Settlement Reasonableness from Negotiations to Coverage Disputes

Tue Feb 21 15:24:38 EST 2012
By Dr. David Tabak

An important decision in litigation-one no doubt informed by an understanding of the evidence and relevant legal issues-is how to evaluate the settlement value of a case. This decision will generally come up first in evaluating a case and will typically become more prominent when a party considers making a settlement offer or deciding whether to accept or reject an offer from an opposing party. There may also be additional instances in which the size of a settlement will be considered, such as when a potential acquirer evaluates the purchase of a company with outstanding legal issues, or if the size of a proposed settlement leads to a coverage dispute between the insured and its carriers. Consequently, many parties have a desire for a methodology for estimating settlement values that is both accurate and convincing. This NERA paper, by Senior Vice President Dr. David Tabak, examines the approaches to estimating and evaluating settlements, which can range from subjective to objective. At one extreme is the purely subjective analysis that may be conducted by an experienced professional, such as a lawyer, judge, or mediator. At the other is the objective quantitative analysis performed by a statistician or econometrician. Dr. Tabak discusses the benefits and drawbacks to both approaches, which vary depending on the circumstances in which they are used.

A version of this article was published in Financier Worldwide's Litigation & Dispute Resolution 2012, a Global Reference Guide.