WHY DID YOU SETTLE THAT CASE?

A horrible nightmare has come true. During a casual Sunday afternoon trail ride, your friend fell off your horse. Now, several months later, he is suing you. You know you have powerful defenses. The horse he fell from -- your elderly and practically "bomb-proof" gelding -- barely moves and has never thrown a rider. You distinctly recall hearing your friend say that he lost his balance as he reached to pick an apple while the horse stood grazing. He also told you that he was "100% OK" after he fell. Since the incident, your friend never missed a day of work, has no scars, and his life seems no different than it was before he rode your horse.

Let's evaluate two possible responses to the lawsuit:.

[1] If your liability insurance policy covered the incident, let's assume that your insurance company plays to pay your friend a very small amount of money to settle the case; or [2] If no insurance covers you, but you hired a lawyer on your own, let's assume that the lawyer recommends that you save the expense of defending the case and instead pay your friend a small sum to settle the case.

Many people believe that settlements under these and similar circumstances are inappropriate. Why would your lawyer or insurance company suggest a settlement, even if you have valid defenses and may win the case? This article explores some reasons that this author, an experiences trial lawyer, has encountered:

The High Cost of Defending a Lawsuit
Litigation (a term describing the process of taking a case through the court system) can be very expensive. It is extremely difficult to control litigation costs. Attorneys representing plaintiffs (the ones who sue) usually derive their fee from a portion of the money the plaintiff recovers, and they usually waive legal fees if the plaintiff loses; this is commonly known as a "contingency fee arrangement."

Defense attorneys, by comparison, do not operate on a contingency fee arrangement. Consequently, the obligation of you or your insurance company to pay the costs of a legal defense remains the same whether you win or lose the case.

The Loser Rarely Pays
"I'll win the case, and then the losing party will pay my lawyer's bill," you might think. Is that likely? Generally, no. Having the loser pay the winner very rarely occurs in the United States legal system, but this might occur if (1) the judge in your case made a specific finding that the losing party's case or defense was frivolous and wants to penalize the loser by having some or all of the winner's legal fees reimbursed; (2) a contract required one party to pay another (some liability releases may contain these provisions); (3) a law on the books requires the loser to pay the winner in a dispute (such a law is unlikely in this personal injury scenario, but check the laws of your state); or (4) a court rule allows the winning party to be reimbursed. As a practical matter, courts are hesitant to order one party to pay another's legal fees.

The Unpredictability of Jury Verdicts
The jury system has received intense criticism in the 1990's. People have blamed juries for not paying attention to the evidence, for injecting their own prejudices into a verdict, for not being representative of the general public since some people are exempt from jury duty, for forgetting major and pivotal events during a trial, and many other things. Therefore, regardless of whether you are the plaintiff or the defendant, any trial can be a gamble because the outcome is never certain.

Avoid Possible Bad Precedent
What if you won your case at trial but the other side is appealing the case to a higher court? At this stage, it would seem outlandish to settle the case when it seems you are ahead. However, parties sometimes settle cases simply because of the possibility that an appellate court could issue an adverse decision that would create a bad precedent (guiding authority) for people like you in future cases. The motivation to settle under these circumstances depends, in large part, on the importance of the issues that will likely be decided on appeal, the present state of the law, how the trial proceeded, the chance that the appellate court can be persuaded to rule favorably, and the likely cost of the appeal.

The Complexity of the Lawsuit Compared to the Amount Demanded
What if the plaintiff is demanding a small amount to settle the case, but defeating the case would require spending several times more than the amount to defend? These circumstances might, in the interests of economics alone, dictate that you save the time, trouble, and money through a settlement.

Conclusion
In conclusion, please keep these concepts in mind:

1. If you have liability insurance, read your policy carefully. A small number of insurance policies specify that the company must receive your approval before settling a claim or a lawsuit within your policy limits. Insurance policies typically give the insurance company ultimate authority to settle a claim brought against you, within policy limits.
2. Consider getting involved in the defense of your case. Possibly, your own lawyer might have originated the notion of settlement. He or she simply may not understand horses and might have difficulty in grasping the issues, evaluating the strengths and weaknesses of your case, or locating expert witnesses to support your defenses. This lack of knowledge might prompt the lawyer to believe that your case is weaker than it could actually be.

As someone who understands horses, you can be a valuable source of information to your lawyer. You might be well-situated to help the attorney find useful and authoritative articles, books, consultants, and expert witnesses.

3. This article is not intended to constitute legal advise. When matters arise based on specific situations, direct your questions to a knowledgeable attorney.

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