Key Takeaways

  • Definition of Nuisance Settlement: A nuisance settlement is a small payment made by an insurer to avoid prolonged litigation costs for a weak or low-value claim.
  • Reasons for a Nuisance Settlement: Insurance companies settle nuisance claims when litigation costs exceed the claim's value, or to avoid legal risks.
  • Factors Affecting the Amount: Settlement amounts depend on medical bills, proof of injury, liability, and negotiation tactics.
  • How to Negotiate a Higher Settlement: Providing stronger evidence, persistence, and the credible threat of litigation can increase settlement amounts.
  • Legal and Ethical Considerations: Attorneys must balance client expectations and the financial realities of accepting or rejecting a settlement.
  • When to Accept a Nuisance Settlement: If evidence is weak, legal costs are high, or an attorney advises it, accepting a settlement might be the best course of action.

A nuisance fee settlement, or nuisance value settlement, is a sum of money paid by an insurance company to settle a case. Insurance companies will often offer a nuisance fee settlement if the benefit of settling for a small amount outweighs the cost of fighting the claim in the courts.

Why Challenge a Claim?

There are a number of reasons why an insurance adjuster might challenge an insurance claim. Some of these include

  • The claimant cannot prove the insured party is at fault.
  • The fault actually was with the claimant or someone else.
  • The injuries sustained by the claimant were not a result of the accident.
  • The claimant was not really injured, or the adjuster has reason to doubt the claimant's injuries.

In such cases, the adjuster will consider the claim a “nuisance claim.” At first, the adjuster will likely deny compensation to the claimant. However, the claimant might be able to persuade the adjuster to pay a “nuisance fee settlement.”

How Much Is a Nuisance Fee Settlement?

Just as with any other type of accident settlement, there is no fixed amount. If the medical bills are less than a thousand dollars, the insurance adjuster will usually offer an amount that covers at least half of the total cost. This sum will not include:

  • Loss of income
  • Damages
  • Pain and suffering
  • Out-of-pocket expenses

An adjuster will normally offer a nuisance fee of $500 or $750 in cases where there are no real injuries to report. Perhaps the medical bills were minimal, or a doctor could not make a diagnosis. That nuisance fee settlement might increase up to $3,000 if the medical bills exceed $1,000, or if there is a diagnosis of serious injury.

Settlement offers are negotiable, even nuisance fee settlements. If the best the claimant can do after an accident is settle for a nuisance fee, the claimant is not obliged to accept the first offer. It is unlikely the amount will change much through negotiation, but if a few phone calls with the adjuster results in an increase of a hundred dollars or more, it will be worth the effort.

Factors That Influence a Nuisance Settlement Amount

Several factors affect the amount an insurance company is willing to offer in a nuisance settlement:

  • Strength of Evidence: If the claimant has minimal or weak evidence, the insurance company is likely to offer a lower settlement.
  • Extent of Medical Bills: Claims with under $1,000 in medical expenses typically receive settlements from $500 to $3,000.
  • Liability Disputes: If fault is unclear or contested, insurers may offer a nuisance settlement to avoid litigation.
  • Persistence in Negotiation: Claimants who consistently challenge adjusters with credible arguments and evidence may receive slightly higher offers.
  • Threat of Litigation: The cost of legal defense for an insurer can be significant, making settlements a more attractive option.

Prompting a Nuisance Fee Settlement

You can often prompt a nuisance fee settlement by

  • Daily contact with the adjuster
  • Offering new evidence
  • Threatening litigation against the insured
  • Reminding the adjuster of the expense of litigation

If the insurance adjuster seems unwilling to settle your injury claim, try calling the adjuster daily about your case. Leave messages with the adjuster. Explain why you disagree with the adjuster's assessment. Ask to speak to the adjuster's manager or supervisor. As long as you have credible evidence of a claim, such good-faith contact is not considered harassment. The adjuster may be willing to pay you a nuisance fee just to get you to stop calling.

Rehashing the same arguments with the adjuster using the same evidence may not get you anywhere. Go back over photographs, statements, and anything else you have pertaining to the accident. Any additional evidence you find that supports your claim, especially if it points to the insured party's liability for your injuries, could lead to a nuisance fee settlement.

An insurance adjuster might also respond to the threat of litigation against their client. We expect our insurance companies to act on our behalf regarding claims, either to pay them or fight them. The last thing we want is for a sheriff to turn up on our doorstep, or at work, serving us with a lawsuit. But only threaten a lawsuit based on good evidence. Courts and bar associations will reprimand attorneys for threatening lawsuits they have no intention of filing. If the adjuster believes you will get the sympathy of a court, the threat is appropriate.

Make yourself aware of how much goes into preparing a defense against an insurance claim. Insurance companies hire defense attorneys as independent contractors paid by the hour. Once you file a lawsuit, they need to respond with the appropriate legal documentation and take depositions. All this legal work is paid for by the insurance company. This may be enough to persuade the adjuster to offer a nuisance fee settlement.

Ethical and Legal Considerations for Attorneys

Lawyers advising clients on nuisance settlements must balance legal ethics with practical financial decisions:

  • Duty to the Client: Attorneys must act in the client's best interest, whether recommending settlement or litigation.
  • Avoiding Frivolous Claims: Ethical rules prohibit attorneys from pursuing claims with no legal merit solely for settlement purposes.
  • Managing Client Expectations: Many clients overestimate their claim's value, and lawyers must explain why a nuisance settlement might be the best option.
  • Bar Association Rules: Some jurisdictions have strict rules on advising clients about settlements, especially when involving low-value claims.

The Role of Insurance Adjusters in Nuisance Settlements

Insurance adjusters assess claims based on financial risks to the insurer. They consider:

  • Legal Costs vs. Settlement: If the cost of fighting a claim exceeds the settlement amount, insurers often opt to pay a nuisance settlement.
  • Risk Assessment: Adjusters evaluate whether a claim might gain traction in court. A well-documented claim is more likely to receive a higher settlement.
  • Company Policy: Some insurers have internal policies that dictate when a nuisance settlement should be offered.
  • Claims History: Repeat claimants or attorneys known for litigating aggressively may receive different settlement offers.

Frequently Asked Questions

  1. Can you negotiate a nuisance settlement?
    Yes, nuisance settlements are negotiable. Persistence, presenting additional evidence, and highlighting litigation risks to the insurer can lead to a higher settlement.
  2. What is considered a fair nuisance settlement amount?
    Amounts typically range from $500 to $3,000, depending on the strength of the claim, medical expenses, and negotiation efforts.
  3. When should I accept a nuisance settlement?
    If liability is uncertain, evidence is weak, or legal costs outweigh potential compensation, accepting a nuisance settlement may be a practical choice.
  4. How do insurance adjusters determine a nuisance settlement?
    They assess claim validity, cost of litigation, and company policies before offering a low settlement to avoid prolonged disputes.
  5. Can an attorney help increase a nuisance settlement offer?
    Yes, experienced attorneys know how to negotiate with adjusters, present stronger evidence, and leverage legal strategies to secure better settlements.

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