Any type of accident can result in damages that can be financially devastating. Medical costs can leave you scrambling, and this is before you account for any property damage. Your injuries may even leave you unable to work and this can add additional stress to a tight budget.
Thankfully, you can recover some compensation for these damages, but what about your emotional suffering? You may actually be able to include this in your claim. However, the methods to calculate pain and suffering damages can be complicated. There’s more than one method and both can leave you scratching your head.
What are Non-Economic Damages?
Before you can start calculating non-economic damages, it helps to know what they are. Non-economic damages are a standard part of most personal injury claims. These losses are different from your economic damages. Your economic losses like medical expenses and property damages are tangible. You have bills, receipts, and estimates that make it fairly easy to calculate the value of these damages.
Non-economic losses are intangible. After all, how can you place a price tag on your pain, suffering, and emotional turmoil? You can’t use bills and other documentation to calculate the financial value of your non-economic damages. If you’re not sure what qualifies as non-economic damage, here are a few common examples:
- Chronic pain and/or suffering
- Permanent disability
- Depression and anxiety
- Post-traumatic stress disorder (PTSD)
- Mental anguish
- Emotional distress
- Loss of quality of life
- Permanent disfigurement
These are only a few examples. Your non-economic damages may include some items not on the list like loss of companionship and even reduced earning capacity, to name a few. Every personal injury claim is different so what applies to one case may not apply to yours. A personal injury attorney can help determine which non-economic damages you should consider listing in your insurance claim.
How to Calculate Your Non-Economic Damages
Okay, so you know your non-economic damages don’t come with bills or receipts. You also can’t pick a dollar amount at random and hope the insurance company accepts your claim. So, how are you supposed to calculate the value of your pain and suffering? If you’re like most people, it’s tough to put a price on mental anguish.
You and/or your attorney can use one of two accepted methods to calculate non-economic damages. Either method will place a value on these losses but one may be better suited for your claim. Here’s a look at the two formulas you can use.
Per Diem Method
The per diem method looks at the average number of days your injuries cause pain and suffering. The method also looks at your average daily pay rate. The formula takes your average daily pay and multiplies this by the number of days you experience pain.
For a day to count, your pain must be severe enough to prevent you from returning to work. This also applies to injury severity. So, the number of days you’re in pain is directly related to your ability to return to work. In other words, you can’t claim a day if your healthcare provider clears you to return to work. If you’re feeling a little confused, sometimes it helps to look at an example formula.
So, if your injuries cause you to miss 100 days of work and your annual salary is $40,000, your average daily pay rate is around $160. This is your average pay for the 250 days your injuries aren’t preventing you from working. You take your average daily rate and multiply it by the number of days you’re not working, the total is the value of your non-economic damages.
Your formula will look like the following;
$160 (your average daily pay) x 100 (the number of days you miss work) = $16,000. The final total represents the value of your non-economic damages.
The Multiplier Method
Another way of calculating non-economic damages is by using the multiplier method. You start by assigning your pain a number typically ranging from 1.5 to 5. A higher number typically represents a more serious injury. Typically, the insurance company assigns the number but you can also get started on the calculations without the adjuster’s assistance.
When it comes to assigning a number to your pain and suffering, injury severity is key. For example, a minor soft tissue injury like a bruise from a seatbelt isn’t going to rate a number 5. However, if your injuries require multiple surgeries or are life-altering like permanent disfiguration, your number can be as high as 5.
Once you assign a number to your pain and suffering, the next step is to look at the value of your economic damages. The total is multiplied by the number representing your pain. So, using the multiplier method your formula will look something like this;
$100,000 (total of your economic damages) x 3 (the number assigned to represent your level of pain) = $300,000. This total represents the value of your non-economic damages.
Is One Method Better Than the Other?
You may be wondering if one method for calculating your non-economic damages is better than the other. The answer is a little vague. While both methods are accepted by insurance companies, this doesn’t mean they’re willing to pay out the full value of your claim.
Several factors go into determining the value of non-economic damages like average daily income, your level of pain, and the total value of your economic damages. Using both methods will often give you different value amounts and don’t be surprised if the insurance companies push for the method producing the lowest total.
For example, the multiplier method often places a greater value on claims with significant injuries. Remember, your total medical expenses are part of the calculations. The per diem method is dependent on your average daily earnings. If you’re in the top income bracket, the insurance company may balk at paying out the claim’s total amount.
A good rule to follow is to use both methods, this way you’re ready with a counteroffer if the insurance company declines the first one. Your personal injury attorney can walk you through both methods and help ensure you receive fair compensation for your non-economic losses.