The New York Times ran an article on Friday discussing a soon-to-be-released study on civil lawsuits and how settlement amounts compared to verdict amounts. The study’s author concluded “settling is better than going to trial” because his research indicated plaintiffs receive on average $43,000 less at trial than what was offered at mediation/settlement. The author further stated that “most of the time, one of the parties has made some kind of miscalculation or mistake.” The real story in this article is that the defense loses $1.1 million on average when it dismisses settlement and goes to trial. That is a huge difference from $43,000.
In the words made famous by Mark Twain, “There are three kinds of lies: lies, damned lies, and statistics.” The article does not state (NOTE: I have not read the full study, just the article) the number of plaintiffs who miscalculated versus the number of defendants. One of the study’s co-authors suggest the underlying numbers would indicate the defense, and not the plaintiffs, miscalculate more often. The co-author said human behavior and responses to risk dictate that “people are more averse to taking a risk when they are expecting to gain something and more willing to take a risk when they have something to lose.” Tranlsated, plaintiffs are more averse to going to trial because they are expecting some amount of money while the defense is willing to take the risk of trial. I agree with this one conclusion. As a former defense attorney, I can tell you several things are at play. One, there is an argument that defense attorneys are motivated to take a case to trial because the get to run up their bills. Defense attorneys make their money billing by the hour whereas plaintiffs’ attorneys usually work on contingency. Second, at the end of the day defense attorneys do not lose any money in their pockets by taking the trial risk because the insurance company pays out the verdict and they simply get their hourly bills paid. Plaintiffs attorneys, however, share the risk with our clients because our fee is a percentage of the money we obtain for our clients. In my personal opinion, this puts our financial interests directly in line with our clients. They are the one and the same.
Another interesting between-the-lines conclusion of the study is the huge difference between $43,000 and $1.1 million. Is this direct evidence of how unreasonable defense attorneys are when evaluating cases? I know from experience that defense attorneys can sometimes drink the kool-aid and convince themselves they can get a defense verdict on technicalities so they discount a case too much. Because a lot of defense attorneys find it hard to emotionally get behind a client who has hurt someone, some hang on to the technicalities to get themselves emotionally worked up in thinking they are doing the right thing.
In closing, there are two points that I want you to walk away with from this discussion. First, there is always value in accepting a known, guaranteed amount of a settlement versus going to trial. You just never know what 12 strangers are going to do with your case. The harder issue you and hour attorney must discuss is what is the discount value of taking a settlement and avoiding the risk of trial. It is worth something, just how much? The second point, and it is a big point to be made, is that you and your attorney must communicate about what your case is worth, the strengths and weaknesses of your case, and anything else that effects the value of your cases, including what kind of witness you make. I do this with my clients by writing them a lengthy evaluation report letter. This report sets out the entire case in a very candid way and includes what I think the case is worth and our chances of receiving more at trial. The defense attorneys write such reports for their insurance clients so why shouldn’t you?
P.S. – If you are interested in learning about how a Georgia car accident case is handled and evaluated, download my free 33-page Georgia Car Accident Guide. It walks you through how a case is handled from its inception through trial as well as teaching you what things affect the value of your case and how your should case should be managed. If you want to check out another practicing trial attorney’s take on this study, I encourage you to hop and over check out Ron Miller’s comments on the Maryland Injury Lawyer Blog.
