Here is a wonderful brief by two CPAs.    Lost wages recovered in personal injury settlements are not taxable is the conclusion reached and well supported by the CPAs in this brief.

CPA Journal May 1998

Taxability of Damages
By Randall K. Hanson and James K. SmithThe exclusion for personal injury is In Brief
New Limits on the Exclusion from Taxability
Damages may be recovered under either breach of contract or tort claims. Tort claims have given rise to
the largest and most publicized judgments. Such claims may arise out of theories of intentional torts,
negligence, or strict liability. Both intentional torts and strict liability claims may give rise to punitive
damages.
Prior to amendment, IRC section 104(a)(2) allowed exclusion from taxability for any damages received on
account of personal injury or sickness. The Small Business Job Protection Act of 1996 amended this section
to limit this exclusion to those damages received for personal injury or physical sickness. A second change
requires punitive damages to always be taxable. These changes are effective for all damages received
after August 20, 1996.
The taxability of damages received prior to that date are affected by two Supreme Court decisions. In one
case involving age discrimination, the court held that all damages received were taxable because they
were not received because of personal injury or sickness nor was the case based on tort or tort type rights.
In a second case, the court held that punitive damages were taxable because they were not received on
account of personal injuries or sickness.
Within the last two years there have been major changes to the way proceeds of lawsuits are taxed. The
Small Business Job Protection Act of 1996 amended IRC Sec. 104(a)(2) and the United States Supreme
Court rendered two decisions clarifying how the proceeds of lawsuits are taxed. The most recent decision
was decided in December 1996. Since the amended IRC Sec. 104(a)(2) and the Supreme Court decisions
make more damages taxable, there will be increased pressure on attorneys and accountants to find ways
to structure settlements so as to minimize the tax effect of successful claims.
The most common theories asserted in seeking to recover civil money judgments are breach of contract
claims and tort claims. Of these two theories, it is tort law that is most commonly criticized and is also
the theory that has given rise to the largest and most publicized judgments. Recent tort cases that have
received extensive media exposure are the McDonald’s spilt coffee case and the General Motors pickups
with their exploding gas tanks. Cases such as these have accelerated the call for tort reform to rein in
what are viewed as outrageous decisions. Legal reform is slow to develop, and, in the meantime, there are
huge numbers of tort claims being commenced, litigated, and settled every day.
To fully understand and appreciate the tax rules relating to damage awards, it is important to have a
working understanding of the common tort law theories and the damages commonly received for these
theories. Understanding tort law concepts is also important because Treasury regulations exclude from
gross income payments received as a result of tort or torttype
claims. After examining the various tort
theories, we will review the taxation of these tort claim proceeds in light of the recent Supreme Court
decisions. Finally we will explore settlement structure strategies.
Tort Theories and Common Damages
Torts can be defined as “civil wrongs against individuals which are not based on breach of contract claims.”
The basic premise is that individual rights should be protected from harm. There are three categories of
tort theories that are recognized in almost every state. They are intentional torts, negligence, and strict
liability. Each of these theories will be briefly examined and contrasted.
Intentional Torts. Intentional torts include a broad group of wrongs that are the result of intentional bad
acts. The common theme consistent in all intentional torts is the intent to harm another person. Common
examples include assault and battery, false imprisonment, defamation, trespass, malicious prosecution,
invasion of privacy, intentional infliction of emotional distress, intentional interference with contract rights,
and fraud.
To compensate a victim for suffering an intentional tort, various damages are recoverable. For example,
assume a person intentionally strikes another with their fist. The victim’s jaw is fractured and has to be
surgically pinned backed together. The victim is hospitalized overnight and is bedridden for two weeks. The
victim will commence a civil tort lawsuit against the aggressor, asserting the tort claims of assault and
battery. The victim will seek to recover compensatory damages for personal injuries, medical bills, lost
wages, pain and suffering, and any other incidental costs incurred, such as renting a neck and jaw brace.
In addition, punitive damages are generally recoverable for victims of intentional torts. Since the aggressor
acted with intent to harm, the legal system has determined it is appropriate to punish the wrongdoer for
the improper behavior. The legal system is sending a message to the wrongdoer and the community that
those actions will not be tolerated. Often punitive damages can far exceed the actual or compensatory
damages awarded. (The O.J. Simpson judgment is a good example.)
Negligence. The second tort theory is negligence. A negligence claim can easily be contrasted with
battery. The victim will seek to recover compensatory damages for personal injuries, medical bills, lost
wages, pain and suffering, and any other incidental costs incurred, such as renting a neck and jaw brace.
In addition, punitive damages are generally recoverable for victims of intentional torts. Since the aggressor
acted with intent to harm, the legal system has determined it is appropriate to punish the wrongdoer for
the improper behavior. The legal system is sending a message to the wrongdoer and the community that
those actions will not be tolerated. Often punitive damages can far exceed the actual or compensatory
damages awarded. (The O.J. Simpson judgment is a good example.)
Negligence. The second tort theory is negligence. A negligence claim can easily be contrasted with
intentional torts in that a negligence claim does not involve an intentional wrongful act. An act of
negligence basically involves failure to use reasonable care under the circumstances with someone or
something being injured or damaged. If a driver loses control of his vehicle and strikes a pedestrian, the
driver can be held liable for injuries under negligence even though the driver did not intend to harm the
victim.
Four elements must be established if a party is to receive a judgment based on a negligence claim. The
four elements of a negligence claim are as follows: a legal duty exists, a failure to meet the applicable
duty of care, causation, and damages. The first element is almost always present. If a person is going to
interact in society, that person has a legal duty to respect the interests of others. The second elementthat
there be a breach of the applicable standard of carerequires
all persons must act reasonably under
the circumstances. If you are driving a car, you must act as a reasonable driver; if you are an accountant,
you must act as a reasonably prudent professional would act under the circumstances. If you fail to act
reasonably, this element is established.
Causation requires there be a reasonably foreseeable connection between the negligent act of the
wrongdoer and the injuries suffered by the victim. If the resulting injuries are too remote, the negligent
party is not liable. If there is an unlikely chain of events that takes place after a negligent act occurs and
the results were not foreseeable, there can be no recovery. For example, if I negligently prepare a tax
return for a client and the client, in a fit of anger and frustration, commits suicide, this consequence is not
