What Happens When You Reject an Insurance Settlement Offer? A Step-by-Step Guide

Legally Reviewed and Edited by: Terry Cochran

Ever received an insurance settlement offer and replied, “Is this fair?” You are right. A whopping 85% of the initial insurance settlement offers are lower than what claimants are entitled to by law. Whether the accident is automobile-related, involves damage to property, or some other insurable event, the first offer by the insurance agency is never the value of the claim.

Insurance companies exist for only one reason and one reason only: to achieve maximum profit by taking in as little as they can. It’s a business model that is frustrating and a deterrent to claimants when they’re offered that initial offer.

But what if you stand firm and reject an offer to be paid by the insurance? What happens when you reject an insurance settlement offer? Is it a gamble that will bankrupt you or an astute step that will lead you to an equitable settlement?

This step-by-step guide will take you through the whole process of rejecting an insurance settlement offer and managing what’s next. From knowing what the results can be to understanding when you have to appear in court, we’ll go over each step thoroughly to enable you to make knowledgeable choices regarding your claim.

Don’t be misled into believing rejecting an offer is the last step—it’s very often the start of the negotiation process that can have an enormous impact on your overall financial recovery.

Possible Outcomes After Rejecting an Insurance Settlement Offer

When you receive the initial insurance settlement offer and find it does not cover you adequately for your damage or injury, declining it keeps several options available. Being informed about the available options will make you prepared for what is to come and set realistic expectations.

The Insurer Makes an Increased Offer

Denying the first settlement offer will generally lead to an even better result. Adjusters are typically provided with a negotiation bracket to operate with, and first offers always fall at the lower end of the bracket. Denying the first offer shows that you have knowledge of the correct value of the claim and will not entertain anything less than what you’re due.

Sarah in Detroit gained that real-world experience when she was rear-ended in a serious accident. “The insurance company originally offered to pay for the damage to my vehicle and injury for $5,000. When I declined it and showed them proof of continuing doctor visits and lost income, they increased the offer to $12,500—over double the first offer.”

The Offer Stands Unchanged

An insurer can stick to the first offer, particularly if they truly believe that it is the value of your claim according to their assessment. That does not mean it is the final word, but it does mean you’ll need to bring further evidence or clout to the bargaining table to keep the conversation going.

The Insurer Withdraws Their Offer

On occasion, an insurance provider can withdraw the offer to settle outright when it is rejected. This is typically where:

1. The statute of limitations is imminent
2. New facts emerge that refute your claim
3. The Insurer perceives that you have unrealistic expectations

Even if this outcome is unlikely, it is always better to be prepared and to have an alternative plan in the event it does result, which can include consulting with an injury attorney.

There Are Numerous Rounds of Negotiation

The most common response to the proposal by an insurance settlement is to initiate the negotiation. Each side presents counter-arguments and introduces evidence to support either position, gradually inching toward the middle. There can be many offers and counter-offers during the to-and-fro until finally reaching an agreement.

Being aware that rejection typically leads to further negotiation and never to instant closure can work to the advantage of expectation management for process and timeline. Patience is the virtue for this step.

Negotiation Process in an Insurance Settlement Dispute

Once you’ve rejected an insurance settlement offer, the negotiation process starts. It’s a relatively standard procedure, but the specifics can be different depending on the specific circumstances of your claim and the policies of the insurance provider.

Obtaining Further Evidence

The stronger the validity of the evidence for your demand, the stronger the power for bargaining. After having turned down an offer, focus on acquiring more documentation that substantiates your losses and damages.

Such evidence can include:

• Complete medical records and bills, including future cost estimates for treatment
• Long-term consequences, according to expert opinion by doctors
• Documentation for missed income and curtailed earning power
• Replacement value or repair quotes for damaged property
• Visual documentation of injury or property damage
• Eyewitness testimonies to validate the things that happened

One worker, James, who did construction work in Ann Arbor, strengthened his negotiating position following a workplace injury by having his orthopedic surgeon prepare a written opinion explaining how the injury would impact his capacity to resume his particular occupation. This written opinion was particularly useful in establishing the long-term economic effect of the injury.

