only one way to determine the compensation amount a victim should receive. Ultimately, it is up to insurers or the courts to decide the ultimate compensation amount.

But with all things considered, the formula is useful and can help victims obtain a fair compensation amount for their losses and injuries. Knowing how the procedure goes will help you better assess your insurance claim's value and aggressively negotiate with insurers or lawyers for a fair settlement.

How It Works

An auto accident settlement formula works by adding up all the victim's special damages and then estimating their general damages. The most prevalent formula is relatively simple. It is as follows: special damages plus (special damages X multiplier).

That is, a personal injury lawyer or insurance adjuster calculates the victim's special damages. They then multiply these damages by a multiplier to determine the settlement value to which the victim is entitled. As mentioned above, the auto accident settlement formula considers various factors, including non-economic and economic damages.

Non-economic or general damages are more subjective. They are meant to reimburse the injury victim for the not-easily calculable losses. They compensate for the loss of enjoyment of life, mental anguish, physical pain and suffering, loss of consortium, emotional distress, loss of companionship, disfigurement, permanent physical disability, and scarring.

In certain cases, a general damages award can be the largest in an injury suit. It is critical to remember that general damages are not calculated by multiplying the wages earned per hour by the number of hours the victim took to heal from their injuries. Instead, they are calculated based on how severe the victim's injuries are and other factors like medical costs, the long-lasting effects of the accident, and lost wages because of an inability to work.

A court or insurance company can often award a higher cap on the general damages amount. Based on how severe the injuries are and other elements, a victim may qualify for a maximum of 250,000 dollars in general damages. Remember, this number does not reflect a guaranteed value; it is only a guide for the amount that could be awarded in an auto accident claim or lawsuit.

Ultimately, proving general damages necessitates the victim telling their story and presenting evidence of the accident's effect on their life. This includes sharing the degree of suffering and pain they have endured due to the liable party's recklessness or negligence.

Economic or special damages are accident-related costs that are easily calculable. These damages reimburse the victim for tangible losses resulting from the vehicle accident. They include property damage, lost wages, medical bills, loss of earning capacity because of accident-related disability, out-of-pocket costs, and other financial expenses related to the collision.

Special damages are generally easily calculable because they are contingent on actual, provable income or expenses. Property damage and medical bill receipts can easily prove these kinds of claims. Loss of earning capacity because of disability and lost wages can be determined depending on expert testimony regarding the anticipated salary of a person under the circumstances prior to their injury and employer records.

Special damages can also comprise future expenses associated with an injury, like future medical attention, rehabilitation, physiotherapy, and transportation expenses for ongoing medical care. All these costs may be part of a special damages award, ensuring the victim receives adequate compensation for their suffering and losses.

If you are an auto accident victim, you should document all your out-of-pocket expenses associated with the accident to ensure you receive maximum compensation from liable parties. Consulting a skilled personal injury lawyer can assist you in understanding what special damages apply to your claim and the best way to seek them. Additionally, an expert attorney can review your case and advise on possible strategies to maximize your compensation amount.

The auto accident settlement formula does not consider punitive damages because they are rarely awarded in auto accident cases. Punitive damages are only recoverable if the liable party acted intentionally, maliciously, or recklessly. Instead of reimbursing the victim, they are meant to punish the at-fault party and discourage others from acting similarly to them.

The Multiplier

A multiplier is a number used to multiply a victim's special damages to approximate their general damages. The multiplier is a critical element of the vehicle accident settlement calculator, so it is essential to know how it works. It plays a primary role in determining how much compensation a victim can anticipate receiving from an approved insurer, depending on the seriousness of their injuries from the accident.

The multiplier is determined by considering how much the victim incurred in medical expenses due to the accident and any lost income they might have incurred consequently. This number varies depending on how much the accident affected the victim's life. It usually reflects how severely the victim was injured and could be as high as 5 or as low as 1.

The more severely the victim was affected by and injured in the accident, the higher the multiplier, because severe injuries will likely permanently affect the victim. Consequently, the higher the multiplier, the more significant the compensation the victim can anticipate recovering for their injuries. On the other hand, a person who has suffered minor injuries with few damages will generally be assigned the lowest multiplier.

To determine the right multiplier for a case, an insurance adjuster must first assess the medical costs incurred and any disability or wage losses the accident caused. The adjuster then compares the values to similar personal injury cases to calculate and agree upon a multiplier that sufficiently compensates the victim for their losses and injuries.

It is worth noting that an adjuster uses all the available evidence to determine an appropriate multiplier, including police reports, witness statements, and medical records. Therefore, it is in your best interest to, through your lawyer, give as many details as possible regarding your injury and accident so your lawyer and the adjuster can accurately evaluate the case and agree on the right multiplier.

Also, note that whereas a higher multiplier will generally mean a higher compensation amount, other factors may impact your settlement offer, including the insurance adjuster's liability assessment and several other legal issues.

Generally, insurance adjusters recommend a lower multiplier if they have reason to believe you will recover quickly from your injuries or have a pre-existing health condition that may complicate recovery. Thus, you want to work with a skilled injury attorney if you were hurt in a car accident to ensure you receive the compensation you deserve for your losses and injuries.

