Plaintiffs who go to trial may not realize just how big of a gamble they are making when they decline a settlement offer.
A new study that will appear in the upcoming edition of the Journal of Empirical Legal Studies finds that settling is generally more lucrative than taking a case to trial.
The study looked at the outcomes of 2,054 cases that went to trial from 2002 to 2005. It found that 61 percent of the plaintiffs made the wrong decision to go to trial and ended up with a verdict that was less money than the settlement offer. By contrast, 24 percent of defendants were wrong to proceed to trial. Both plaintiffs and defendants made the right decision to go to trial in 15 percent of the cases, meaning that the defendants paid out less than the plaintiff initially demanded but more than the defendant originally offered.
Though the study found that plaintiffs are more likely to incorrectly opt for a trial, defendants face the biggest financial risk in forgoing settlements. Of the cases where defendants incorrectly opted to go to trial, the average plaintiff settlement demand was $770,900 while the average verdict was $1.9 million. That means the defendants paid on average an additional $1.1 million.
By comparison, the average settlement offer to plaintiffs who wrongly went to trial was $48,700 and the average verdict was $43,000, meaning the plaintiffs saw an average loss of only $5,700.
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