foreseeable, and I will not be liable for the unforeseen consequence. Proximate cause would not be
present.
The final element of a negligence claim is proof of damages. Victims have the obligation of establishing
the extent of the damages suffered.
If I negligently lose control of my vehicle striking a pedestrian, the pedestrian will likely seek to recover
damages for personal injuries, lost wages, medical expenses, pain and suffering, and other incidental
costs. Note that punitive damages are generally not recoverable for negligence claims. The negligent party
did not intend to cause any harm; there is no need to punish this wrongdoer.
The beauty of negligence from a victim’s perspective is that the actions of all persons are measured
against that of a reasonable person under the circumstances. Almost anytime a person is injured, it can be
argued someone else caused the injuries by not acting reasonably. The tort of negligence can reach each
of us in our daily activities, making this a powerful theory in the hands of a skilled attorney.
Strict Liability. The third tort theory arose because the legal system found victims with significant
damages or injuries, but they were unable to recover under an intentional tort or negligence theory. Strict
liability is a liability “without fault” approach. Strict liability was initially reserved for situations deemed to
be inherently dangerous or deemed to be an ultrahazardous activity. Examples were demolition by
blasting, keeping wild animals, or putting on fireworks displays. For example, if a company is going to
destroy a building by strategically placing dynamite in different locations and a person is harmed during
the demolition, they can recover for their injuries even if the demolition company used reasonable care in
planning the demolition. The same logic applies to those who insist on keeping wild animals as pets. If a
pet cougar harms a victim, the victim can recover from the pet owner even if the pet owner was acting
reasonably.
The most important strict liability theory today is when strict liability is applied to defective or
malfunctioning products. If a manufacturer puts out a product deemed defective and unreasonably
dangerous, injured parties are granted a recovery. The victim need not show the manufacturer was
negligentonly
that the product was defective. In most states there are precise ways in which a victim
may show the product was defective. The most common methods of showing a product is defective is to
show it was designed in an improper way, or was put together improperly, or was packaged in an improper
way, or the instructions were incomplete or improper. Once a product is shown to be defective, it is
irrelevant that the victim used the product in a careless way since judgments are typically not reduced
because of the victim’s contributory negligence. The philosophy is that the manufacturer should not have
placed a defective product on the market in the first place, and, since it did, there is no defense that the
victim could have been more careful. An example of a strict liability claim would be if a company
manufactures and sells a threewheel
all terrain vehicle. These products tend to tip over easily causing
serious injuries. If the design is shown to be defective, it is irrelevant in most states that the victimoperator
was speeding at the time of the injury.
Punitive damages are recoverable for strict liability claims especially in the case of defective products that
cause personal injuries. Punitive damages would be recovered in addition to damages for personal injuries,
property damages, medical expenses, lost wages, pain and suffering, and other incidental costs.
The Taxability of Damage Recoveries
When a person is harmed by another, the victim generally seeks to recover compensatory damages. The
taxability of the damages received depends on the type of harm suffered by the taxpayer. Categories of
compensatory damages generally include*
loss of income,
* expenses incurred,
When a person is harmed by another, the victim generally seeks to recover compensatory damages. The
taxability of the damages received depends on the type of harm suffered by the taxpayer. Categories of
compensatory damages generally include*
loss of income,
* expenses incurred,
* property destruction, and
* personal injuries.
All damages are taxable, unless the IRC permits the exclusion of settlement proceeds. The primary section
permitting exclusion is IRC Sec. 104(a)(2), which was amended by the Small Business Job Protection Act of
1996.
IRC Sec. 104(a)(2). Prior to amendment, this code section allowed exclusion for any damages received on
account of personal injuries or sickness. Personal injuries or sickness were interpreted broadly to include
many nonphysical injuries, such as personal embarrassment, mental pain and suffering, breach of contract
to marry, injury to reputation, emotional distress, and violations of civil rights. Despite the broad
interpretation of this code section, the IRS successfully challenged the rule’s interpretation in several court
cases.
The Small Business Job Protection Act of 1996 severely limited the types of damages eligible for exclusion
under IRC Sec. 104(a)(2). The language was changed to only allow exclusion for compensatory damages
received on account of personal physical injuries or physical sickness. Damages received for emotional
distress or other nonphysical injuries are not considered physical injury or physical sickness for purposes of
this code section and are not excludable. The only hope a taxpayer has in trying to exclude damages
received as a result of nonphysical injuries is to show they had their origin in a physical injury. Damages
received for loss of consortium due to physical injury or physical sickness of a spouse are an example.
These damages would be excludable because they originate from physical injury or physical sickness of the
spouse.
A second change to IRC Sec. 104(a)(2) requires punitive damages to always be taxable. It is no longer
possible to exclude punitive damages from taxable income, even if they relate to personal physical injury
or physical sickness. This was a sharp change from prior law that allowed punitive damages to be excluded
if they related to personal injuries.
The changes to IRC Sec. 104(a)(2) are effective for all damages received (whether by suit or by
agreement) after August 20, 1996. The taxation of compensatory and punitive damages received before
August 20, 1996, in tax years ending before that date, is determined by the old law. The old rules are
heavily influenced by two United States Supreme Court cases involving the interpretation of that section.
Commissioner of Internal Revenue v. Schleier. In this case, a former pilot was fired by United Airlines
when he reached age 60. He sued United Airlines under the Age Discrimination in Employment Act (ADEA).
The purpose of the ADEA is to prohibit age discrimination in the workplace. The act makes it illegal to
discharge any employee between the ages of 40 and 70 because of age. After litigation, the parties ended
up settling the dispute and Schleier received $145,629. Half of the award was attributed to “backpay” and
half to “liquidated damages.” The airline did not withhold any payroll or income taxes from the portion of
the settlement attributed to liquidated damages.
When Schleier filed his income tax return, he included as gross income the backpay portion of the
settlement and excluded the portion attributed to liquidated damages. The commissioner of the IRS issued
a deficiency notice, asserting Schleier should have included the liquidated damages as gross income. The
Tax Court held in favor of Schleier, ruling the entire award was excludable as “damages received on
account of personal injuries or sickness” under IRC section 104(a)(2). After the 5th Circuit agreed and held
for Schleier, the matter was heard by the Supreme Court.
The Supreme Court disagreed with the lower courts and held the entire award was taxable. The court took