Understanding the Adjuster’s Mindset

Effective negotiation requires knowing the motivation and limitations of the opposite side. Adjusters are rated by performance in settling claims economically and quickly. Adjusters possess settlement power to the limits assigned, beyond which they must get the approval of supervisors.

When communicating with adjusters:

• Maintain a professional, matter-of-fact tone
• Emphasize factual evidence instead of emotional appeals
• Be specific about why the offer is inadequate
• Demonstrate understanding of similar claim settlements
• Be prepared to negotiate, but remain firm when demanding fair remuneration

Communications Strategies While Negotiating

The manner in which you respond with the word no to an insurance settlement offer can be impactful. Letter communication leaves you with a paper trail and gives you the ability to choose words with caution, yet word-of-mouth can sometimes easily clarify misunderstandings.

Written Communication

One should reject a formal offer to settle with:

• Clearly indicate that you are declining the offer
• Express the reasons the offer is unacceptable explicitly
• There exists new evidence to substantiate the valuation claim.
• Offer a concrete counteroffer with reasoning
• Establish an appropriate response timeline

Sample Letter Rejecting a Settlement Offer

[Your Name]

[Your Address]

[City, State ZIP]

[Your Phone Number]

[Your Email]

[Date]

[Insurance Adjuster’s Name]

[Insurance Company]

[Company Address]

[City, State ZIP]

Re: Claim Number: [Your Claim Number]

Date of Loss: [Date of Incident]

Dear [Adjuster’s Name],

I am writing in response to your settlement offer of [offer amount] dated [date of offer]. After careful consideration and consultation with my [doctor/attorney/etc], I must respectfully decline this offer as it does not adequately compensate me for the damages I have sustained.

The offer fails to fully account for the following:

1. Ongoing medical expenses: My treatment is expected to continue for [timeframe], with estimated costs of [amount] according to my healthcare provider’s assessment (see attached medical report).

2. Lost wages: I have been unable to work for [number] weeks, resulting in lost income of [amount]. My doctor anticipates I will need an additional [timeframe] before returning to full work capacity.

3. Pain and suffering: The accident has significantly impacted my daily life, preventing me from [specific activities] and causing persistent [specific symptoms].

Based on the documentation provided and comparable settlements for similar claims, I believe a fair settlement would be [your counter-offer amount]. This figure more accurately reflects my actual damages and is consistent with settlements in comparable cases.

I look forward to your response by [date – typically 14-30 days from your letter]. I remain open to discussing this matter further to reach a fair resolution.

Sincerely,

[Your Signature]

[Your Printed Name]

Verbal negotiation tactics

• When interacting with adjusters
• Record all calls on the telephone
• Clarify key points in writing later
• Pose open-ended questions about how they arrived at the offer
• Utilize silence effectively after making arguments
• Stay calm even during heated debates

Setting Healthy Boundaries

It is only to be expected to be let down by a settlement proposal, but successful negotiation requires balancing assertiveness with realistic expectations. Research similar cases in the jurisdiction to establish an appropriate zone of expectation for the settlement. Publicly reported settlement information, law blogs, and internet-based information can provide valuable benchmarks.

Remember that each claim is unique, and various factors influence settlement values, including:

• Local jurisdiction and settlement patterns
• Clarity on liability
• Nature and type of injury
• Quality of documentation
• Your negotiation skills or attorney’s

Making a Counter-Offer in an Insurance Claim

After declining an offer to settle an insurance claim, it is only proper to make a considerate counteroffer. Where the simple word “no” can be interpreted either way, the counter-offer shows that you are willing to talk while putting another anchor into the negotiation.

Determining the Right Counteroffer

Determining an appropriate counteroffer requires a careful review of all the losses and damages. Though insurance companies work with established formulas to operate with, the estimation should be accurate and thorough.

For economic losses (those with certain monetary values):

• All future, ongoing, and past medical costs
• Property replacement or repair expenses
• Lost benefits and income
• Decreased earning capacity
• Out-of-pocket expenses related to the accident

For non-economic losses (intangible losses):

• Pain and suffering
• Emotional distress
• Loss of enjoyment of life
• Permanent disability or disfigurement

One such method for estimating non-economic damages is the “multiplier method,” i.e., taking economic damages and multiplying them by a multiplier (typically 1.5 to 5) depending on the level of injury. Be prepared, however, to back the calculation up with specific examples of the way life was impacted.

