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Most cases result in settlement. Some are dismissed outright, and a small handful make it to trial, but most cases are resolved through an agreement between the parties. Thus, the ability to value, negotiate, and settle a case is an incredibly important skill for a civil litigator. Valuing and negotiating a case is a difficult process, which requires experience and talent. Ultimately, the settlement value of any given case is what one side is willing to pay and the other side is willing to take. Sometimes, these amounts never meet and the case should be tried.
There are four major factors to consider when evaluating a personal injury case: liability, sustainable value, comparative fault, and collectability.
STEP 1: ASSESS LIABILITY
The first step in evaluating any case is liability: how sure are you that your side will win. In some personal injury cases, such as a pedestian knock-down or a ladder/scaffold failure, liability generally strongly favors the plaintiff. In others, such as most slip and fall cases, liability tends to favor the defense.
In some cases, where liability is clear for one side or the other, the case may be subject to dismissal or summary judgment, meaning that the judge looks at the undisputed facts and decides which side wins as a matter of law. In most cases, however, there are questions of fact and credibility that must be answered by a jury if the case does not settle. When a jury gets involved, there is always a level of unpredictability.
Once you've evaluated the odds of winning, that number should be assigned a percentage or a range of percentages. Knowing how likely you are to win, and what percentage your client will be held responsible, requires knowing the law, knowing both sides' arguments and evidence, and being able to objectively apply the law to the facts.
STEP 2: ASSESS THE DEFENDANT'S EXPOSURE
A defendant's exposure is the amount it will cost if the defendant loses the case: its worst case scenario. This value is derived by examining the sustainable value of the case (your best case scenario) and factoring in comparative fault. Conversely, the plaintiff's worst case scenario is losing and getting nothing.
A - determine the sustainable value of the case
To know what a case is worth, you need to have some idea of the full value under the best possible circumstances. In a personal injury context, there are often records of settlements and verdicts in cases with similar injuries. There are some commercial publications, such as the jury verdict reporter, but the most valuable records are published court decisions.
With most jury verdicts, the parties have a right to ask that the amount be reviewed by the trial judge and, if necessary, the appellate court. In New York State Court, the Appellate Division takes an active role in reviewing jury verdicts, and will lower or increase the award if it "deviates materially from reasonable compensation." The Federal Courts are less active in reviewing jury verdicts, and will only change an award if if "shocks the consience." Federal juries, however, must decide civil cases with a unanimous verdict of eight jurors; whereas a NY State jury in a civil case can issue an award with 5 of 6 jurors agreeing.
When the injury you are dealing with has been examined published decisions, there may be case law that provides a range of "sustainable value" for that injury. By "sustainable value," I mean the amount, if everything goes in your favor, that the court will let the plaintiff walk away with. One notable blog, John Hochfelder's New York Injury Cases Blog, focuses on discussing these decisions. As John often notes, the courts often leave these decisions purposely vague.
Every person, and every injury, is unique. Just as with evaluating liability, determining damages is as much of an art as it is a skill. The plaintiff's age and other unique factors (pre-existing conditions, unique limitations, etc.), are important to consider when comparing cases.
Juries generally award personal injury damages in two parts: past and future. Within that, the damages may further be divided into lost earnings and pain and suffering. To compare a case, you will need to break down this number by year so as to compare it to your plaintiff.
In examining comparative injuries, you also need to take into account the type of case and the venue. For example, a spinal injury is generally worth more in a construction accident case than in a motor vehicle case. With respect to venue, there are conservative counties and liberal counties. A Bronx verdict is not particularly informative when assessing the value of a Nassau County case.
B- If applicable, assess a range for comparative fault
In some cases, comparative fault (the plaintiff's level of responsibility) is not an issue. It is not an issue, for example, where the plaintiff was a passenger in a car, or where liability is "strict," such as in a ladder/scaffold failure. In contrast, comparative fault is nearly always an issue in slip or trip and fall cases.
When the plaintiff's fault is an issue, comparative fault can be one of the most difficult factors to evaluate. It is extremely fact sensitive, and something over which different people will have varied opinions. Also, many times, comparative fault overlaps with the liability inquiry.
