Plaintiffs Who Roll the Dice at Trial are Statistically Likely to Get Less Money

11/17/2008

According to this recent article in the New York Times, plaintiffs who reject settlement offers and roll the dice at trial are statistically likely to get less money than if they had taken the settlement.  According to the article, “The lesson for plaintiffs is, in the vast majority of cases, they are perceiving the defendant’s offer to be half a loaf when in fact it is an entire loaf or more,” said Randall L. Kiser, a co-author of the study and principal analyst at DecisionSet, a consulting firm that advises clients on litigation decisions.
The study was based on over 2000 trials and it concluded that about 60% of the time the plaintiff (the person bringing the suit) got a worse deal that the settlement offer they rejected .The study, which is to be published in the September issue of the Journal of Empirical Legal Studies, found that plaintiffs typically received about $43,000 less at trial.  And, while defendants typically do better at trial, when they don't the results are far more pronounced.  When a defendant gambles wrong and goes to trial, statistically they end up paying about $1.1 million dollars more.
I found this article to be particularly interesting based on my own (completely non-scientific) observations.  Most medical malpractice insurance policies give the doctor the absolute consent to settle a malpractice suit.  That's not to say the insurance company has to settle the case if the doctor gives consent, but the insurance company usually cannot settle the case until the doctor gives his/her consent.  What this means, is that the healthcare provider is much more willing to take the risk of going to trial if the likely verdict is less than his/her policy limits.  Most medical doctors carry about $1 million dollars in coverage.  If the verdict is likely to be $1 million or less, the doctor has no reason to settle the case because there is not much of a chance the doctor will have to pay any money out of his/her own pocket.  On the other hand, if the exposure to the doctor is significantly more than the $1 million in coverage, the doctor is much more likely to give consent in order to avoid his personal assets being at risk.  
Hans 
p.s. Thanks to John Day in Nashville for bringing this article to my attention.