a very narrow view as to exclusions from income. The court felt that a claim based on being laid off work
because of age discrimination is not a claim on account of personal injury or sickness. To clarify its
interpretation of “personal injury or sickness,” the court set forth a hypothetical typical tort claim. The
court used an example where a victim is injured in an automobile accident. The victim suffered medical
expenses, lost wages, pain, suffering, and emotional distress. If this victim settled for $30,000, the court
indicated all of the award would be excluded from gross income. The medical expenses and the pain and
suffering would clearly be the result of personal injuries. The lost wages would be excluded, also, as long
as “the lost wages resulted from time in which the taxpayer was out of work as a result of the injuries.”
The court noted that in this hypothetical, each element of the settlement was received on account of
personal injuries or sickness.
Since the court felt age discrimination was not a personal injury or illness, neither the backpay nor the
liquidated damages could be excluded. In discussing the backpay portion of the case, the court did agree
that Schleier may have suffered psychological or “personal” injury by the employment termination that may
even be comparable to that suffered by an accident victim. In the court’s view, this did not entitle Schleier
to exclude the backpay because there was no link between the psychological injury and loss of wages. By
contrast in the car accident case, the court felt there was a direct link between the car accident and loss of
wages. With regard to the liquidated damage portion of the settlement, the court felt this too was taxable
since it was punitive in nature and was not granted on account of injury or sickness. In reaching this
conclusion, the court set up a twostep
test for excluding settlements, first the claim had to be based
upon tort or tort type rights and, secondly, the claim had to be based on personal injuries or sickness. In
deciding if the claim was a torttype
claim, the court looked to the type of remedies recoverable under
ADEA. If a claim is a tort type claim, the court expected to see recoveries allowable for pain and suffering,
emotional distress, harm to reputation, or other consequential damages. Since ADEA does not provide for
remedies commonly associated with personal injury, the court concluded such claims are not tort type
claims.
wages. With regard to the liquidated damage portion of the settlement, the court felt this too was taxable
since it was punitive in nature and was not granted on account of injury or sickness. In reaching this
conclusion, the court set up a twostep
test for excluding settlements, first the claim had to be based
upon tort or tort type rights and, secondly, the claim had to be based on personal injuries or sickness. In
deciding if the claim was a torttype
claim, the court looked to the type of remedies recoverable under
ADEA. If a claim is a tort type claim, the court expected to see recoveries allowable for pain and suffering,
emotional distress, harm to reputation, or other consequential damages. Since ADEA does not provide for
remedies commonly associated with personal injury, the court concluded such claims are not tort type
claims.
C.O’Gilvie v. United States. In O’Gilvie, a woman died of toxic shock syndrome. Her husband and two
children commenced a tort action against the maker of a Playtex tampon that caused the death. The jury
awarded $1,525,000 actual damages and $10 million punitive damages. The family paid income taxes on
the punitive damages and then sought a refund. The children actually received a refund. The lawsuit
combined the claim of the father for a refund of taxes he paid and the government’s claim for the return of
the refund paid to the children of the deceased victim. The central issue of the case was whether punitive
damages were taxable or not. The lower court had found in favor of the taxpayers holding that the punitive
damages were received on account of personal injuries and were, therefore, nontaxable under IRC section
104(a)(2). The Court of Appeals disagreed and held the punitive damages were taxable.
The Unites States Supreme Court affirmed the decision of the Court of Appeals and held the punitive
damages were taxable, even though this case involved a tort action to recover for personal injuries. In a
sweeping decision, the court stated that punitive damages are issued not to compensate for injuries, but
to punish reprehensible conduct and to deter its future occurrence. Since the punitive damages are issued
for punishment of a wrongdoer, the damages were not received “on account of a personal injuries or
sickness” and therefore had to be taxable.
The Supreme Court struggled briefly with justifying the exclusion of compensatory lost wages while taxing
noncompensatory punitive damages. The court noted that while not taxing compensatory lost wages
seems to give the taxpayer a windfall, this is justified since the receipt of lost wages is in response to the
personal injuries suffered by the taxpayer. The receipt of punitive damages is not received because of
personal injuries, but rather because of the reprehensible conduct of the defendant.
The dissenting opinion argued that the punitive damages issued in this case were issued because of the
personal injuries suffered by the toxic shock victim. In the dissent’s opinion, it was the personal injury
suffered by the victim that led to the issuance of punitive damages.
Structuring Settlement Agreements
The new rules regarding the taxation of damages makes structuring of settlement agreements a more
important issue. The brightline
tests provided by amended IRC section 104(a)(2) and the two Supreme
Court decisions create a new set of incentives for taxpayers. The first incentive is to avoid punitive
damages that are now always taxable. This will make voluntary settlements more attractive to plaintiffs in
cases involving significant punitive damages. Instead of leaving the allocation between compensatory and
punitive damages in the jury’s hands, the plaintiff can ensure that no damages will be labeled as punitive
by settling out of court. In voluntary settlement agreements, defendants never acknowledge fault anyway,
so they clearly would not be interested in classifying damages as punitive since this indicates they
engaged in reprehensible activities. Only juries will issue damages that are specifically categorized as
punitive.
A second incentive is to allocate as large a portion of the damages as possible to personal physical
injuries or physical sickness. In cases involving multiple claims, including personal physical injuries, this is
a definite issue. In cases involving emotional distress or other nonphysical injuries, the challenge to the
plaintiffs will be to show some type of physical injury resulting from stress. Examples of physical injuries
resulting from emotional distress might include ulcers, headaches, insomnia, or other related maladies.
Once again, plaintiffs will have an incentive to determine their own fates by settling the case and taking
the decision away from the court.
The allocation of damages between compensatory and punitive, and between physical and nonphysical
injuries, will surely be a heavily litigated area, as the IRS fights to limit taxpayers’ creativity. It is
important for the settlement to be very specific in the allocations. Allocations that are unclear are usually
interpreted against the taxpayer. Another important factor is the setting in which the allocation is made.
Based on prior Tax Court cases, it is clear that taxpayers have the greatest level of success when
allocations are made in an adversarial setting. *
Randall K. Hanson, JD, LLM., is a
professor of business law and James K. Smith, PhD, JD, LLM, CPA, an
assistant professor of accountancy
at the University of North Carolina at Wilmington.
now more limited thanks to Uncle Sam.
Home