Making Your Counter-Proposal Effective

How the counter-offer is presented is sometimes more impactful than the offer. A proper presentation for the counter-offer:

• Acknowledges the insurance provider’s position with respectful disagreement
• Gives proper, factual evidence to substantiate every step in the argument
• Rational organization of documentation and convenience of reference
• Presents new evidence and/or perspectives not previously presented
• Demonstrates reasonable flexibility on the initial request (if appropriate)

Grand Rapids educator Michelle supported the counteroffer with a year’s worth of diary detailing the way the injury affected home life and classroom work, with concrete, real-life examples that were impossible to obtain with statistics.

Justifying Your Valuation

Insurance adjusters respond to facts, not to statements. For each item in the counter-offer, state definite reasons:

Medical costs: Give billing records, schedule of treatment, and professional advice on future treatment

Lost earnings: Provide pay stubs, employment documentation, and work records

For property damage: Include repair estimates for several vendors, the cost to replace, or diminished value appraisals

Pain and suffering: Quote medical reports showing pain levels, psychological assessments, and personal statement of impact

The stronger the evidence you can document for every element of your claim, the stronger your negotiating position.

Timing Your Counteroffer

What happens when you reject an insurance settlement offer? Timing can make or break the reception of your counteroffer. Consider the following:

• Wait until maximum medical improvement or until an established prognosis is achieved
• Be mindful of the statute of limitations for the type of claim
• Permit the insurer a reasonable time to consider new information
• Do not wait until the last minute because this can cause excessive stress

Mediation and Arbitration in Insurance Settlement Disputes

Where face-to-face conversations collapse following the refusal to accept an offer to settle by an insurance policy, alternative methods of resolving disputes, like mediation and arbitration, offer formal exits. Both processes can resolve impasses without the delay, cost, and unpredictability of litigation.

The Mediation Process Defined

Mediation is when the insurance company and you work with the assistance of a neutral third party (the mediator) to facilitate the negotiation and conversation process. Mediators, unlike judges or arbitrators, don’t make or impose settlement agreements but assist the two sides in reaching an agreement.

The general process for mediation involves the following:

• Mediator selection: Both sides choose an impartial professional mediator, often an attorney or retired judge who specializes in insurance.
• Preparation for Mediation: Both sides submit position statements and the necessary evidence for the mediator’s review.
• Opening Session: The mediator explains the process, and each side presents its perspective.
• Private caucuses: Private meetings with each side by the mediator to discuss strengths, weaknesses, and potential compromise points.

Negotiations: The mediator shuttles between the parties, relaying offers, counteroffers,

Agreement or deadlock: If it’s an agreement, it’s written and signed by both sides. In the event of no agreement, the mediator can offer follow-up meetings or other approaches.

• Mediation can bring many benefits to insurance disputes:
• Typically, it is faster than a lawsuit
• Typically, it is less expensive than court hearings
• Facilitates creative resolutions impossible in the courtroom
• Maintains settlement terms in secrecy

Preserves relations that otherwise would be destroyed by acrimonious litigations

One small business owner in Lansing, Robert, reported mediation services to be most successful following the settlement of a commercial property damage claim. “I was stuck at $30,000 with the insurance provider. We compromised by having them make direct repairs with one of the contractors they used, and we accepted a cash settlement, which worked for both sides.”

What Happens When You Reject an Insurance Settlement Offer: When and How Arbitration Operates

Unlike mediation, arbitration involves a binding decision by the third-party decision maker (the arbitrator). Mandatory arbitration clauses are included in certain insurance contracts, and in other cases, the agreement is voluntarily made to submit to arbitration as the method for resolving the conflict.

The arbitration process typically entails the following:

Initiating arbitration: Either side makes a formal request for arbitration under policy terms or by agreement.

1. Appointment of Arbitrator(s): Either one or three can be appointed according to the procedure.
2. Sharing information: Both sides share information and evidence that they will present.
3. Hearing: Each side makes its case, including witness evidence and documentary evidence.
4. Decision: The Arbitrator makes the written decision (award), and it is typically binding and enforceable.