If you are not content with the compensation amount an insurer has offered, understanding how the multiplier works comes in handy, as it will help you challenge your case and give reasons why a higher multiplier should be used. With knowledge and a skilled lawyer working for you, you will have a higher chance of recovering the compensation you deserve.

Insurers Do Not Always Grant the Estimated Settlement Amount

Vehicle insurance providers are not mandated to grant the amount the auto crash settlement formula approximates. The result of a vehicle collision settlement depends on several factors, like medical costs and property damage, that vary from case to case. An insurer may grant a different settlement amount if doing so will benefit their business more or if the victim's case has mitigating factors that may lower the overall compensation amount.

Additionally, the laws of some states limit the settlement amount a vehicle insurance provider must award in a given injury claim or lawsuit. In these instances, an insurer will only award up to the standard limit, even if the formula estimates a higher amount than the stipulated maximum payout.

Before consenting to any settlement offer, it is essential to research your state's laws and fully comprehend the ramifications of the terms of the offer the insurer makes. A skilled attorney can also assist in ensuring you recover a fair compensation amount for your case.

In the end, while an insurer may opt to award the amount the formula has estimated, that is not guaranteed. You want to do your due diligence before accepting any offers from your insurance provider or the at-fault party's insurance company.

Factors Impacting the Approximated Settlement Amount

Several factors can impact the settlement amount of a victim's auto accident claim. Here are some things you should consider when determining your possible settlement value as an auto accident personal injury victim:


The compensation you obtain in California car collision cases depends on whether or not you were partly liable for the crash. You would likely recover a larger settlement if the collision were entirely due to another person's fault. But if you were partially at fault, you would recover only a portion of your compensation. Also, if multiple parties were to blame for your collision, their respective insurers would review every claim independently before agreeing on a settlement figure.

Available Insurance Coverage

The liability coverage amount the other party carries also affects the compensation value you recover. You might not recover the total settlement amount if your claim is worth more than the available liability coverage amount. This is especially true if the liable party lacks property from which you can recover damages above the policy limit. In this case, you might have to pay for your outstanding accident-related costs out of your pocket.

Total Number of Damages

The insurer will need you to write a demand letter quoting the settlement amount you seek to recover. To do this, you must calculate the total damages you have suffered. Often, you will qualify for general and special damages. If you are eligible for punitive damages, it will raise your recovery.

The Severity and Type of Injuries

The degree and type of injuries you sustain in an auto crash influence the medical treatment you require, how long you must stay at the hospital, and whether you can resume work. Generally, the more severe your injuries are, the higher the settlement amount you will likely receive.

Other factors include how severely your vehicle was damaged, how much money it would take to replace or repair it, and your insurance coverage. The amount and type of evidence provided about the accident is also a factor when determining a settlement offer by an insurer. This may include pictures of the accident scene, witness testimonies, and police reports.

It is critical to note that auto accident personal injury cases vary; therefore, insurance companies handle every claim differently. Thus, it is essential to consider each of these elements when determining the expected settlement amount you may recover from an insurer.

By knowing the various components that constitute an insurer's settlement offer, you will be better placed to negotiate for a desirable amount. This may help you obtain the best deal after an auto accident.

Caps on Damages

In California, the non-economic damages obtained in car accidents are capped. The highest amount in general damages an insurer or court can award to an auto accident personal injury victim is two hundred and fifty thousand dollars.

However, economic damages are not capped. Additionally, there are exceptions to this cap based on case facts. If, for example, the victim suffered specifically psychological or physical trauma because of their accident-related injuries, they may recover more than two hundred and fifty thousand dollars in general damages.

Note that caps on damages vary from one state to another. Therefore, if you are an auto accident victim in California, you want to understand all the laws regarding your claim. A skilled car accident personal injury attorney can provide valuable assistance and advice and ensure you receive fair compensation for your injuries and losses.

The Per Diem Formula Is An Alternative Settlement Formula

Another method that insurers use to determine the value of an auto accident claim is the per diem formula. Under this formula, the victim is assigned compensation of a given amount for each day they experience pain and suffering. Generally, a victim's per diem earnings would be close to their daily income if the accident had not occurred.

For the most accurate estimate of your possible auto crash settlement, consult an experienced car accident lawyer. The lawyer will ensure you recover compensation for all potential losses associated with the accident.

Find an Experienced Personal Injury Attorney Near Me

If you are involved in an auto accident, you want to know how to calculate your compensation and the amount you can expect. Most importantly, you should take the matter seriously and hire a skilled car accident personal injury lawyer to assist you in obtaining the compensation you deserve.

Even if you know the formula for calculating damages, the insurance company may try to deny you what the auto accident settlement formula has estimated you should receive. An attorney may help you aggressively deal with the insurance provider and ensure you receive what you deserve. Additionally, various legal issues in your case may require a lawyer's interpretation.

At Orange County Personal Injury Attorney, we have represented hundreds of car accident victims and can help you too. We have helped them calculate their compensation amounts and, thanks to our negotiating skills, rigorously negotiated with insurance companies to ensure they obtain the value they deserve. Additionally, we understand the ins and outs of the legal system and the local courts, which gives us the upper hand even if we have to go to court. Call us at 714-876-1959 for a consultation and to share your case details.