A winter wonderland may be fun to sing about–especially on Christmas eve–but, if you are negotiating a treacherous parking lot covered with ice,  bursting into song is the last thing on your mind.

Slipping on ice is no laughing matter and, although falls may be funny in some slapstick type comedies, they can be downright deadly in real life.

To mind comes the case of diet founder Robert Atkins who on April 8, 2003, at age 72, slipped on the ice while walking to work, hitting his head and causing bleeding around his brain.

After losing consciousness on the way to the hospital, where he spent two weeks in intensive care, he died of “blunt impact injury of head with epidural hematoma.”

Fortunately, most falls–though painful–are not this deadly.  You may be wondering, if you’ve fallen on the property of another, if you have a claim.  I’ve responded to that issue in the following question which was originally posed at LawGuru.com.

Q.  My mother slipped on the ice at her apartment complex and injured her shoulder and back. The complex assistant manager witnessed her fall. She has been off of her job at Walmart from the beginning of December and cannot go back until January. She is 85 and supplements her Social Security with her job at Walmart.

Does she have any recourse?

A.  Slip and fall cases can be tough.

The key is “duty”.

Did the apartment complex have a duty to remove ice from the spot where your mother fell?   Whether they had such a duty depends on the facts.   It depends on where she fell.

If she fell in the parking lot she might not have a claim.  It’s just not feasible, in cold climates, to maintain parking lots completely free of ice and snow. On the other hand, if ice had accumulated to a dangerous degree in the parking lot and the owners knew or should have known about it and took no steps to fix it then they could be liable.

If she fell on the steps to her apartment her claim might be stronger.  Apartment complexes normally have a duty to remove ice and snow that accumulates on stair steps.

If she fell on a sidewalk her claim might be stronger still.  Some Utah counties and cities have ordinances which require a landowner to remove snow from the sidewalk within 24 hours.  You can often find those ordinances on-line, at your local public library or, if that fails, at a nearby law library.

Law libraries are found at law schools, and, often, adjacent to court complexes.  Most law libraries are open to the public and, during business hours, they frequently have a reference librarian or other assistants to help you find what you are looking for.

And, if you want to know exactly when the snow last fell, consult the National Weather Service at its website, for weather info on your locality.

Conclusion

Slips on ice are a peril of life in a cold climate.  Many people fall without negligence on the part of the property owner. Whether you have a claim will depend on the law and the facts of the case.

Disclaimer

This article is intended for information purposed only.  If you have a specific question about the law in your state consult an experienced injury attorney who has experience with slip and fall cases.  He or she will  help you sort out the facts.

With the recent injury and death of Natasha Richardson from an injury to her brain after striking her head in a ski accident it behooves all of us to learn the symptoms of closed head injury so that we may be alert to their presence in a friend or loved one after an accident.

Brain injury can occur from a minor impact to the skull.  It can also happen without impact to the skull.

This latter is known as a contrecoup concussion.  Rapid movement of the head forward and backward can cause the brain to move forcibly against the front of the skull causing injury to the delicate organ.

SYMPTOMS

Some of the common symptoms of a brain injury are as follows:

1.  Vomiting–if you observe someone throwing up after an accident get them to a doctor right away.

2.  Unconsciousness–a reduced state of consciousness is often caused by a head injury.  Doctors have developed the Glasgow coma scale to gauge the severity of loss of consciousness:

“The system involves three responses: eye opening, verbal response and muscle response.  These responses are graded in range from mild to severe loss of consciousness.  For example, the five grades of verbal response range from correctly answering the questions ‘Who are you? Where are you? What day and month is it?’ (Mild) to not responding at all…. (Severe)” From the Mosby Medical Encyclopedia.

Other symptoms of a brain injury include:

3.  Headaches
4.  Fatigue
5.  Dizziness
6.  Blurred vision
7.  Trouble concentrating
8.  Bothered by noise
9.  Bothered by noise
10.  Irritability, lack of patience
11.  Loss of temper easily
12.  Memory difficulty
13.  Anxiety
14.  Insomnia

There is a way to use these last 12 to ascertain the presence of brain trauma.  First check those that apply after an accident.  Next, answer honestly whether any were present before the accident.  For example, I sometimes get irritable when I’m hungry.  Is that evidence of head injury?  Obviously not.

Once you have determined that a symptom is present after an accident but also before the accident ask yourself “is it the same?  or is it worse?”  Worsening of a pre-existing symptom may be evidence of a head injury.

You then total up the number of symptoms that were not present before the accident or, if present, were worse following.  The greater the number of symptoms, the greater the likelihood of a head injury.

Discuss the results with your primary doctor and, if he deems it appropriate, get a referral to a neuropsychologist who can interview you and, as necessary perform a battery of tests to objectify the injury and its effects on your cognitive functioning.

