Legal Definitions - write-off

The term write-off has a general meaning in finance and a specific application in personal injury law.

Generally, a write-off refers to the act of reducing the book value of an asset or debt because it is no longer considered recoverable or useful. This often means removing it from a company's financial records as a loss or expense, which can impact its reported profits and tax obligations.

In the context of personal injury cases, a write-off refers to the difference between the original amount a medical provider bills for services and the lower amount that the provider ultimately accepts as full payment. This often occurs when an insurance company negotiates a reduced rate with a medical provider, or when a provider agrees to accept a lower amount from a patient directly.

When someone is injured due to another party's negligence, they are entitled to recover the reasonable value of their medical care. The existence of a write-off becomes important in these cases because it helps determine what the "reasonable value" of the medical services truly was, rather than just the initial billed amount. Courts may consider evidence of these write-offs when assessing the damages owed to the injured party.

Here are some examples illustrating the concept of a write-off:

• Example 1 (General Financial Write-off): A small electronics store sells a batch of outdated smartphone accessories that don't sell well. After several months, the store decides these items are obsolete and unlikely to sell at their original price. The store removes the remaining inventory's value from its financial records as a "write-off," reflecting a loss on those assets. This reduces the store's reported inventory value and can lower its taxable income for the year.

  How this illustrates the term: This example demonstrates a general write-off where a business reduces the recorded value of an asset (obsolete inventory) because it's no longer expected to generate its original value, treating it as a loss.

• Example 2 (Personal Injury Medical Write-off): Maria is involved in a slip-and-fall accident at a grocery store, resulting in a broken arm. The emergency room bills her $8,000 for treatment. However, Maria's health insurance company has a pre-negotiated agreement with the hospital and pays only $5,500, which the hospital accepts as full payment. The $2,500 difference ($8,000 - $5,500) is considered a write-off.

  How this illustrates the term: This shows the specific personal injury meaning of a write-off: the amount by which the original medical bill is reduced because the provider accepts a lower, negotiated payment as full satisfaction of the debt. This $2,500 write-off would be a factor in determining the "reasonable value" of Maria's medical expenses if she were to sue the grocery store.

• Example 3 (Personal Injury Medical Write-off with Different Provider): John suffers whiplash in a rear-end collision caused by another driver. He receives chiropractic treatment, and the chiropractor's total bill for the sessions is $2,000. John's auto insurance policy, which covers medical payments, negotiates with the chiropractor and pays $1,600, which the chiropractor agrees to accept as the complete payment. The $400 difference ($2,000 - $1,600) is a write-off.

  How this illustrates the term: Similar to the previous example, this highlights the write-off as the reduction from the initial billed amount to the amount the medical provider accepts as full payment. This write-off is relevant in assessing the actual economic damages for John's medical care in his personal injury claim against the at-fault driver.