The stakes are high. Trial is scheduled for next week and negotiations are at an impasse. You have already offered more than the case is really worth, but you recognize the risk that a jury might award far more than you have offered. Keeping in mind the ultimate goal of claim handling, you believe the case will settle if you add a little more money to your last offer. On the other hand, you have a good attorney, strong liability and damages defenses, and genuinely believe the jury may return a defense verdict. What should you do?
The liability claim business is, by definition, a risky business. Ideally, the decision to position a case for trial or settlement is made early and the defense costs are allocated appropriately. Often, elements that are out of the control of the defense (i.e. unreasonable or unresponsive claimant counsel), prevent an early disposition.
The approaches to resolving liability claims are as varied as the number of companies and individuals practicing the craft. At one end of the spectrum is the "play it safe" strategy of resolving every claim short of trial by paying just enough money to secure a release. At the opposite extreme is the "roll the dice" strategy of taking close cases to trial and trusting that a jury will see it your way. While there is no one-size-fits-all answer to the question, a number of factors should be considered when the defense is deciding whether to take a liability case to trial. Many are case-specific, but some of the important factors are universal:
- Is there a ceiling on an adverse award?
- Will the costs and expenses of proceeding to trial justify a higher offer?
- Is it likely that the claimant will accept your higher offer?
- What has changed since you evaluated the case for settlement?
- How much stress are you willing to endure?
Assuming the case has been properly valuated for settlement, the final process of making the trial-or-settlement decision flows from a related, yet separate, methodology.
Is There a Ceiling?
When the total damages claimed or permitted are capped at a level not too far removed from your settlement evaluation, there is little risk of taking the case to trial. Conversely, cases with catastrophic injuries, punitive damages claims, or emotional, open-ended damages claims require more careful scrutiny before tossing the dice. The claim valuation process usually includes consideration of the "worst-case scenario." In terms of objective risk assessment, a one percent chance of a million-dollar verdict is comparable to a 50 percent chance of a $20,000 verdict. Arguably, the raw settlement value of both claims can be assessed at $10,000. However, the impact of a verdict exceeding your evaluation by $10,000 differs considerably from the impact of a verdict exceeding your evaluation by $990,000. That potential impact must be taken into account during the evaluation process and the trial-or-settlement decision.
Will Trial Costs/Expenses Justify a Higher Offer?
Ordinarily, the majority of the legal expense of defending a case is incurred during investigation and discovery. However, the cost of the final push toward trial and of trial itself (not to mention post-trial proceedings and appeals) can approach or exceed the expenses incurred in investigation, pleadings, discovery, and motion practice. While a trial-or-settlement decision should not hinge solely upon the cost of defending the claim, the expense is a legitimate factor to be considered.
It's important to remember that the defense costs should be factored into the valuation of the claim out of the gate. Resist the temptation to add the expense a second time during the home stretch. If the case was worth $40,000 in settlement after the plaintiff's deposition, it does not become worth $50,000 on the morning of trial merely because the trial will cost $10,000. Although fallacious, such logic is often useful to justify what is, in reality, a "cold feet" settlement on the courthouse steps.
Will Claimant Accept Your Higher Offer?
Often, your course is set early in the claim process. When liability is clear and the claimed damages are reasonably supported by the evidence, there is often no reason to position the case for trial. However, when claimants are unreasonable or fail to acknowledge genuine weaknesses in their claims, it is sometimes apparent that the case is headed for a jury. In cases in which a reasonable settlement is not going to happen, continued negotiations are of little benefit to the defense, but instead act as a distraction from the task at hand: defending the claim.
What Has Changed Since Evaluation?
Liability claim management is a process rather than an event. As the process continues, the merits of the case often change. New facts come to light, the court issues rulings, and current events modify community attitudes. You must be attuned to developments and your evaluation must be flexible enough to respond to changes when necessary. If a plaintiff locates a strong, independent eyewitness who places liability on the defendant, it is time to reconsider your analysis. If the court excludes your accident reconstruction expert and grants the plaintiff's motion for summary judgment on the issue of liability, it is time to reassess your position. If the local news outlets provide blanket coverage of a rash of deadly tractor-trailer crashes one week before the trial of your wrongful death trucking liability case, it is time to rethink your evaluation.
Conversely, if the only change is that the calendar pages have flipped to the month in which the trial is scheduled, the only reason for a change in settlement position is the aforementioned "cold feet."
A Question of Stress
A stockbroker asks new clients to rate their toleration for risk. With higher risk comes the possibility of higher gains as well as the possibility of higher losses. The same can be said of claim management. Settle all of your cases and you will never have a runaway jury verdict. You'll never get a defense verdict, either. Take a lot of cases to trial and you'll not only age prematurely, you will open yourself to second-guessing in hindsight. You'll also hone your valuation skills in the real world and, occasionally, jump up and receive a high-five and kudos for a job well done.
Conclusion
Regardless of the applicable protocol, a human being must decide whether to risk a trial. There is no magic wand. The decision should be based on a reasonable consideration of all available information and reflect a rational, intelligent choice. Irrational fear should not be a part of the process, nor should unsupported hope. Regardless of subsequent events, a settlement-or-trial decision is necessarily correct if the decision-maker carefully weighed the available information, applied the proper factors and carried out the decision. Then, a high-five is in order.
Stockard "Rob" Hickey III, is a member of the Louisville, KY, office of Frost Brown Todd, LLC. He practices in the firm's Trucking and Commercial Transportation Group. He can be reached at rhickey@fbtlaw.com.
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