Most cases settle out of court before proceeding to trial. However, not all cases settle for what they should. Sometimes, the plaintiff ends up settling the case for a lot less than the case is worth. Other times, the defense pays a premium to resolve the case. How are you supposed to know if the settlement offer being made is fair?
Some say that the measure of a good settlement is when both parties walk away from the settlement unhappy. This means that the defendant paid more than he wanted to pay, and the plaintiff accepted less than he wanted to accept. Several factors can provide guidance on whether the settlement should be accepted. In general, if you can get close to judgment value of the case in settlement, then it should be considered a very good settlement.
One of the first considerations that attorneys and clients should factor in is the chance of prevailing on the issue of liability. If the other side is clearly at fault, then a settlement offer should not be decreased because of the risk of losing the case. If the plaintiff has only a 60% chance of prevailing on liability, he may want to consider taking 40% less in settlement.
However, some cases do not involve clear cut issues of fault. Often, the fault involved in a personal injury action may be spread around. In other words, more than one party or person may be responsible for the plaintiff’s injuries.
In cases involving the fault of more than one party, any settlement offer must account for that fault. This is difficult if one of the parties at fault is not solvent or otherwise cannot make a contribution toward settlement. Fault of the plaintiff must also be factored into any settlement offer if the plaintiff is partly responsible for his own injuries. Thus, if the fault of others, including the plaintiff, is reasonably evaluated to approximate 20%, then the settling defendant should offer close to 80% of the plaintiff’s damages in settlement.
Another important factor to consider in assessing the fairness of a settlement offer is the venue (the court jurisdiction) in which the action is pending. Some jurisdictions draw from jury pools that are more conservative or liberal than others. If the court in which the case is pending draws from a more liberal jury pool, then the settlement offer should take that factor into account by being on the higher end of the range of possible judgments to account for the fact that liberal juries award more money to injured persons.
Most settlement offers will not take into account judicial interest. Judicial interest is awarded to the plaintiff who wins at trial. In an old case, the interest on the judgment can be substantial. However, most defendants will not pay interest in the settlement.
Unfortunately, the financial need of the plaintiff can result in a diminished recovery. Defendants know that in some cases, they can simply “wait it out,” and the plaintiff will take a lot less now because he cannot afford to wait the period of years before the case proceeds to trial. If the defendant knows that both the attorney and client are willing to wait as long as it takes to recover the maximum amount of money, then they are more willing to present a higher settlement offer.
In serious injury cases, you should consult with an attorney before accepting any settlement offer made by the other side.