I dislike trying personal injury cases with high-low agreements that contain the size of the verdict. If you will force us to take the case to trial, I would prefer the chance of the upside. My gut-level reaction is no deal.
But the problem with this bravado is clients. Our law firm has a decent volume of personal injury cases, which means our lawyers can spread the risk of the possibility of an unacceptable outcome at trial. Clients have just one case, so their risk calculus is very different. An added force of inertia for high-low agreements that makes the numbers more reasonable for injury victims is that insurance companies want to limit the possibility of a verdict exceeding the policy limits. A high-low agreement in litigation is a type of settlement that is often used in personal injury cases. This agreement is a contractual arrangement between the parties to the lawsuit that establishes a minimum and maximum settlement amount. What Is a High-Low Agreement?
In other words, it sets a range of values within which a settlement can be reached.
Under a high-low agreement, the plaintiff and defendant agree to a maximum and minimum settlement amount before the trial. The maximum amount is the highest amount that the plaintiff can receive in the event of a favorable verdict at trial, regardless of the actual damages that may be awarded by the jury. The minimum amount is the lowest amount that the defendant will pay to the plaintiff, regardless of the verdict.
Example of a High-Low Agreement
For example, if the plaintiff and defendant agree to a high-low agreement with a maximum amount of $500,000 and a minimum amount of $100,000, then the plaintiff will receive at least $100,000 if the verdict is unfavorable. If the verdict is in the plaintiff’s favor, the plaintiff will receive no more than $500,000.
The high-low agreement is usually kept confidential from the jury, and the parties may not inform the jury of the existence or the terms of the agreement. This is to ensure that the jury is not influenced by the settlement agreement in making its decision.
When to a High-Low Makes Sense
High-low agreements are often used in cases where the outcome of the trial is uncertain, or where the plaintiff may be taking a significant risk by going to trial. Again, lawyers have lots of cases. The victim has one. And that increases the risk.
We see this a lot a lot in medical malpractice cases. For example, a plaintiff who is seeking damages for a complex medical condition may not be able to predict the amount of damages that a jury may award. In such cases, a high-low agreement can provide some certainty and limit the risk of going to trial. We had a client get a high-low offer of $2.5 million and $1 million while the jury was deliberating. It is hard to be more sure about a case than we were about that one. But a high-low made sense to the client. He regretted it after we got a $5.2 million verdict. But for him, the logic of his decision – based on his financial goals and how much was at risk – was sound.
Be Clear on What the High-Low Agreement Is
If you will make a high-low agreement, it is important to make sure everyone is crystal clear on what the agreement is. Not most, but a good number of high-lows are made during trial while the jury is out. In Missouri Lawyers Weekly, there was an article about a case in which the parties reached a high-low settlement in what I think was a car accident case (the article is not clear) just before the jury reached a verdict. According to the plaintiff’s lawyer, the settlement agreement was for whatever the jury handed down up to $1.36 million, plus prejudgment interest. Incredibly, the jury awarded exactly that: $1 million-plus $360,000 in prejudgment interest.
The defense attorneys moved to set aside the judgment and enforce the settlement agreement, arguing that the agreement did not include prejudgment interest. The trial judge agreed and ordered the settlement of $1 million be enforced with no prejudgment interest. The plaintiff is appealing that decision.
How this gets sorted out is anyone’s guess. It sounds like a lot of he said/she said stuff that you really want to avoid litigating. The take-home message here is obvious: all high-low agreements need to be crystal clear on every essential ingredient, including costs, and where applicable, interest and attorneys’ fees.