Note: Credit for the development of this list goes to Sureyya Dikmen, PH.D. and the work he performed for his research project: “Behavioral Outcome in Head Injury.”

Conclusion

Brain injury is a common result from many types of accident.  It can vary widely in manifestations.  Car accidents with their “whiplash” type influence on passengers can produce a contrecoup concussion where there is no visible damage to the skull.  Brain injuries can have devastating impact on the lives of their victims.  If you have any of the telltale signs of a brain injury be sure to get checked out by a physician with skill and experience in dealing with these symptoms.

Sixteen year old Sally is southbound on I-5 near Eugene, Oregon. She hears a ring and knows she has just received a text message. After rustling through her purse, she finds her phone and checks the message. Her best friend Jane, back in Washington, has just seen Steven, Sally’s latest crush, at the Vancouver Mall.

“Should I talk to him?” Jane wants to know.

Sally has to be in Ashland in three hours so stopping is out of the question. And besides, she has no problem texting and driving. She could do it blindfolded.

Minutes later Farmer Tom, who is harvesting ryegrass seed, is blindsided by Sally’s red VW bug. Farmer Tom spends five weeks in the hospital and misses the high point of the seed harvesting season.

Back home in Vancouver Sally peruses her State Farm insurance policy and wonders: “BI–Bodily Injury, what does this cover?”

The policy says it will “pay damages which an insured becomes legally liable to pay because of bodily injury to others caused by accident resulting from the ownership or use of your car.”

Hmm…thinks Sally…what are “damages?”

DAMAGES DEFINED

Black’s Law Dictionary defines damages as “a sum of money awarded to a person because of the [wrongful act] of another.”

“Ok, so “damages” just means money,” Sally rightfully concludes.

“But how do the courts decide what money to award?”

TYPES OF DAMAGES

Damages, says the Blacks Law Dictionary, come in three broad classes: actual, nominal and punitive

Nominal damages are those awarded where a right has been violated but there is no substantial injury. When Sally drove on to the farmer’s field that was a trespass. Had she done so with no loss to the land or equipment or farmer that would have entitled the farmer to nominal damages (usually one dollar) for trespass.

Punitive damages also known as exemplary damages are intended to punish the defendant. They may be awarded where the conduct of the defendant was particularly wicked. Had Sally intentionally drove off the road to run over the farmer a jury in Lane County, Oregon might award punitive damages against her.

Actual damages also known as compensatory damages are those awarded for actual or real loss or injury. This is what bodily injury insurance most commonly covers. In most auto accident cases, actual damages break down into general damages and special damages.

SPECIAL DAMAGES

These, says Blacks Law Dictionary, are the “actual result of the injury complained of, by reason of special circumstances or conditions.” Special damages are easily quantifiable. In a bodily injury case three important special damage components are medical, lost income, and household services.

Medical Expenses

This includes hospital visits, prescriptions, and neck braces. Medical expenses need to be reasonable and necessary. Juries may trim down the medical expenses they consider excessive. If Farmer Tom ran up a $10,000 chiropractic bill the jury might decide he overtreated and cut the bill down to $3,000.

Farmer Tom might have a hard time sleeping after the crash and insist on a new Vera Wang bed prescribed by his family doctor. This would be a hard sell to convince a jury that this was a necessary medical expense relating to the accident.

Lost Income

Farmer Tom hired family members and friends to complete the seed harvest so the crop was not lost. The additional expenses he incurred reduced his profits and so he would have a claim against Sally for lost income. This would be covered by her bodily injury policy.

Household Services

Farmer Tom and his wife are very progressive and so divide up the household tasks. He is responsible for mowing the lawn and washing the cars on Saturday. To replace himself in these tasks Tom had to hire a neighbor boy. The money paid for these services would be recoverable by Tom in a personal injury claim against Sally so this would be covered by her bodily injury policy.

GENERAL DAMAGES

These are the difficult to quantify side of bodily injury damages. What is commonly known as “pain and suffering” comes under this category. Loss of enjoyment of life also falls under this category. General damages is often roughly calculated using a multiplier such as 1x, 2x, 3x times the reasonable and necessary medical expenses.

ATTORNEY FEES

If you are sued by someone after an accident, your bodily injury coverage will also pay for an attorney to defend you. These lawyers, known as “insurance defense attorneys” will be hired by your insurance company for you.

SUMMARY

Bodily injury coverage protects you if you are sued after causing physical injury to another. The coverage extends to anyone using your car with your permission. Your coverage also protects you if you are driving someone else’s car with permission.

The basic elements covered include medical expenses, lost wages, household services, pain and suffering, and attorney fees to hire an attorney to defend you.

About the Author: Rex Bush is founder of Bush Law Firm near Salt Lake City, Utah where he handles personal injury cases in Utah and throughout the United States and Canada. For information on personal injury issues visit his website: Utah Personal Injury Attorney

In horse-and-buggy days flighty stallions sometimes bolted and raced out-of-control down crowded streets.

But, horses had “horse sense” and rarely drove head on into the next wagon.

Without horses to guide us all the foibles of humanity come into play.

Are car accidents necessary? Probably not. But since they are a fact of life in modern America and since “forewarned is forearmed” here are some tips to help you cut your losses if you are involved in one.

STOP

Even if you just feel a bump on your car or think you might have hit someone or something, you should stop. Failing to stop could get you in a whole lot of trouble.

CALL THE POLICE AND REPORT THE ACCIDENT

If there has been an injury or the possibility of injury you should call the police.

if the other driver asks you not to involve the police, you should definitely call the police. From experience I can tell you that these people often don’t have insurance and try to weasel out of paying you later on.

In twenty five years I have only twice seen at-fault drivers make good on their promise to pay for damage after an accident. One of those cases involved me when I tapped another car on an icy road and was asked to replace the car seat. Buying a new car seat was cheap for me as it avoided an increase in my rates.

