• What’s it Going to Take to get you into this Settlement? Effective Negotiation Skills for the Claims Professional
  • February 3, 2012 | Author: Michael P. Gould
  • Law Firm: McCumber, Daniels, Buntz, Hartig & Puig, P.A. - Eagleville Office
  • Settling a claim is like purchasing an automobile: you don’t want to pay any more than necessary.  From a claims perspective, there are often additional considerations, which may include satisfying the insured and, in some instances, sending a message to the claimant and his or her counsel.  This article will provide a basic primer to assist in the process and offer some practical advice in obtaining favorable results.

    A. Be Prepared

    Before beginning any settlement negotiation, it is important that you have done all your homework.  This includes obtaining all necessary documents to properly evaluate a claim.  These documents may include police reports, necessary witness statements, medical records, proof of wage loss, prior claims history (where applicable) and lien information.  As soon as practical, it is important to obtain copies of any contracts, which may provide coverage or indemnification.  A failure to do so in a timely fashion may impair your ability to obtain relief at a later date and, in some cases, act as a waiver.

    B. Value the Claim Appropriately

    Often times, valuing a claim is easier said than done.  While property claims are typically for a liquidated amount, there is an art to evaluating a bodily injury claim, which involves a multitude of factors.  Of course, the nature of the injury must be considered, but characteristics of the claimant cannot be overlooked.  Indeed, a scar on a young man may not have the same impact as a scar on a young lady.  The age of the claimant is also a determining factor.  One of the biggest variables in valuation which is overlooked is the venue.  Oftentimes, it is difficult for the claims professional located in a conservative jurisdiction to recognize the premium that must be considered in far more liberal venues.  Thus, venue must be afforded some consideration.

    There are a number of other factors that also merit consideration, including a claimant’s motivation to settle.  Very often there is a psychological hurdle the claims professional may have to overcome with the claimant.  Claimants feel wronged, and sometimes there is no amount of money that can adequately compensate claimants who desire their day in court and their pound of flesh.  Other times, there are external factors at work such as a claimant’s expectation, driven by friends who boast having received a large settlement.  In cases where the claimant is represented by counsel, the attorney may attempt to place added value on a case by his or her reputation of receiving large settlements and verdicts. 

    C. Choose your style

    When negotiating, it is important to pick a style that best suits your personality.  Typically, this is broken down into a style that is either cooperative or competitive.  The old saying, “you get more flies with honey” is the building block for the cooperative style.  The advantage to this style is that it develops a sense of trust with the claimant and counsel and a feeling that you are working with them. This settlement concept is often seen when purchasing a car.  The salesman will tell the buyer that he or she is working with the buyer, but the manager is the one who is ultimately making the decisions.   Similarly, claims professionals can use their supervisor, fictitious or otherwise, as the scapegoat for an inability to meet certain demands.  Though, when doing so the claims professional must concede a certain amount of authority, which could have a detrimental effect if the claimant views the adjuster as simply a middle man.

    Employing a more competitive style sends a message to the claimant that you are in control. The hallmark of this style is that it is often more adversarial and, consequently it is easier for the negotiations to break down.  

    While geographical constraints do not always provide for face to face negotiations, such meetings provide several added benefits.  In-person negotiations greatly cut down the time between the parties going back and forth since there is a presumption the decision makers are present and able to resolve the case at the meeting.  Meeting the claimant also provides the claims professional the chance to make his or her own, independent assessment of the claimant, which includes evaluating both the severity of the injury as well as the type of witness the claimant may make in front of a jury.  This also has the added benefit of making a claimant feel like someone is taking a personal interest in his or her claim.  Certainly, in a first-party claim this is of paramount importance.

    D. Timing is Everything

    Settlement negotiations are often referred to as a horse trader game, where the sides go back and forth until an agreement is reached.  This takes the form of an offer and counter-offer until settlement is achieved.  Psychologically, each party feels like it is in control while also making certain concessions.  Though, to be effective, both sides must be working in good faith and have realistic expectations.  

    When negotiating, sometimes “timing is everything.”  It is commonly believed that the end of the year is an optimal time to settle a case.  The prevailing mindset is that the insurer is anxious to close out a claim and get it “off the books” before the end of the year, while the claimant can often use the money around the holidays.  Of course, there may be other times throughout the year when a claimant is motivated to settle, and the prudent claims professional should watch for these cues. 

    Consideration should also be given to when you make an offer and how soon you respond.  There is no hard and fast rule as it varies depending on the situation.  It is not unusual for one party to be within its authority level but still make the proverbial phantom phone call.  It is important that this gamesmanship does not result in one particular side growing frustrated and walking away from a settlement that otherwise could have been achieved.

    Deadlines may also be employed during negotiations but can compromise credibility if they are not carried out.  They may also shut down negotiations prematurely.  Thus, any deadline or threat must be well measured.

    E. Tricks of the Trade 

    When it is time to actually make an offer, there are several strategies that are sometimes utilized.  I have seen offers made that are odd numbers such as $23,435.86.  There is no legitimate basis for this calculation other than to simply give the appearance that it was arrived at by some meaningful computation.   By making such an offer, the claimant may believe that some formula must have been used at arriving at this number, thus lending an air of credibility to it.  Where counsel is involved, the “Rule of the Third” can be helpful.  Typically, the fee arrangement in personal injury claims compensates counsel for one-third of the recovery.  Thus, by making an offer divisible by 3, counsel is able to quickly calculate his or her fee and convey to the client the net offer. 

    Throughout this process, it is also important not to tip your hand while also looking for common tells.  More often than not, when claimant’s counsel says, “Can you get me anymore?” he is probably willing to accept the current offer.  “I’m willing to try this case,” probably means that you are not.  Instead, a more subtle approach is often more effective; “what days are you available for expert depositions?” 

    Ultimately, there is no right or wrong way to negotiate, and it is important to adopt the methods and style which most suit your personality.  In the end, a happy file is a closed file.