Checking the Price Tag

A Point of View

David H. Fauss, M.S.M.

On June 28, 2018

Category: Jury Behavior, Jury Deliberations, Litigation Research, Magnus Insights, Magnus Research, Psychology, Trial Consultants, Trial Consulting

The old adage “if you have to ask the price, you can’t afford it” doesn’t apply to litigation. In part, this is because, especially in the context of civil litigation, affordability is not decided by the buyer. Buyers (insurance claims adjusters, for example) usually operate as if there is no price tag to check. We have worked with hundreds, or perhaps thousands, of these types of buyers and they have methods they use as a part of their case evaluation to figure what they consider a “reasonable price” to resolve the case – that is, “buying” the claim. It may be an artifact of the types of cases for which we get hired, but often this “reasonable price” is not working in terms of getting the case resolved. Perhaps the defense lawyer and claims adjuster differ in their assessment of the value of the case; perhaps the adjuster and his/her supervisor differ. In a prior post, I recounted an early experience we had with a defense lawyer who told us he thought the value of a wrongful death claim was $X, his adjuster/client thought it was 20% of $X – an 80% differential is a big gap! (And it gets even more complicated when there is a team/hierarchy of adjusters who must “round table” a claim to determine what they consider collectively to be the value of the case.) Recently, I was reminded of this pricing dilemma by another defense lawyer client who called to hire us to conduct pre-suit mock jury research in order to convince his client of the need to give him ample authority to settle the case early. His concern was, without a realistic benchmark of the potential of the case, the client will under value the matter. While, in some ways, settling early will cost him many billable hours, this client was trying to do what is best for his client by resolving the case early. But, he knows he can only do this if the client has a look at the price tag. Absent that, there will be no early resolution and the legal fee meter will run up the total expenditure. As a disclaimer, mock jury research is not a predictor of a specific verdict amount. Run from any trial consultant who says it is. Yet, mock jury research does provide enough of a price check to use for the purpose of determining likely verdict ranges. With such information, smart claims professionals can make informed decisions about how to proceed with litigation. The “price” may be $0 if the claim is fully defensible, but, if there is a difference of opinion, then paying for a “price check” typically saves more than the cost of that price check, usually by a huge multiplier.

Most people are interested in knowing the price of something before they buy it. Typically, when the cost of an item is substantial, for example, the cost of a house, the buyer is keenly interested in knowing the factors that are important determinants of the cost, such as neighborhood, comparable sales, re-sale potential, etc. Litigation, of the type Magnus works on, usually costs substantially more than the cost of a house or other major purchase. However, despite the tremendous cost of litigation, not to mention the greater cost associated with a multi million or multi billion dollar verdict, some of our potential clients appear uninterested in performing their due diligence pertaining to the cost. Absent requesting a “price check,” in the form of an attitude survey, focus group, or mock trial, there is no way to know if one is “making a purchase” based on a fair price or a price that is inflated due to the purchaser’s ability to pay. We have worked with countless insurance adjusters, defense lawyers, claims managers, general counsels, and other decision makers whose personal assessments of their case’s value have been wrong, wrong, wrong. Their assessments were wrong because they were not based on anything more than “a feeling”; or experience with a similar, but not identical, case; or a desire not to place a fair value on the case because doing so would impact their bonus; or any one of a number of other faulty reasons. When we have conducted mock jury research for this type of client, he/she is often shocked to discover no one else perceives the case in the same way, not to mention placing a low value on it. Imagine the insurance adjuster who has valued a tragic personal injury case for less than the $25,000 policy limits, then watches several mock juries award over $10,000,000. We have witnessed this phenomenon on countless occasions and it is fascinating to observe how the client will react to the huge discrepancy. Could it be that all of the mock jurors are wrong, leaving only one person (the adjuster) to have placed the correct, and low, value on the case? Or, perhaps, there were factors important in the jurors’ consideration of the case that were never brought to light in the adjuster’s perusal of the claim file. Overall, I believe it is preferable to make decisions, particularly those involving a lot of money, not to mention other people’s lives, with more, rather than less, information. Part of every attorney’s and adjuster’s preparation should be finding out what other people think about the value of the case; doing anything less is like buying a house after foregoing the inspection that would have revealed termites, a leaky roof, and more. Due diligence always involves a price check.

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