Any driver who gets involved in a car accident would be concerned about the average car accident settlement in their state. After all, whether you are at fault or not, vehicular accidents can have devastating consequences, including physical injury, psychological trauma, and major financial losses.

If you live in California where the latest traffic fatality statistics show 3,563 deaths in a year, you might be concerned about what happens to the victims involved in car accidents and their families. What is the average car accident settlement and how is compensation determined?

Sadly, there is no special calculator that everyone uses to know the average car accident settlement in California. What we do know is that according to the 2019 Insurance Fact Book published by the Insurance Information Institute, the average auto liability claim for property damage is $3,638, while the average bodily injury claim is $15,270.

While these average figures are not representative of every car accident case, they give you a rough indication of how much a claimant can expect for a car accident settlement. And if in the unfortunate circumstance you do get involved in a car accident, it would be helpful to know the following information.

Here’s your quick guide to car accident settlement-related facts and processes in the state of California.

How are car accident settlements facilitated in California?

The purpose of a settlement in this context is for the injured person or victim and the person or entity legally liable for the injuries to come to an agreement and resolve their legal dispute concerning the car accident.

In general, a typical car accident settlement would have the legally liable party agreeing to compensate the injured party. In return for the cash settlement they receive, the injured party releases the legally liable party from further future liability concerning the car accident.

When settlements proceed smoothly and are finalized, they typically bring legal claims for damages to an amicable conclusion.

A final settlement usually bars an injured victim from asking for more compensation at a later stage for the same injuries in the car accident. This is why it is important for lawyers representing car accident victims to ensure the settlement amount they negotiate for meets the financial needs of their clients fully.

Parties involved in a car accident settlement

When a car accident takes place, an injured person typically can make a legal claim for damages and/or bodily injury against the person or entity whose actions or decisions led to the accident and ensuing injuries. Therefore, it is paramount that any or all legally liable individuals or entities are identified early on in a car accident case.

If you get involved in a car accident, your lawyer will have to determine with certainty who has the legal liability for the accident. They need to gather facts and investigate to get information to establish duty of care – that legal and moral obligation of a person to not act in ways that compromise the safety of other people.

Most car accident cases are cut and dried, where the legally liable party is easily identified. However, there are also cases where certain oversights concerning duty of care are found to have contributed to the accident. Examples of these include:

  • Car manufacturers who do not conduct sufficient safety tests on their products
  • Employers who fail to provide safety training for their drivers and who allow them to drive even when impaired due to business quotas and deadlines
  • Government entities that fail to provide safe road infrastructure to motorists/drivers

In these situations where more than one person or entity bears a legal liability in a car accident, the injured party might enter into multiple settlement agreements with the different liable parties.

car accident settlement California

How is a car accident settlement calculated?

The primary goal of a car accident injury lawyer is to work out a settlement that fairly reflects the degree of suffering and harm their client (the injured party) has suffered as a consequence of the car crash.

In general, the dollar amount sought as compensation is indicative of the extent or severity of the victim’s injuries, the victim’s expenses related to the accident, and the effects of the injury on the victim’s quality of life.

Damages covered in a settlement

Car accident claims usually cover two categories of damages.

Economic damages

These refer to actual expenses the injured party has incurred because of the accident, including ambulatory services and care, diagnostic testing, hospitalization, surgical services, treatment, medication, rehabilitation, etc. Related expenses arising from the injury also include the purchase of any mobility devices the victim needs, such as a wheelchair or crutches, and employing a physical therapist or nurse for the victim.

Economic damages also encompass any costs related to the repair or replacement of the victim’s vehicle involved in the car accident, the loss of salaries or wages (while the victim was unable to report for work), and in the case of permanent disability due to the accident – the victim’s loss of earning capacity because of the injuries they sustained.

Other expenses that may arise because of the accident include house renovations or additions required to aid in the mobility or to accommodate the injuries of the victim.

Non-economic damages

This type of damages refers to all the negative consequences of the injuries on the total wellbeing of the victim. Non-economic damages include:

  • Physical pain and mental anguish suffered by the car accident victim
  • Reduction on the victim’s enjoyment and quality of life
  • New difficulties in the victim’s life directly related to their injury in the car accident
  • Impact on the victim’s close personal relations that can be attributed to the car accident

Non-economic damages in car accident settlement are more difficult to monetize. Therefore, other considerations are usually made in computing for non-economic damages, including:

  • The victim’s age at the time of the accident
  • The severity or extent of the injury
  • Whether the injury is debilitating permanently
  • Whether the injury prevents the victim from performing daily living and personal care tasks on their own
  • The duration of injury treatment and the physical pain the victim has to endure because of the required therapy
  • How much pain and mental suffering the victim must undergo because of the injury
  • The type or extent of the physical disfigurement the victim sustained because of the accident

Generally, the more severe the injury and the longer-lasting its impact, the higher would be the amount the lawyer would seek as a settlement on behalf of their injured client.

Of course, injuries are a lot more difficult to quantify, especially since the effects of an injury vary from person to person.

For example, a car accident involving a young prima ballerina and a grandfather who takes care of his grandkids so his children could work may be affected differently from the loss of a limb. This means their lawyers might arrive at totally different settlement claims based on the two victims’ different life circumstances.