The choice of law can make this inquiry particularly important. In personal injury cases, the law of the state where the accident happened usually governs. In New York, in most cases, a person can recover even if they are mostly (but not entirely) at fault, although the award will be reduced by their proportionate share of negligence. Other states, such as New Jersey, do not let the plaintiff recover if they are more than 50% at fault.
C- Do Some Math
The full sustainable value of the case, minus comparative fault, gives you a sense of the defendant's exposure. From that, you can determine a settlement range by discounting liability. Say a case has a full sustainable value of $750,000 to $1 million, but the plaintiff was 25-50% at fault and there's a 30-40% chance the defendant won't be held responsible at all. In that scenario, the defendant's exposure is between $375,000 (750k - 50% comparative) and $750,000 ($1 million - 25% comparative). Thus, the settlement value is between $225,000 (375k - 40% liability discount) and $525,000 (750k - 30% liability discount).
These numbers, of course, are fictitious, and would need to be adjusted to reflect the facts of any particular case. Realize also, both sides will likely have a different assessment.
STEP 4: COLLECTABILITY, LIENS, AND OTHER FACTORS
Often, defendants have limited insurance coverage. Because of the difficulty collecting a judgment, the reluctance of insured defendants to contribute to a settlement beyond their policy limits, and the fact that the average individual does not have significant assets, the insurance coverage frequently serves as a cap on the amount of money someone can receive. You can have a million dollar injury, but a basic $25,000 motor vehicle policy and an impecunious defendant, leaving no-where else to look for additional compensation (other than, perhaps, social security).
Liens may also pose a problem with settlement. Any Workers Compensation lien or Medicare/Medicaid lien must be paid from the client's share. These don't interfere with the settlement per se, but are factors that can make it more complicated.
Litigation cost can also be an issue. If a case goes to trial, both sides have to pay for doctors to testify, which can be expensive. This should never be a decisive factor, but it is (along with the unpredictability of a jury) a justification for the plaintiff giving a small discount to avoid trial, and the defendant offering "nuisance value" to make the case go away. Not all cases warrant such a discount, but in some situations it is appropriate.
STEP 5: NEGOTIATE
Negotiating a settlement is a back-and-forth process of demands and offers. The starting point is almost always absurdly low or absurdly high. You never start off telling the other side exactly what you want because then you have no room to negotiate.
Generally, the plaintiff leads off the negotiations with a demand. Having evaluated the case, the plaintiff's attorney should have a target number in mind, and will make a demand that is significantly higher than that. The defendant, in turn, responds to the demand with some sort of offer. Based on the defendant's response (the number will, of course, be extremely low), the plaintiff can get a sense of how the defense has valued the case.
Both sides will at least appear set in their ways, but that is just how attorneys work. It is not just an exchange of numbers, but also a discussion of the merits of the case.
Especially if your side has a strong case, you don't have to settle. One of the most pursuasive things you can say in settlement negotiations is that you want to try the case (as long as you mean it). In fact, some insurers will keep their offers low until you prove that you have no problem going to the jury; conversely, some plaintiff's attorneys will cave rather than take a case to trial.
As a case progresses through discovery, there are several instances where the parties exchange information. These are the ideal points to discuss the case with the other side and revise the demand/offer. Each move is goal-oriented. If you give your bottom line, you probably won't get it: they aren't telling you what they are really willing to pay; why should you tell them what you are willing to take?
Bidding against yourself, generally, is a mistake. When one side moves, its the other side's turn. That's just how it goes.
Choosing whether to accept or reject a settlement is up to the client. Some clients are risk takers, while some are risk-averse. It is important to get authority, to manage the client's expectations, and to make sure the client is on-board with your perspective of the case. That said, clients, generally, have no experience on which to value their own case. That's what they hired you for. It is up to you as their attorney to explain what the case is worth, and to make them feel confident that their attorney is fighting to get them the best result.
