Unlike economic damages, non-economic damages cannot be calculated using bills to create a sum total. Therefore, there are a number of approaches that insurance companies take when quantifying pain and suffering, emotional anguish, and other general damages as part of an injury settlement. The two most common methods are the “per diem” (daily rate) method, and the multiplier method.
Using A Daily Rate
The first approach to calculating non-economic damages is called the “per diem” method, which is Latin for “per day.” The idea here is to demand a specific dollar amount for each day you had to live with the trauma caused by your accident.
Identifying an amount that can be justified in court and by the insurance company can be tricky. For this reason, many people use their actual daily earnings to formulate a reasonable daily rate. The belief is that having to deal with the trauma caused by your injuries every day is at least comparable to the effort of going to work each day.
For example, if you’re earning $45,000 per year at your current or most recent job, you would divide your salary by the 250 working days per year. That amounts to $180 per day. If you suffered emotional trauma for a total of five months, or roughly 150 days, you would multiply 150 by your daily rate of $180 and arrive at $27,000. This would be your non-economic damage total.
Multiply Your Special Damages
True to its name, the multiplier method adds up all of your special (economic) damages and multiplies that amount by a number between 1.5 on the low end, and 4 or 5 on the high end. The multiplier will depend on a number of variables related to your case, including:
- The seriousness of your injuries
- The impact of your injuries on your daily life
- Your prospects for a quick and complete recovery
- Whether the other party was clearly at fault for the accident
Typically, the worse the general damages were for the victim to endure, the higher the multiplier number will be, which results in a higher overall payout. The multiplier method is most frequently used by insurance companies. As opposed to needing to settle on a daily rate, you and the defendant, or more specifically their insurer, will negotiate the most appropriate multiplier.
To find your total compensation paid, simply multiply your special damages by the multiplier you feel is fair according to the above list of variables. For instance, if your special damages amounted to $12,000 and you believe your multiplier to be 2.5, your total compensation paid would be $30,000.
