What Does It Mean if Insurance Company Makes a Small Settlement Offer?

We often get ridiculously small settlement offers from an insurance company that forces us to take these cases to trial. But why do insurance companies make small settlement offers?

A Small Settlement Offer May Be Made for Many Different Reasons

A small settlement offer from an insurance company may mean that the company does not believe the claim is worth much or that the claims representative believes there are serious questions about their insured’s liability or the alleged injury.

Frequently, the insurance claims representative doesn’t understand the legal aspects of their insured’s negligence and liability.

Also frequently, the insurance claims representative doesn’t understand the seriousness of the plaintiff’s injury.

Sometimes, a new or inexperienced claims representative is trying to resolve the claim quickly and cheaply. When this happens, we immediately file a lawsuit which results in a new claims representative being assigned to the case.

Do I Have to Accept a Small Settlement Offer?

No, you never have to accept a settlement offer. You can choose to accept the offer, negotiate for a higher amount, or have your personal injury case heard by a jury at a trial.

Most of the time, when an insurance company makes a small settlement offer, they will increase their offer. Often, an insurance company will increase its offer many times.

Does a Small Settlement Offer Mean I Don’t Have a Good Lawyer?

Insurance companies frequently make a small settlement offer, even a ridiculously low settlement offer. The amount of a settlement offer rarely has anything to do with your personal injury lawyer.

Does My Lawyer Have to Tell Me About a Settlement Offer?

When an insurance company offers to settle for only $10,000, or any amount, your personal injury lawyer must tell you about every settlement offer, even a ridiculously low settlement offer.

It doesn’t mean that your lawyer is doing a bad job. It just means that the insurance company doesn’t want to settle, or at least not now.

Unfortunately, insurance companies frequently don’t make reasonable settlement offers until the time of trial.

GEICO Forced Us to Trial By Making a Small Settlement Offer, and They Got Clobbered

GEICO’s settlement offer was only $10,000 for our client’s torn meniscus with arthroscopic surgery. GEICO never increased its settlement offer for four years and then offered an equally ridiculous settlement offer of only $20,000.

Because of GEICO’s ridiculously low settlement offer, we took the case to trial in Nassau County Supreme Court in New York.

Just before the trial started, in the hallway in front of the courtroom, the GEICO claims representative increased the settlement offer to $100,000. We declined the offer and proceeded with the trial.

The jury awarded our client $465,000 for his serious injury.

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GEICO Was Found to Have Acted in Bad Faith

A few weeks before writing this, GEICO was ordered to pay over $2 million because of their bad faith refusal to settle a case fairly.

A motorist, whose car “flipped up in the air into a power pole” when struck by a car insured by GEICO, had $10,000 in medical bills. The motorist’s lawyer offered to settle with GEICO for the $30,000 insurance policy, but GEICO refused and offered only $12,409.

A judge issued a judgment in the amount of $2,916,000, and the defendant filed for involuntary bankruptcy. But GEICO hired a lawyer to fight the bankruptcy petition!

Since GEICO’s insured would obviously benefit from the bankruptcy, GEICO’s motivation to fight the bankruptcy could only have been to protect itself so GEICO could not be sued by the trustee in bankruptcy for their bad faith failure to settle the injury claim, if the involuntary bankruptcy proceeded.

GEICO’s lawyer was not successful in stopping the bankruptcy, and the trustee in bankruptcy sued GEICO in US District Court. The federal jury found GEICO liable for $2,020,342

GEICO will likely appeal the order, but it’s going to cost GEICO a lot of money. I hope the attorneys don’t settle and let it go to appeal.

This case illustrates the frustration that personal injury lawyers frequently have with insurance companies.

Bad faith claims are difficult in New York State, but we have made insurance companies pay above the insurance policy.

See more FAQs

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Phil Franckel is well-known in New York and has been a personal injury lawyer since 1989. He is a Founding Partner of 1-800-HURT-911, LLP®, the Personal Injury Dream Team™, and a former Member Board of Directors of the New York State Trial Lawyers Association. He has an Avvo Top 10  Rating, Avvo Client’s Choice Award with all 5-star reviews, Avvo Top Contributor Award, Multi-Million Dollar Trial Lawyers Award, and others. See Mr. Franckel’s bio for areas of expertise.

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Philip L. Franckel, Esq. is one of the HURT911® Dream Team™ Founding Partners at 1-800-HURT-911® New York; He has a 10 Avvo rating; Avvo Client’s Choice with all 5-star reviews; Avvo Top Contributor; and a former Member of the Board of Directors of the New York State Trial Lawyers Association.

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