Auto Insurance Claims: Fair Settlement Offer ?, incurred vs paid

Question
QUESTION: My husband was rear-ended on 05/20/2009.  Shortly after the accident he started having severe back pain.  Before the accident he might have seen the doctor once for a back ache, but never had X-rays and was never diagnosed with a back disorder.  He had an MRI on 07/24/09 and was diagnosed as having a Lumbar Disc protrusion.  He had his first epidural steroid injection on 08/03/09 which tremendously helped his pain.  In July 2010, he started feeling the discomfort again and had a second ESI.  It has also helped with his pain and he is currently asymptomatic.  Of course, this could just last for about a year and he might need another injection.  The doctor told us after a 3rd ESI then we would talk about possible surgery if necessary.  We, however, have decided to start the settlement process with State Farm and have gotten an offer back at $11,000.  Our health ins paid his medical claims minus our co-pays, which totaled $2668.00 (this is the amount they paid not billed).  We paid about $278.00 in copays.  My husband missed about a week and 1/2 of work after the accident and for lost wages they will reimburse about $1358.00 (I believe this is net pay).  I missed two days of work for each of his Epidural visits and that's about $271.00 in wages.  That makes $6500.00 that he would be getting for pain & suffering.  Also, my husband took a $1.00 cut per hour in pay after this happened in order for him to work in a position that he felt would be better for his back and not cause further damage.  Is this something that we can collect in loss of wages?  If so, how would we go about figuring how much to ask for?  What about future medical expenses?  I have to send State Farm a letter rejecting this initial offer and with an amount that we are requesting.  By the way, I did not send them an initial demand letter.  Thanks in advance for any help you can give.

ANSWER: First of all, I am very sorry for the delay in my response.  

I think you have a good idea of what your damages are.  The lost earning capacity is what you are talking about as far as the $1.00 cut per hour.  I would suggest doing a little math and asking for an amount reflect of this loss earning capacity.  Simply average the hours he worked for the last year and then multiply it by the time you feel it will take for him to recapture the lost potential.  As an example, if he worked 40hours per week then for the next five years. . . 46 weeks per year (assuming he can take 6 weeks off for vacation and holidays), he would be at $1840.00 lost per year (46 weeks at $40 lost per week), so for five years it would be $9200.00 of lost earning potential, follow?

I would ask for $35K for the entire loss and negotiate from there.  Future medical needs to be quoted by a doctor.  

You want to send in a demand letter that details the costs / damages for each section of the claim. . .

1.  Hard medicals (actual bills incurred and out of pocket expenses for medical treatment)
2.  Lost wages
3.  Future Medical
4.  Lost Earning Capacity
5.  Pain and suffering (about 1.5 to 2.0 times the hard medicals), this amount is negotiable based on how much pain and suffering you really think there is.  It is always a fight.  Ask for twice the amount you expect to get and don't settle for less than the 1.5 to 2.0 figure)


I hope this helps. . . .

---------- FOLLOW-UP ----------

QUESTION: Thanks for explanation.  I just want to clarify something regarding the hard medicals, in the demand letter do I use the actual amount that each provider charged our health insurance? Or the actual amount that the health insurance company has paid?  Due to contractual agreements that the providers have with our health ins. co. there are write-off's that the providers are taking between the billed amount and their allowed amount.  

The total of hard medical bills that we have is $7518. The health ins just paid $2668. We only had to pay $278 for out-of-pocket copay's.
Thanks again!  

Answer
That is a common question and remains debated.  

The best answer is that the medicals are what have been incurred, not billed.  For subrogation purposes, it gets more complicated, but for you and your calculation, I would use the incurred amount, and not the amount paid by the health insurance company.  Subrogation will be a big part of this case, so after the settlement offer is extended (based on incurred stuff), then what was actually paid will be due back to the carriers that paid for it.  

JP