Early Settlements Can Save Money

A new study published this month in the Columbia Business Law Review indicates that early settlements save money to defendant-businesses.  (See June 9, 2008, National Law Journal, www.nlj.com.)

Defendants could save anywhere from $32,000 to $670,000 per case depending upon the severity of the injuries.  Defendants would save money in lower legal fees and a lower pay-out at the end of the case to the injured claimant.

The study also proposes that businesses be given 180 days to make the equivalent of no-fault-like payments of medical and lost income expenses not otherwise covered plus an additional amount to cover attorneys’ fees.  However, claimants would not be compensated for pain and suffering and emotional losses.

This study scores on one point.  Both sides proft from early settlement rather than trial.  Settlements are preferred over trials as a means to resolve disputes.  The courts favor settlements.  It is good for the parties in bringing finality and certainty to the outcome.

New York City has recognized the value of early settlements and has been a pioneer in pursuing early settlements.  New York City has had an early settlement unit for at lease 15 years.  In the last couple of years it has stepped-up its early settlement program which is administered through an outside vendor, Cybersettle (www.cybersettle.com).  We have been able to settle a good number of cases with New York City through its early settlement program.

Of course, in some instances early settlement is not possible and is not beneficial for the client.  For example, liability or responsibility for the accident may be contested and may require a trial.  Or where the amount of damages is great, the defendant’s insurance company must go through all of the steps of litigation up to trial before it can arrive at a fair number for the claim.   For example, it may need to have depositions, exchange of expert information,  and conduct extensive physical examinations before its claims department can reach a fair evaluation.  Often, the numbers are determined by committee, and higher numbers require more documentation, more committee meetings, and time.

In some cases early settlement is not possible because the client’s injuries are not apparent; over time the degree of severity becomes more apparent.  This was evident in a recent trial.  The client slipped on ice.  Initially, she needed surgery for a a torn mensicus, however, this was not her most serious injury.  Only over the course of time did her most serious injury became apparent.  It was chronic low back pain syndrome which required extensive medical treatment and five medications a day to control the pain.

We think that the study falls short in recommending that clients take early settlements and forego the right to collect for conscious pain and suffering.  This is an important component of any serious injury case.  We do not see this as a realistic proposal.

The study’s only significant observation is that early settlements are good business for defendants and their insurance companies.  We have known that for years.


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