Currently, the biggest political and national issue is the economy. Economic slowdowns affect how personal injury cases are handled. Below are a few of the effects of a weak economy on personal injury cases.
In small to medium, non-catastrophic cases, insurance companies will evaluate claims more conservatively.
Insurance companies have investments just like individuals, and when these investments suffer substantially, claims also suffer. The insurance companies must look for ways to save money and one of the first places they look is in the area of claims. In bad economic times, the $20,000 settlement will become a $15,000 settlement, and the very small cases that settle for under $10,000 will become more difficult to handle. Insurance companies will also resist paying maximum value on catastrophic cases.
Insurance companies will likely cut staff, making it more difficult to get claims processed.
When staff is cut, cases may be transferred or assigned to adjusters with whom the accident attorney has never worked. When the personal injury attorney has not established a relationship with the adjuster, the attorney must do additional work to convince the adjuster of his or her credibility.
Adjusters now have a higher caseload and are essentially swamped, especially during high settlement times such as the months of October, November, and December.
Jurors will likely be more skeptical about smaller cases, especially those involving soft tissue or low impact collisions.
In bad economic times, political and media campaigns for tort reform tend to get stronger. The argument is that: “Runaway juries and personal injury attorneys are killing our businesses, including small companies, in this difficult economy.” So, juries are likely to be at least as conservative as they were before the economic slowdown.
With the economy affecting state budgets, there will be even fewer trials and higher litigation costs.
Every branch of state government is going to take a hit and that includes the judiciary. In many states, the judiciary is being cut and otherwise shortchanged.
The judicial branch of every state is going to be cutting court staff, letting retired judges go unreplaced, and some courthouses will likely be closed throughout the country. When this happens, the most likely case that is going to be affected will be the small to medium personal injury case. Judges do not want attorneys to take the $20,000 to $30,000 case to trial when it’s going to cost so much money to do so. Instead, they will want to concentrate limited judicial resources on the high profile criminal cases and the high level product liability and medical negligence cases. Therefore, the insurance carrier will know that it will take a long, long time for a $45,000 to $50,000 case to get a trial date.
Furthermore, court costs increase. Filing fees, mediation costs, and other costs that were heretofore assumed by the judiciary will be passed on to clients.
Clients are more eager to settle and/or hope for unrealistically high settlements and verdicts.
In a bad economy, clients often hope that their financial problems can be resolved by settling their case. Some clients may refuse to accept a decent settlement offer because they are counting on a huge settlement to get them out of debt. Others conversely will want their money so quickly, they will settle cheap. Phony claims also tend to increase and more people will exaggerate their symptoms.
Health insurers and other lienholders may be more difficult to deal with, especially state Medicaid and federal Medicare.
Health insurers who pay medical bills are entitled to reimbursement from the settlement or judgment. Often, however, they will agree to accept less than full reimbursement.
When the economy is bad, health carriers, such as Blue Cross/Blue Shield, will be more inclined to request full reimbursement, or close to it, rather than to reduce their liens substantially. Even in normal economic times, it can be difficult to convince the people in the state Medicaid office to reduce their liens in non-catastrophic cases. They often want one hundred cents on the dollar and are seldom willing to go much lower than that.
Therefore, when a personal injury attorney calls to negotiate a lien reduction, he or she is likely to hear no.