Weighing the Uncertain Outcome of Trial Against Settlement

February 05, 2013

Katharine M. Nohr, Esq.
Nohr Sports Risk Management, LLC

You may have followed the Barnhard v. Cybex International, Inc. product liability lawsuit in which the Appellate Division, Fourth Judicial Department of the Supreme Court of the State of New York, reduced the lower court judgment by 31% to approximately $44 Million. Later, Cybex entered into a settlement agreement, agreeing to pay, net of insurance, $19,500,000.

The case arose out of an accident that occurred when Plaintiff Natalie Barnhard was working as a physical therapist and a 500 lb. Cybex exercise machine fell on her, resulting in paralysis. A jury awarded Plaintiff $66 million, finding Cybex 75% at fault.

Your organization may never experience a financially catastrophic verdict like Cybex did in this case, but it does illustrate the unpredictability of juries. No matter how skilled attorneys and claims adjusters may be in evaluating a claim before trial, a runaway verdict may occur. The concern for any organization is that the verdict will exceed insurance policy limits and the organization will be on the hook for more money than they are capable of paying. In the Cybex case, the company faced possibly being de-listed from the Nadaq Stock Market, due to declining equity.

Before a jury trial, the parties will have opportunities to attempt to settle a claim. Alternative dispute resolution can mean the difference between a settlement within policy limits and exposure to an organization beyond policy limits. Some jurisdictions require mandatory arbitration for smaller cases. Arbitration can also be a contract requirement or can be voluntarily entered into between parties. There are numerous types of arbitration that parties can agree to, including a high/low arbitration, where the parties agree to a ceiling and floor for the award. Parties can use a single arbitrator or a panel. In some cases, arbitration awards may be appealable.

Another means of alternative resolution is the use of mediation in an attempt to reach an agreed upon settlement. Mediators can use an evaluative or facilitative style in helping the parties reach a resolution. One of the realities of mediation is that neither party wins the case, rather they come to a compromise which they are willing to live with. The uncertain outcome of a jury trial gives the parties and incentive to resolve the case.

Another means of reaching a settlement pre-trial is through a settlement conference scheduled with a Judge. These settlement conferences are often required by courts before proceeding to trial. The Judge serves as a mediator to assist the parties to resolve the case, which is a means for the court to diminish their caseloads and save the cost of trial.
In short, even if you are optimistic about your chances at trial, it is important to consider possibly settling a case before trial rather than to face a potentially large verdict, exceeding insurance policy limits.