What Factors Affect a Lawsuit Settlement?

Civil lawsuits are filed for a number or reasons and are founded on an infinite number of issues. The vast majority of lawsuits, however, are filed either in an attempt to collect money owed to the plaintiff by the defendant or alleging that the defendant injured the plaintiff in some way and seeking compensation for the injuries. The factors that affect a lawsuit settlement can be as varied as the reasons lawsuits are filed; however, there are factors that inevitably affect almost all settlements. Among those factors are the cost of litigation, the defendant's ability to pay, and the chances of winning if the case proceeds to trial.

When a plaintiff files a lawsuit in an attempt to collect a debt, the court will require the defendant to answer the plaintiff's complaint and either admit or deny that the money is owed. If the defendant denies owing the money, then the process of discovery begins. A trial may eventually be set where the parties may argue their respective cases. The amount of time and resources required to litigate a debt collection case is generally directly related to the amount of money in controversy—the more money allegedly owed, the longer it will take to collect, and the more money will be spent trying to collect it.

A lawsuit based on injury to the plaintiff, commonly referred to as a personal injury lawsuit, begins by the plaintiff filing a complaint with the court. Discovery will also be conducted and a trial eventually held if a lawsuit settlement is not reached. In a personal injury lawsuit, the cost of litigation can quickly escalate. In addition, it is not uncommon for a personal injury lawsuit to take months, or even years, to reach trial. The time frame alone often gives a plaintiff an incentive to reach an out of court lawsuit settlement.

In many lawsuits, the parties may attempt to reach a lawsuit settlement before the case is even officially filed with a court. Once a case is filed, the costs begin to add up for both sides. Cost, therefore, is one of the primary motivators for both sides of a lawsuit to reach a settlement.

Whether or not the defendant has the financial resources to pay a debt or to pay a large compensation award may also affect a lawsuit settlement. A plaintiff may prefer to reach an agreement for an amount that a defendant can actually pay than to spend a significant amount of time and money only to be awarded more money that the defendant has no realistic ability to pay. Also, in personal injury lawsuits, the defendant is frequently covered by liability insurance that may have a maximum liability limit. In that case, the plaintiff may be better off simply agreeing to the maximum amount that the insurance company will cover.

The chances of winning a lawsuit will clearly factor into any lawsuit settlement negotiations. When one side is certain of winning, it will be less likely to agree to a settlement. Having said that, a jury verdict is never certain, which makes considering a lawsuit settlement a wise move, even when a party is fairly sure of winning.