However, the settlement amount you can receive also depends on the financial resources of the liable party, who would pay either through insurance or by using their own assets. This, of course, can limit the amount of the settlement.

Therefore, it’s crucial to get a seasoned car accident attorney with a track record of success in similar cases. They would be able to dig deeper or go beyond the surface to find out all parties who share legal liability in the car accident.

Methods used to calculate claims

Insurance providers utilize a range of methods to compute the value of a personal injury claim. Most of the methods they employ are actually variations of the multiplier method.

Aside from the multiplier method, some insurers use the damage formula and per diem method. All three methods are described below.

Multiplier method

The multiplier method is one of the most common ways insurance companies and lawyers compute for pain and suffering damages. In this method, to determine the car accident’s true cost to the injured party, all you need to do is add up all actual damages (aka “special damages”) and multiply that number by a value from 1 to 5.

The basis of the multiplier method is the belief that injuries that come with more quantifiable damages (e.g. hospital bills) are usually the outcome of more serious car accidents, so they require a multiplier to calculate the actual cost of the accident.

For example, if your medical bills reach a total of $5,000 and you lost wages in the amount of $3,000 because of your injury, the sum of the actual damages is $8,000. In the multiplier method, the sum would be multiplied by a number between 1.5 and 5. In this scenario, if we use the most common multiplier used, which is the number 3, the calculation would be $8,000 x 3. This would then be equal to $24,000 – the total damage amount.

Whether the multiplier used is higher or lower depends on the extent of your injuries, recovery time, and any aggravating circumstances.

Most serious accidents may merit 3 or 4 as multipliers, while in accidents with aggravating circumstances (e.g. an intoxicated at-fault driver), the multiplier could be higher than 5. But if you, an injured victim, are also proven to have been negligent or reckless right before the accident, your lawyer would also be forced to use a lower multiplier.

Note that insurance companies don’t really use whole numbers as multipliers. Instead, what they use are complex computer algorithms before assigning a multiplier.

The multiplier method has been the subject of criticism because of the use of arbitrary, inconsistent multipliers that depend on who is making the calculations. It might also not represent real-world impacts of injuries by simply focusing on the cost of medical bills.

For example, both a fiction writer and photographer use their eyesight to make a living. If these two people hypothetically become victims in a car accident that leads to their blindness, they could end up having more or less similar medical expenses.

However, the writer might still be able to “write” by using available technology or dictating their work to someone, but the photographer would suffer more severe psychological stress because of their inability to take photographs and make a living.

Damage formula

Insurance companies use the damage formula for calculating pain and suffering.

What the at-fault party’s insurer focuses on here are the special damages or the sum of all the medical expenses incurred by the victim resulting from the accident.

To calculate for the non-economic damages and permanent disability (if any), which are lumped together as general damages, the insurance adjuster will simply multiply the special damages sum by about 1.5 to 3 when the injuries are considered minor.

In situations where the victim’s injuries are more severe and painful, the special damages amount is multiplied by 5 or more, in addition to lost income. The outcome of this computation usually serves as the starting point for most settlement negotiations.

Per diem method

The per diem or daily rate method is another way of computing the pain and suffering damages of car accident victims. This method is used by both insurance companies and lawyers to come up with a dollar amount you need to receive daily or weekly while suffering or living with the pain from your injuries caused by the accident.

The problem with this approach is how you (or your lawyer) can justify the daily rate you use. One way to ensure your daily rate is justified and reasonable is by using your actual daily earnings before the injury as a basis for the calculation.

car accident settlement calculator

A word of caution regarding the accuracy of these methods

All car accidents are unique, including the at-fault party and the victims. Therefore, the above methods per se may not give an accurate settlement amount. Each outcome is subject to certain factors and specific information that can impact the multipliers used or the daily rate you arrive at.

However, these methods do give both parties a ballpark figure of the settlement amount – something they can use as a basis for further negotiation.

The settlement negotiation proper

When your lawyer has identified the potentially legally liable parties and calculated the amount you need to seek as damages, your lawyer would typically demand payment formally. This can come in the form of a demand letter or a lawsuit filed in a California court, or both.

Your lawyer’s action opens the door to negotiations with the other party’s legal and insurance representatives. They may or may not agree to their client’s legal liability. And if they do, the amount their client needs to pay in damages would still be subject to negotiation.

Of course, the objective of the attorney or insurance representative of the opposing party is to limit their client’s financial exposure, while your lawyer wants you compensated to the maximum dollar amount.

Negotiations can be done directly or with the help of a mediator for both parties to arrive at a middle ground. This way, you are assured of receiving a fair and reasonable settlement amount, which also releases the at-fault party from further liability in the accident in question.

The decision to accept or reject a settlement offer rests solely on you. However, your lawyer should also advise you on the merits of a settlement offer. They can express their opinion on whether it is wise to accept it.

Get the Quirk Reed LLP advantage in your car accident claim

Car accidents can be stressful and complicated cases. But with the experience and legal expertise of Quirk Reed personal injury lawyers on your side, you’ll have the best chance of receiving a fair and just settlement in your car accident claim.

Please get in touch with us today!