If considering arbitration when refusing to accept an insurance settlement offer, consider:

• Whether the policy requires arbitration for certain disputes
• The fees (usually paid by the parties)
• Binding character of the decision
• Appointment of the Arbitrators
• Restraints on recoverable damages

Differences Between Mediation and Arbitration

When deciding which alternative dispute resolution method might best serve your needs after rejecting an insurance settlement offer, consider these key differences:

Preparing for Mediation or Arbitration

Thorough preparation greatly improves your chances for success with either procedure. Before doing either:

• Chronologically organize all documentation
• Summary of the most relevant facts and timeline
• Be clear about your “bottom line” acceptable outcome
• Pick your strongest evidence and arguments
• Prepare to answer counterarguments
• Have an attorney, especially for arbitration
• Practice presenting arguments assertively and calmly

Taking Legal Action After Rejecting an Insurance Settlement

If the settlement offer by an insurance provider is rejected after negotiation, mediation, and arbitration fail to result in an acceptable result, the final resort is the lawsuit. It involves both potential benefits and factors to consider.

When Is Litigation Required?

Bringing a lawsuit is never an option that should be adopted lightly. Sue when:

• The insurance company is acting in bad faith by denying or delaying your claim unjustly
• The settlement gap remains substantial despite good-faith negotiations
• The statute of limitations is approaching
• You have compelling evidence backing your stance

The possibility of recovery makes the cost, hassle, and aggravation of litigating worthwhile

Lisa’s experience indicates when it’s necessary to sue: “I was offered $25,000 for the two surgeries and eight-month work missed that I endured. We spent three futile months bargaining. We were faced with outright refusal to budge in the face of mountains of evidence. We would only be heard if we sued.”

Understanding the Litigation Process

If you decide to sue when you reject an insurance settlement offer, anticipate the formal but at times drawn-out process:

Filing the complaint: Your attorney files the formal legal document that contains your claim, the damages to be sought, and the basis for the recovery.

1. Discovery stage: Both sides share information by:
2. Written interrogation (questions)
3. Requests for Documents
4. Depositions (testimonies)
5. Expert witness testimonies
6. Pre-trial motions: Either party may make motions asking the court to rule on particular issues before trial.
7. Settlement conferences: Formal settlement talks are typically directed by the court prior to trial.
8. Trial: Your case goes to trial if the settlement fails. Either the jury or the judge determines liability and damages.
9. Post-trial activities: After the verdict, either side can make appeals or objections to certain elements of the trial or outcome.

Meanwhile, settlement talks are normally in effect, and most cases are resolved without going to trial. Pending trial dates typically make insurance companies offer more favorable terms.

Cost-Benefit Analysis for Legal Action

Before going forward with litigation after denying an insurance settlement offer, do a careful cost-benefit analysis, taking into account:

• Potential costs
• Lawyer fees (hourly or contingency)
• Litigation costs and court filing fees
• Compensation to an
• Your time investment
• The psychological impact of extended legal processes
• The threat of losing and regaining nothing
• Possible advantages:
• Much better pay
• Restraining the insurance companies
• Establishing precedent for future cases
• Full verification of the assertion

Mark, who is a contractor in Flint, explains: “My attorney explained that I should expect to recover more than the $50,000 being offered, but it would cost around $15,000 in fees for expert witnesses and costs to sue. We would need to be fairly certain that we could recover at least $65,000 to make it economically worthwhile to sue.”

Handling lawyers on contingent fees

Most personal injury lawyers accept contingency fees when they represent injured individuals who have denied insurance settlement offers. It’s an arrangement whereby:

• You incur no upfront legal fees
• Your attorney receives a percentage of the recovery (typically 33-40%)
• You generally don’t pay fees to attorneys if you’re not awarded.

This fee structure aligns the lawyer’s interests with your own and makes legal advice accessible regardless of your financial situation. However, even with contingent arrangements, you may need to cover case expenses should you not receive compensation.

When producing future attorneys

• Specify fee arrangements before signing agreements
• Define responsibility for case expenses
• Learn why percentage fees can be different if the case goes to other stages.
• Evaluate the attorney’s experience with cases like the one at hand

Insurance Bad Faith Claims

In certain situations, the actions by an insurance provider after you decline to accept a settlement offer can be considered “bad faith,” allowing for further claims beyond the initial damages.