If your car is in an accident and the person driving was rendered physically incapable of making an accident report, then you, as the owner of the vehicle, should make sure the accident is reported to the police.

If another driver causes an accident but does not stop do your best to get the license number. If there are witnesses get their names, addresses and phone numbers. Then call the police. Keep the witnesses at the scene till the police arrive.

If you are injured in a no-contact accident caused by a driver who flees the scene you can be compensated by your uninsured motorist coverage.  However, your carrier will require “independent proof” that another driver caused the accident.

EXCHANGE INFORMATION

Drivers must exchange names, addresses phone numbers and insurance information.

GATHER INFORMATION

Make a diagram of the accident, showing the positions of the cars before, during, and after impact.

Measure skid marks (if possible), or make sure the police do it, note the positions of traffic lights and street signs, estimate the respective driving speeds (for your own records), and record details about the weather and road conditions.

If possible, have photographs taken of the accident scene and of any damage or injury to persons or vehicles.

Pictures of serious damage to your car or other cars can help you if you later pursue a claim for injuries.

On the other hand, minor damage to your car or another car can help you if someone files a claim against you.

I once tried a case where the insurance defense attorney obtained a photograph of the minor damage to my client’s car and had it blown up to to an exhibit measuring four feet by four feet.

This was impressive to the jury who felt that minor damage to car meant minor damage to the occupant and so they awarded a smaller than normal amount of money on the case.

DON’T ADMIT FAULT

You should cooperate with police officers investigating the case. Answer the police officers questions factually. Don’t guess or estimate. Do not volunteer information or comment on the accident to the police witnesses, or other drivers. Do not admit any fault for the accident.

Do not sign any pieces of paper. In some states you may be asked to sign traffic tickets–but this in itself is not an admission of guilt or wrongdoing.

You must take an alcohol test if requested, or risk losing your license.

SEE A DOCTOR

As soon after the accident as possible, it would be a good idea to be checked out by a doctor. Even if there are no initial signs of pain, there might have been damage done to the neck or spine.

Sometimes people get injured in car accidents but because those injuries don’t show up immediately, they don’t seek medical treatment promptly.

If a short time after your auto accident, you or one of your passengers develop pain in the neck or back or you feel you’re suffering from a mental or emotional disability caused by injuries to the head, see a doctor.

If you have a head injury, you may need to see a neurologist. Head injuries can occur even though you don’t hit your head. This is what happened to Natasha Richardson who died from head injuries in a skiing accident. This is known as a “contrecoup” concussion.

At the very least consult a chiropractor with respect to back and neck injuries.

DEALING WITH INSURANCE COMPANIES AND CLAIMS ADJUSTERS

After the accident contact your insurance company to inform them of the accident.

If the other driver was at fault report the accident to his insurance company.

His company should provide you with a rental car, if needed, and pay to have your car fixed.

If your car is totaled the his insurance company should pay to fix it. Kelley Blue Book and NADA both have web sites where you can get information about the value of your car.

You will likely be contacted by a claims adjustor from your own or another parties’ insurance company.

Be careful about what you say.

If you feel you have no injuries at the time and tell that to the adjustor, and later on it develops that you had injuries that you were unaware of, (this is very common in whiplash cases,) the adjustor is sure to bring it up, in an effort to keep the settlement as low as possible.

CALL A LAWYER

You may want to talk to an attorney at this time to clarify your rights and discuss questions of liability for the accident.

WHAT TO DO IF YOU ARE SUED

If you are served with a complaint and summons and you have insurance just take the complaint and summons to your insurance agent. This would be the agent for the insurance you had at the time of the accident. Auto insurance covers you based on coverage on the date of the accident. If you changed insurance since the accident your prior insurance still has a duty to defend you.

If you were not covered by insurance you should consult a lawyer who specializes in insurance defense. It will be worth paying his hourly fee to have him protect your interests.

You might be able to get the case dismissed by proving you were uninsured at the time of the accident. The injured person can then make a claim under his uninsured motorist coverage.

His uninsured motorist insurance carrier may go after you for “subrogation”. If that happens, your insurance defense lawyer can be a big help negotiating the best possible settlement of the claim.

This may be a time to consider filing bankruptcy so a consultation with an experienced bankruptcy lawyer to discuss Chapter 7 and Chapter 13 should be scheduled.

Medical bills are one of the most important items to include in the settlement brochure. All insurance claims adjusters and insurance defense attorneys use them to one degree or another to calculate settlement value of the case.

“Specials” is short for “special damages” which are basically specifically provable items such as medical bills and lost wages.

Medical Specials of ______________(name)
Through ________________________________________(date)

Note: in the following section place the name of the healthcare provider on the first line and the amount of the bill on the second.
___________________ $ ________

___________________ ________

___________________ ________

TOTAL CHARGES $

Here is the template I use to prepare the cover letter to go with my settlement brochures.

Wednesday, October 22, 2008
___________________________
___________________________
___________________________
___________________________

RE: My Client: ___________________________
Date of Loss: ___________________________
Policy Number: ___________________________
Claim Number: ___________________________
Your Insured: ___________________________

Dear ____________________,

My client, ____________________, was ______________ on _______________________. My client was ________________________________________________________
_____________________________________________.

The investigating officer attributes primary fault for the accident to your insured for ___________________. Your insured was also cited for ___________________. The investigating officer found that my client did not contribute to the accident.

The amount of damage to the vehicle my client was estimated at the time of the accident to be _________________.

After the accident my client presented to __________________________________ where he/she was diagnosed with:

My client was also referred to _______________________________. The diagnosis was:

TOTAL MEDICAL SPECIALS: $
TOTAL SPECIALS: $

For the foregoing reasons, demand is made for the sum of $_________ to compensate my client for the injuries sustained in this unfortunate accident.