Most cases result in settlement. Some are dismissed outright, and a small handful make it to trial, but most cases are resolved through an agreement between the parties. Thus, the ability to value, negotiate, and settle a case is an incredibly important skill for a civil litigator. Valuing and negotiating a case is a difficult process, which requires experience and talent. Ultimately, the settlement value of any given case is what one side is willing to pay and the other side is willing to take. Sometimes, these amounts never meet and the case should be tried.
There are four major factors to consider when evaluating a personal injury case: liability, sustainable value, comparative fault, and collectability.
STEP 1: ASSESS LIABILITY
The first step in evaluating any case is liability: how sure are you that your side will win. In some personal injury cases, such as a pedestian knock-down or a ladder/scaffold failure, liability generally strongly favors the plaintiff. In others, such as most slip and fall cases, liability tends to favor the defense.
In some cases, where liability is clear for one side or the other, the case may be subject to dismissal or summary judgment, meaning that the judge looks at the undisputed facts and decides which side wins as a matter of law. In most cases, however, there are questions of fact and credibility that must be answered by a jury if the case does not settle. When a jury gets involved, there is always a level of unpredictability.
Once you've evaluated the odds of winning, that number should be assigned a percentage or a range of percentages. Knowing how likely you are to win, and what percentage your client will be held responsible, requires knowing the law, knowing both sides' arguments and evidence, and being able to objectively apply the law to the facts.
STEP 2: ASSESS THE DEFENDANT'S EXPOSURE
A defendant's exposure is the amount it will cost if the defendant loses the case: its worst case scenario. This value is derived by examining the sustainable value of the case (your best case scenario) and factoring in comparative fault. Conversely, the plaintiff's worst case scenario is losing and getting nothing.
A - determine the sustainable value of the case
To know what a case is worth, you need to have some idea of the full value under the best possible circumstances. In a personal injury context, there are often records of settlements and verdicts in cases with similar injuries. There are some commercial publications, such as the jury verdict reporter, but the most valuable records are published court decisions.
With most jury verdicts, the parties have a right to ask that the amount be reviewed by the trial judge and, if necessary, the appellate court. In New York State Court, the Appellate Division takes an active role in reviewing jury verdicts, and will lower or increase the award if it "deviates materially from reasonable compensation." The Federal Courts are less active in reviewing jury verdicts, and will only change an award if if "shocks the consience." Federal juries, however, must decide civil cases with a unanimous verdict of eight jurors; whereas a NY State jury in a civil case can issue an award with 5 of 6 jurors agreeing.
When the injury you are dealing with has been examined published decisions, there may be case law that provides a range of "sustainable value" for that injury. By "sustainable value," I mean the amount, if everything goes in your favor, that the court will let the plaintiff walk away with. One notable blog, John Hochfelder's New York Injury Cases Blog, focuses on discussing these decisions. As John often notes, the courts often leave these decisions purposely vague.
Every person, and every injury, is unique. Just as with evaluating liability, determining damages is as much of an art as it is a skill. The plaintiff's age and other unique factors (pre-existing conditions, unique limitations, etc.), are important to consider when comparing cases.
Juries generally award personal injury damages in two parts: past and future. Within that, the damages may further be divided into lost earnings and pain and suffering. To compare a case, you will need to break down this number by year so as to compare it to your plaintiff.
In examining comparative injuries, you also need to take into account the type of case and the venue. For example, a spinal injury is generally worth more in a construction accident case than in a motor vehicle case. With respect to venue, there are conservative counties and liberal counties. A Bronx verdict is not particularly informative when assessing the value of a Nassau County case.
B- If applicable, assess a range for comparative fault
In some cases, comparative fault (the plaintiff's level of responsibility) is not an issue. It is not an issue, for example, where the plaintiff was a passenger in a car, or where liability is "strict," such as in a ladder/scaffold failure. In contrast, comparative fault is nearly always an issue in slip or trip and fall cases.
When the plaintiff's fault is an issue, comparative fault can be one of the most difficult factors to evaluate. It is extremely fact sensitive, and something over which different people will have varied opinions. Also, many times, comparative fault overlaps with the liability inquiry.