Some examples of actions in bad faith are:

• Unreasonable delay in the procedure
• Lack of proper investigation
• Falsification of policy terms
• Providing false or misleading information
• Undercharging substantially less than the apparent worth for no legitimate reason
• Bad faith claims can possibly result in:
• Reimbursement of the original claim amount
• Compensation for the other losses caused by the bad faith
• Payment for attorney fees and expenses

These charges build so much bargaining clout and can cause the insurers to reconsider unreasonable positions.

Seeking Professional Help

Once an offer for an insurance settlement is rejected, the next process can be more troublesome. While some claimants negotiate by themselves, the majority are assisted by expert advice, particularly when disputes become more severe.

When Do You Require Consulting with a Michigan Personal Injury Lawyer?

When to Employ a Michigan Personal Injury Lawyer

• Your wounds are serious or permanent
• Your claim entails significant damages
• Liability is contested or uncertain
• Responsibility is shared by many
• The insurance provider employs coercive actions
• Negotiations for a settlement collapse
• There exists discomfort with the negotiation process

The statute of limitations is imminent

It is generally worth contacting early, even if it is you doing the negotiating. Most lawyers make initial consultations available at no cost to review the claim and provide initial advice.

Things to Anticipate with Legal Representation

Once you’ve hired a Michigan Personal Injury Lawyer after declining an offer for settlement by an insurance provider, they typically:

• Provide a thorough examination of the claim and all the related evidence
• Determine possible strengths, weaknesses, and valuation drivers
• Develop a strategic litigation or negotiation plan
• Coordinate all communications with insurance agents
• Obtain more evidence, with expert views if required
• Provide solid demand packages with comprehensive documentation
• Navigate complex legal procedures if litigation is necessary
• Preserve your rights throughout the procedure

Warren’s Jason narrates the experience thus: “I negotiated with myself for two months and got into a stalemate with the insurance. I hired an attorney. They identified problems with the coverages I never even realized in weeks. They presented the medical evidence more effectively than I could. The settlement almost doubled.”

Legal Representation Can Alter the Dynamics

Insurance firms handle claims in a different manner once attorneys get involved. Studies show that claimants recover more on average, even after attorneys’ fees are deducted. This is because:

• Legal experts learn fair claim valuation from experience in handling comparable cases
• Legal representation indicates readiness to litigate if required
• Attorneys can recognize bad faith tactics and utilize them to their advantage
• Formal presentation of evidence improves bargaining power
• Increased penalties for unjustifiable actions by insurance companies

Finding the Right Lawyer

If you’re unhappy with the settlement proposal and choose to proceed with legal representation, it’s crucial to choose the right attorney. Consider:

• Prior experience with the type of claim
• Litigation and negotiation track record
• Communication style and accessibility
• Fee structure and transparency
• Client testimonials and feedback
• Reputing by peers in
• Strategies to effectively manage your claim

Conclusion

It is a life-altering decision to reject an insurance settlement offer. While it involves risk and doubt, having information about the potential outcome and process gives you the power to battle for the rightful reward.

Bear the following in mind while navigating post-rejection terrain:

• Initial offers will be opening offers, but never final offers
• Robust evidence and documentation support your position
• Subprofessional presentation of the claim makes a settlement more likely to be favorable
• Conflict resolution through other approaches can resolve standstills without litigation
• Legal representation alters the way insurance companies handle your claim

Most importantly, each step beyond the point of rejection must be calculated and informed. Whether negotiating on one’s own or with the use of professionals, having realistic expectations but assertively representing one’s interests is the path to the most equitable remuneration.

Seek Guidance for Your Insurance Settlement Case

If you or someone you love is considering rejecting an insurance settlement offer, get the legal representation you need. Speak with our compassionate, knowledgeable Cochran, Kroll, & Associates, P.C. attorneys.

We can review your case, guide you through what happens after rejecting an offer, and help you navigate the next steps in your insurance claim. Contact us today for a free, no-obligation consultation.

Our contingency fee basis means we only get paid if we win your case, so there is no financial risk to you to get started. Call our law firm today at 1-866-MICH-LAW  and schedule your no-obligation, free case evaluation.

Disclaimer : The information provided is general and not for legal advice. The blogs are not intended to provide legal counsel and no attorney-client relationship is created nor intended.