SIX THINGS TO CONSIDER BEFORE ACCEPTING ANY PERSONAL INJURY OFFERS
There are essentially six factors that must be assessed before considering accepting any offers to settle your personal injury case. (1) The risk of a defense verdict; (2) likely allocation of fault; (3) ability to pay; (4) value of injury (5) and time involved and remaining cost to proceed, and (6) the benefit if any of rejecting the offer. This is where much of the value of representation is earned. In order to apply these factors carefully, there is no substitute to experience that only a lawyer fully familiar with the particular category of case can apply. The lawyer can also walk you though this assessment, and your input into the reasoning for the conclusion for each category can prove very help. Nonetheless, often the person who has sustained a significant loss may have a hard time approaching this assessment with a objective view.
(1) Risk of a Defense Verdict:
The first assessment that must be made is trying to figure out the percentage chance of losing the case at trial, in other words a verdict in favor of the defendant. In this unfortunate outcome the recovery is zero. Cases are different. Some have clear liability and absolutely no risk of losing and others have a higher risk of losing, but only pursued due to the significance of the injury or loss. In order to effectively make this assessment, one must know the law that applies to the case and the facts as they have either proven themselves or likely to be established in formal discovery. In further making this assessment, the credible facts must be applied to the law that will ultimately be given to the jury (jury charge – instruction by the judge to the jury in deciding the case). To further complicate this assessment, each jury is a different set of individuals and group dynamic often applies a different moral compass to the case. Lets call this the application of prejudice (to pre-judge). In other words, the exact trial could theoretically video taped and given to a different set of jurors, and the different sets may come to entirely different conclusions. Assuming a fair assessment can be made – for example the risk of losing the hypothetical case is 10 percent = the mathematical application would require at least a 10 percent discount to be applied to the value of the injury.
(2) Percentage Allocation of Fault:
Next, one would have to do a similar assessment to the above (the above is only gaming a risk of an absolute loss). Most cases provide the jury with the opportunity to apply comparative fault. This is a discount that the jury applies to the case before they reach the damages award. There are many cases where no comparative fault is applied, and any lawyer with a basic familiarity and understanding of the category of case will be able to determine if the jury will be charged with applying comparative fault. The discount of comparative fault must be applied to the already discounted risk of a defense verdict (if any).
(3) Ability to Pay:
Often the reality of the defendant’s ability to pay controls much of the assessment. If there is a $100,000.00 dollar insurance policy and the research into the defendant reveals that they are likely judgment proof, then there is a limit on the value of the case to the available insurance. If ability to pay is a factor in the assessment of a particular personal injury offer, first and foremost, there must be complete insurance disclosure, including the production of the declaration page setting forth the policy limits and excess insurance disclosure and if none, then an affidavit of no-excess coverage provided by the named defendant. The next step is an asset search on the particular defendant. One must remember that a personal injury judgment is only satisfied after all secured creditors, such as a credit cards, car loans, and mortgages. There are also homestead exceptions that apply in New York that protect the defendant of a particular amount of the value of their primary residence if owned. Based upon the research, one must be able to make an assessment of the risk of bankruptcy protection precluding your recovery. Not any easy task, but something that must be done in serious injury cases with limited coverage.
(4) Value of Injury:
This is by far the hardest category. The same injury applied to different people does not always have the same effect or cause the same degree of loss. In trying to tackle this category of assessment, one first must determine the economic loss. Lost earnings and medical expenses (that either have to be paid back to a first party provider or where outstanding or unreimbursed). The category of economic losses have to be applied in terms of past and future (if applicable). Next is the category of non-economic losses. In this category one has to attempt to value the likely award that will be given for past pain and suffering and loss of enjoyment of life and future pain and suffering and loss of enjoyment of life (assuming that the injury is permanent in nature). In assessing future damages, the life and work expectancy table must be applied. There are jury verdict reports that can be used to provide some guidance, but reported verdicts are often skewed in favor of greater than normal results, and therefore giving them too great a weight in the assessment of an offer can be a mistake.
(5) Cost and time to proceed:
The remaining costs in the prosecution of the case and the costs of trial should be discounted. This is generally the cost of experts at the time of trial and treating physicians. They are not inexpensive and can be at least $5,000.00 for a half a day.
(6) Benefit of Proceeding rejecting offer:
The first offer is rarely the best offer. The process of negotiating a personal injury case is often a long drawn out process that only comes to a head with the trial itself approaching. This is why in a strong case, the matter must be pursued towards trial to achieve a proper valuation by the defendant in settlement negotiations at a time where they are most uncomfortable.
Example of a Calculation:
Lets use a fairly simple example. Plaintiff trips and falls on a New York City sidewalk due to a defective condition, and sustains a injury to the shoulder involving a tear to the labrum. Surgical intervention is required (arthroscopic in nature). The plaintiff is active and 50 years old. Does not engage in athletics, but certain aspects of daily living are compromised. Lets assume that there is a $15,000.00 medical lien that has to be paid back and the plaintiff missed two months of work for a total loss of earnings of $6,000.00. The defendant is responsible to maintain the sidewalk based upon statutory requirements and has a million dollar policy. Based upon this particular case, ability to pay is not a factor. The first assessment, the risk of any trip and fall with a defense verdict is real (often jurors do not like trip and fall cases) and therefore we apply a 20 percent change of defense verdict. The case will apply comparative fault, and in the application based upon experience, it is likely the jury would award 30 percent comparative fault to the plaintiff for failing to see what was there to be seen (this assessment must be done in an objective manner as many people have walked sidewalks with many defects and have not sustained injury or made a claim). We determine that the economic losses are $21,000.00, with no claim for future lost earnings or medical. For the purposes of non-ecomomic losses, a value is placed at $250,000.00. Total damages of $271,000.00 – discounted by 20 percent leaves $216,800.00. A further discount of 30 percent for comparative fault leaves $151,760.00. We then apply the cost of trial. Lets say the cost of trial will be $11,000.00 (one doctor and one engineer as a liability expert). Experts and treating physicians are not inexpensive for the purposes of court appearances. This leaves a balance of $140,760.00. Lets say in this example the defendant has offered $125,000.00 to settle the case and this is not the first offer, but a stated best and final (this of course is rarely the best and final for all purposes) but in our example we are a distance in time from trial (one year) and the defendant is likely to stand their ground at least until such time as the case reaches trial. The benefit of rejecting the offer is there will likely be future negotiations as the case gets closer to trial (lets say 10 months time) with an incremental increases. As long as the experts do not have to be paid, holding out for a better offer may provide a better return on investment that could otherwise be achieved by having the money in hand. Offers do not always remain open for the taking, but in the practice of personal injury, they generally do. On the other hand, perhaps the plaintiff wants to get the case behind them and move on with their life, and the delta between the valuation using the principles set forth in this post is not so significant to offset the desire for money in hand.
In conclusion, there is no substitute for experience and willingness to carefully analyze each any every aspect of a given case in the consideration of an offer of settlement. All to often there are many lawyers that just shoot from the hip in their assessment of offers to settle, made by lawyers that are just looking for a quick recovery and easy legal fee. In a personal injury case, you only have one case, and it is critical to have a lawyer that will treat your case as one case only.