The choice of law can make this inquiry particularly important. In personal injury cases, the law of the state where the accident happened usually governs. In New York, in most cases, a person can recover even if they are mostly (but not entirely) at fault, although the award will be reduced by their proportionate share of negligence. Other states, such as New Jersey, do not let the plaintiff recover if they are more than 50% at fault.
C- Do Some Math
The full sustainable value of the case, minus comparative fault, gives you a sense of the defendant's exposure. From that, you can determine a settlement range by discounting liability. Say a case has a full sustainable value of $750,000 to $1 million, but the plaintiff was 25-50% at fault and there's a 30-40% chance the defendant won't be held responsible at all. In that scenario, the defendant's exposure is between $375,000 (750k - 50% comparative) and $750,000 ($1 million - 25% comparative). Thus, the settlement value is between $225,000 (375k - 40% liability discount) and $525,000 (750k - 30% liability discount).
These numbers, of course, are fictitious, and would need to be adjusted to reflect the facts of any particular case. Realize also, both sides will likely have a different assessment.
STEP 4: COLLECTABILITY, LIENS, AND OTHER FACTORS
Often, defendants have limited insurance coverage. Because of the difficulty collecting a judgment, the reluctance of insured defendants to contribute to a settlement beyond their policy limits, and the fact that the average individual does not have significant assets, the insurance coverage frequently serves as a cap on the amount of money someone can receive. You can have a million dollar injury, but a basic $25,000 motor vehicle policy and an impecunious defendant, leaving no-where else to look for additional compensation (other than, perhaps, social security).
Liens may also pose a problem with settlement. Any Workers Compensation lien or Medicare/Medicaid lien must be paid from the client's share. These don't interfere with the settlement per se, but are factors that can make it more complicated.
Litigation cost can also be an issue. If a case goes to trial, both sides have to pay for doctors to testify, which can be expensive. This should never be a decisive factor, but it is (along with the unpredictability of a jury) a justification for the plaintiff giving a small discount to avoid trial, and the defendant offering "nuisance value" to make the case go away. Not all cases warrant such a discount, but in some situations it is appropriate.
STEP 5: NEGOTIATE
Negotiating a settlement is a back-and-forth process of demands and offers. The starting point is almost always absurdly low or absurdly high. You never start off telling the other side exactly what you want because then you have no room to negotiate.
Generally, the plaintiff leads off the negotiations with a demand. Having evaluated the case, the plaintiff's attorney should have a target number in mind, and will make a demand that is significantly higher than that. The defendant, in turn, responds to the demand with some sort of offer. Based on the defendant's response (the number will, of course, be extremely low), the plaintiff can get a sense of how the defense has valued the case.
Both sides will at least appear set in their ways, but that is just how attorneys work. It is not just an exchange of numbers, but also a discussion of the merits of the case.
Especially if your side has a strong case, you don't have to settle. One of the most pursuasive things you can say in settlement negotiations is that you want to try the case (as long as you mean it). In fact, some insurers will keep their offers low until you prove that you have no problem going to the jury; conversely, some plaintiff's attorneys will cave rather than take a case to trial.
As a case progresses through discovery, there are several instances where the parties exchange information. These are the ideal points to discuss the case with the other side and revise the demand/offer. Each move is goal-oriented. If you give your bottom line, you probably won't get it: they aren't telling you what they are really willing to pay; why should you tell them what you are willing to take?
Bidding against yourself, generally, is a mistake. When one side moves, its the other side's turn. That's just how it goes.
Choosing whether to accept or reject a settlement is up to the client. Some clients are risk takers, while some are risk-averse. It is important to get authority, to manage the client's expectations, and to make sure the client is on-board with your perspective of the case. That said, clients, generally, have no experience on which to value their own case. That's what they hired you for. It is up to you as their attorney to explain what the case is worth, and to make them feel confident that their attorney is fighting to get them the best result.
Disclaimer: Nothing on this law blog should be understood to constitute legal advice or establish an attorney-client relationship. To the extent anything on this site may be considered attorney advertising, take notice that prior results do not guarantee a similar outcome.