Sincerely,
BUSH LAW FIRM

Rex Curtis Bush
Attorney for ________________________

CHECKLIST – DEMAND PACKAGE/SETTLEMENT BROCHURE

Date of accident:
BUSH LAW FIRM Client:

1. Order PIP payments ledger, send AUTH.TO FURNISH MED. INFO.(calendar for followup)
2. Received PIP payments ledger. (If PIP still available note on ACCT. SHEET)
3. Check PIP ledger for any other doctors, clinics, prescriptions, etc.
4. Mail DEMAND PACKAGE QUESTIONNAIRE to client.
5. Request impairment rating or final narrative report letter from:
6. Received impairment rating or final narrative report.
7. Requested Medical Bills:
8. Received Medical Bills:
9. Requested Medical Reports:
10. Received Medical Reports:
11. Received completed DEMAND PACKAGE QUESTIONNAIRE from client.
12. Mail or fax LOST WAGES REQUEST LETTER to employer. Calendar for follow up.
13. Received lost wages information from employer or client.
14. Calculate lost wages information.
15. Check dates of service on ALL med. bills, presc., reports,records,etc. Make sure bill is current & incl. all services to date, esp. MT, PT & Chiro.
16. Arrange medical bills in chronological order, keeping all of one dr’s/clinic’s bills together, then list each dr/clinic on MEDICAL SPECIALS SUM. in same order.
17. Check for prescriptions. Add as last item on MEDICAL SPECIALS SUM.
18. Check for future medicals information, if applicable; add to bottom of MEDICAL SPECIALS SUM. below drs/clininc/presc. (Place a copy of future medicals documentation in future medicals section of demand.)
19. Read medical records & reports to identify any problem areas. (In reading if another dr./clinic is mentioned check on it to see if there are more med. bills.
20. Organize medical records & reports in order of impact or in reverse chron. order.
21. If this is an uninsured/underinsured motorist case, gather information that is evidence of uninsured/underinsured motorist. (circle one)
22. Obtain liability or jury verdict research.
23. Arrange info. in demand package format. See “Preparing a demand package” policy).
24. Draft DEMAND LETTER.
25. Type DEMAND LETTER; MEDICAL SPECIALS, FUTURE MEDICALS, and LOST WAGES SUMMARIES.
26. Proof DEMAND LETTER; MEDICAL SPECIALS, FUTURE MEDICALS, and LOST WAGES SUMMARIES. Check date of accident on accident report against the date in letter
Check verdict amounts in comp. verdicts with what is typed in letter
Check spelling on medical terms, doctor’s, client and adjusters names
Check to see that all dollar amounts and numbers are correct numbers
Check all dollar totals with adding machine, run tape, attach to page
Check names and amounts on medical specials summary with the bills
27. Place divider sheets in appropriate places within documents in folder.
28. Go to CHECKLIST OF ITEMS TO ACCOMPANY DEMAND LETTER & MATERIALS TO GIVE TO ATTY.
29. Ok by attorney only after atty review of demand checklist has been done by atty.
30. Finalize DEMAND LETTER; MEDICAL SPECIALS, FUTURE MEDICALS,& LOST WAGES SUMMARIES.
31. Have attorney sign letter.Make copy of front page only of demand letter for atty.
32. Place MEDICAL SPEC/FUTURE MED WORKSHEET under ACCOUNTING SHEET and DEMAND LETTER/LOST WAGES WORKSHEET in misc. section after review.
DOUBLE-CHECK before mailing demand:
33. Make sure letter is signed before copying. Copy entire demand package, make EXACT copy of what we send to the insurance company.
34. Make copy of MEDICAL SPECIALS SUMMARY and place under ACCOUNTING SHEET.
35. Write number of copies down on copies sheet.
36. Make sure divider tabs are “in” for each section & labeled in demand & copy.
37. After copying demand go thru page by page, to see that every page got copied, & that pages are facing out. Be sure highlighted items get highlighted on copy.
38. 3-hole demand, place in report cover w/bus. card. Route to attorney for review.
39. Final ok by attorney.
40. Add name to DEMAND OUT/STAT SHEET in legal administrator’s office.
41. Add to CURRENT CASE SHEET date demand sent, adjuster name, phone & claim number.
42. 2-hole copy, insert prongs, “file copy” right hand corner & put in demand file.
43. Tape demand envelope closed.
44. Mail demand package or hand delivered (circle one). Place postage and first class stamp on envelope and write amount of postage on postage cost sheet.
45. Write down amount of demand package materials on accounting sheet ($3.50-$5.50).
46. Mailed “demand sent letter” with copy of MEDICAL SPECIALS SUMMARY to client.
47. Tickle for follow up on demand in five days with adjuster.
48. Put PERSONAL INJURY CHECKLIST PART 2 in file on top of all checklists.

demcheck.ck 081495 (File-green label Checklist Demand Package) This checklist should be on goldenrod paper.

After 25 years of working as an injury attorney on thousands of cases ranging in value from ten thousand dollars to millions of dollars there are three key principles that stand out when it comes to getting maximum dollar value from a case. They are:

1) IDENTIFY ALL INJURIES;
2. MAKE SURE EACH INJURY IS PROPERLY DIAGNOSED;
3. MAKE SURE EACH INJURY IS APPROPRIATELY TREATED.

STEP ONE: IDENTIFY ALL INJURIES

“What?”, you say, “Isn’t that the doctor’s job?”

Maybe.

But is it the doctor’s job to make sure you get maximum recovery on your case?

In this day of specialization doctors are increasingly aware of their own area of specialization and less aware of injuries outside their area. It’s sort of like the “forest for the trees” metaphor.

An orthopedic surgeon, for example, can certainly spot a bone break. But is it realistic for him to also know symptoms of TMJ (temporomandibular joint disorder)

TMJ

Temporomandibular joint disorder is an abnormal condition with facial pain and poor function of the lower jaw. It is caused by a defective or dislocated TMJ joint (i.e. jaw joint).

