Accidents are unexpected and often turn into financial hardships. Suddenly, you owe thousands in medical costs, you’re dealing with property damage, and missing income due to lost work. Trying to fit all of the financial puzzle pieces together can be challenging and more than a little stressful.
If you’re not responsible for causing the accident, you may be able to file a claim to recover compensation. Did you know your compensation can potentially cover more than your economic losses? However, determining the value of non-economic damages can leave you confused and wondering if it’s worth the effort.
Before you give up on including your non-economic damages in your personal injury claim, here’s what you should know about calculating their value.
What’s Considered a Non-Economic Damage
You’re probably familiar with economic damages. These are losses that come with handy price tags like your medical expenses, property repair and replacement costs, and even lost income.
Since you can easily find the value of these damages, calculating your losses is relatively easy. All you need is a calculator and the paperwork and you can come up with the precise value.
Non-economic damages are a little different for a simple reason; these losses refer to both your emotional and physical suffering. You can’t turn to financial documents to help determine their value, and this also doesn’t mean you can pull a number out of the air. Insurance companies and the legal system require a little more than your best guess.
Before we get into how you can calculate your non-economic damages, it helps to know what they are. Some examples include the following:
- Chronic pain
- Permanent disability
- Depression and anxiety
- Post-traumatic stress disorder (PTSD)
- Mental anguish
- Emotional distress
- Loss of quality of life
- Permanent disfigurement
Some of these non-economic damages may seem like they are referring to the same thing. For example, mental anguish and emotional distress can have the same definition but in personal injury law, they can refer to two separate and distinct losses.
Something else to consider if your personal injury claim may not list all of these non-economic damages. Every claim is unique, just like the accident. No two accidents are exactly the same.
How Do You Determine the Value of Your Non-Economic Damages
As we mentioned earlier, non-economic damages don’t tend to come with handy price tags, bills, or receipts. These are intangible losses and this makes calculating their value a little more complicated. We also noted you can’t just give your pain and suffering a random value.
Sure, this does simplify the claim process but it also increases your chances of receiving a denial letter from the insurance company. This doesn’t mean your pain and suffering doesn’t have an economic value, only that it’s a little harder to figure out how much your non-economic damages are worth.
To make it easier for everyone from accident victims to attorneys and insurance companies to calculate the value of non-economic losses, the legal system recognizes two distinct methods. Either method will give you a total value of your non-economic losses. The best method for you often depends on factors like your economic damage value and average daily salary rate.
The Multiplier Method
You can use the multiplier method to calculate your non-economic damages. You’re going to need the total of your economic damages before you can move forward. You also need to assign a number to your pain and suffering.
The numbers typically range from 1.5 to 5. A higher number typically indicates more severe injuries. Who assigns your pain and suffering a number can vary, but it’s usually left to the insurance adjuster or courts.
You take the value of your economic damages and multiply it by the number assigned to your pain and suffering. So, if your pain is rated at 3 and your economic damages total $100,000, your non-economic losses have a value of $300,000.
The formula is as follows:
$100,000 (economic damages value) x 3 (the number assigned to represent your level of pain) = $300,000.
Adding the total of your economic and non-economic damages gives your personal injury claim a value of around $400,000.
The Per Diem Method
You can also use the per diem method to calculate the value of your non-economic damages. Instead of taking the value of your economic losses, this formula looks at your average daily salary.
If you’re a salaried employee, divide your annual pay by 365 (number of days in a year). If you’re paid hourly, multiply your pay rate by the number of hours in a payday.
Don’t lose the total of your average daily pay. You’re going to need it to figure out the value of your non-economic losses. The next step is determining how many days your injuries prevented you from returning to work. So, if you’re out of work due to injuries for 100 days, this is the number you use in your formula.
If you’re feeling a little confused, don’t worry. Sometimes looking at a formula example can help with clarification;
$150 (your average daily pay rate) x 100 (days your injuries prevented you from working) = $150,000. This is the value of your non-economic damages which you add to the total of your economic losses.
Which Method Is Best for Personal Injury Claims?
When it comes to deciding which method is best for calculating your non-economic damages, there isn’t an easy answer. Remember, every accident is unique and this extends to the personal injury claim. What one accident victim can claim will probably be different than what applies to your case.
With that being said, one method for calculating non-economic damages isn’t necessarily better than the other. Your personal injury attorney can give you some advice, but don’t be surprised if they recommend using both formulas.
During negotiations with the insurance company, you should expect to receive a lower offer than your claim’s true value. This is normal but you may be able to speed the process up by countering with another offer using a different calculation
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