WHAT DOES A 0.5% TRIAL RATE REALLY MEAN?

We have been told that 20 years ago it was common for three to four percent of litigated claims to go to trial. That trial rate number has been eroding for years, and now we are hearing from claim organizations of all sizes that they have trial rates as low as 0.5%.

If a claim organization’s trial rate is 0.5% – that means that the claim organization ultimately is finding only one out of every 200 plaintiff demands they receive is unreasonable.

This seems inconsistent to us, given that we often hear in the same conversation how unreasonable plaintiff attorneys are becoming with their demands.

To be clear, nuclear verdicts (and our industry’s obsession with them) have a chilling effect on negotiations. They make defense teams want to avoid a jury trial at all costs. But that fear helps contribute to a type of self-induced social inflation. Every over-valued settlement chips away at loss ratios. Every overpaid settlement encourages a higher demand the next time.

In our insurance litigation world, the best alternative to a negotiated agreement (the BATNA) is a trial. In fact, it’s the only alternative (unless you’re a big fan of arbitration).

What defense teams need is granular understanding of trial risk. Without knowing your BATNA, you are flying blind. Determining what other cases settled for is equally blind, unless you’re confident that that other settlement was in the context of a granular BATNA understanding.

This means that defense teams need to understand – at a data driven level — who is on the other side of the negotiating table. How risky is the plaintiff attorney? Do they take cases to trial? Are they good at extracting non-economic damages? How familiar are they with the venue in question? Show me numbers.

It is no longer sufficient to say that the plaintiff attorney is “scary.” Or that the venue is “liberal.” In a room with 10 scary plaintiff attorneys, there are three who are light years beyond the other seven. And there are liberal venues in some states that are more favorable to the defense than the most conservative venues in another state.

We can do better. We know collectively that more than one out of 200 plaintiff demands are in fact unreasonable, and often highly so. As an industry, the professionals managing litigation are exceptionally bright. They simply need to the data and hard facts to make better assessments of their BATNAs.

Find out more about our Analyzer product here.

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