One common sign of “TMJ” is clicking of the joint when the jaws move. [Mosby Medical Encyclopedia, Revised Edition.]

I represented a Chinese man who came to the United States to attend college. While cruising the freeway in his Volkswagen bus one night, he was struck from behind by a semi-truck.

His injuries were numerous and various.

One day, after he had seen many doctors, he was visiting with me, discussing his case. My attention was drawn to an audible “pop” sound which coincided with the opening of his mouth.

TMJ? You better believe it. One of the worst cases I had ever seen (or heard). I brought it to the attention of one of his doctors so a referral could be made to a TMJ specialist.

HEAD INJURY

Another common malady in accident cases (especially after auto accidents) is a “closed head injury”, which is trauma (injury) to the brain without skull fracture.

One type of closed head injury is a “concussion” which is a violent jarring or shaking injury to the brain. [Mosby Medical Encyclopedia, Revised Edition.]

Closed head injuries are quite common in car accidents and can occur even though the injured person did not strike their head. There is a type of head injury known as contre-coup concussion that is described in the following paragraph:

“A rapid acceleration and deceleration of the head can
force the brain to move back and forth across the inside
of the skull. The stress from the rapid movements pulls
apart nerve fibers and causes damage to brain tissue.
This type of injury often occurs as a result of motor
vehicle crashes and physical violence, such as Shaken
Baby Syndrome.” Source: Brain Injury Association of
America.

How do you make sure all injuries are diagnosed?

Use a checklist.

There at least twelve (12) common symptoms of closed head injury.

Years ago I obtained a list of these from a neuropsychologist. (A “neuropsychologist” is the medical professional who specializes in the diagnosis and treatment of closed head injuries.)

I also obtained, from a TMJ specialist, a list of common TMJ symptoms.

These symptoms have been incorporated into a checklist which is included in my accident paperwork that all my new clients have been filling out for years.

I’ll be posting it on this blog so be sure to come back or sign up for RSS feed or email feed so you don’t miss it.

Another way to make sure all injuries are identified is to tell your doctor. At your first visit, certainly, but also on later visits. Be sure to tell your doctor about symptoms that are new or worse since the accident.

Sometimes your pain might be most severe in your neck right after the accident. Later, when that pain subsides your knee could be troubling you most and your knee could turn out to be the most seriously injured part of your body.

If he doesn’t listen, tell your attorney. You might feel something is minor or not important so you are reluctant to tell your doctor or attorney. The best practice is to tell your doctors and attorneys everything. Let them decide what is important.

If your doctor doesn’t listen tell your attorney. If your attorney won’t listen get another attorney. Find someone who will listen.

Attorney-client relationships are like all relationships: there is no substitute for good communication. And that requires listening, on both sides.

STEP TWO: MAKE SURE EACH INJURY IS PROPERLY DIAGNOSED

How do you make sure each injury is properly diagnosed?

Once you’ve used the checklist and spotted a potential injury bring it to the attention of your doctors and lawyer. Your lawyer can ask your primary treating physician to make a referral to a specialist who can perform tests and formally diagnose the injury.

STEP THREE: MAKE SURE EACH INJURY IS APPROPRIATELY TREATED.

Make sure all of your injuries is appropriately treated by going to the doctor after your accident.

Stoicism was a philosophy practiced in ancient Greece. The essence was “suck it up, don’t complain, be a man”.

This philosophy may have worked in Ancient Greece but it doesn’t work in a modern injury case. Not if you want to get top value for your injuries.

If you are hurt, go to the doctor. Follow his treatment recommendations.

Insurance defense attorneys love to bring up in court that the plaintiff (injured person) did not follow the doctor’s recommendations. Juries expect you to follow your doctor’s advice.

There’s a legal principle called “mitigation of damages”. It says you must take steps to reduce the harm you suffer when someone causes you injury. If you fail to follow your doctor’s advice, you have failed to “mitigate your damages”.

There is a specific “jury instruction” that the defense attorney will ask the judge to give the jury if he thinks you haven’t been faithful to treatment recommendations.

You will get less money if you don’t get the treatment prescribed by your doctors.

Even something as small as missing an appointment can make a difference.

Doctors don’t like it when patients miss appointments. They sometimes write in large letters: “PATIENT FAILED TO SHOW“.

Juries get to see all the medical records. Imagine their reaction to just one of those comments.

So make your appointments. Do your part to get better.

If the TMJ specialist tells you to wear your brace daily for six weeks, wear the brace.

If your doctor prescribes daily exercises, do the exercises.

If surgery is recommended and the second opinion doctor agrees. Get the surgery. Your case is worth infinitely more after the surgery.

CONCLUSION

By following the advice in this article you avoid mistakes that will cost you thousands, tens of thousands, or even hundreds of thousands of dollars on your injury case.

Here’s an actual post from the chat.lawinfo.com site. I’ve modified my response for purposes of this blog.

Q.
I was hit by a drunk driver on New Years Eve. I was hospitalized for 2 days with broken ribs. My 1994 van was totaled. I will miss 2 weeks of work. The drunk who hit me was insured. Am I entitled to anything more that the $2000 I will get for the van? I now have to buy a new car (the $2000 won’t come close to replacing it)

A.
Each state has criteria that must be met to qualify for an award of pain and suffering. In Utah, for example, you need to incur $3,000 in reasonable and necessary medical bills or have a permanent injury.

With two days in the hospital you probably already have $3,000 in medical bills.

Some of the strong points of your case are:

1) broken bones (juries and claims adjusters love broken bones [ o.k. they don't love them but they give them a lot of respect when it comes time to make an award for pain and suffering.]

2) a drunk driver (juries and claims adjusters hate drunk drivers [this time I think, yes, they actually do hate them] which works to your advantage, once again, when it comes time to make a claim for pain and suffering.

This may sound crass, but in most states you would be “in the money” so to speak, on a claim for pain and suffering compensation.

YOU SHOULD CALL A LAWYER