Settlement Negotiating Psychology: “Tit for Tat” Negotiating Ploys

Most big personal injury cases are resolved at mediation.  The mediator shuttles from room to room taking numbers back and forth.

The first numbers, however ridiculous, matter.  There is a cognitive bias in settlement negotiations that causes parties to overemphasis the first number offered.  This leads to inadequately making the adjustments from that starting point.

Gauging the next “move” based solely upon how much the other side has budged- “tit for tat” negotiations with no bearing on one’s own case evaluation is another common mediation mistake. It is understandable that negotiators and mediation participants desire proportionality and reciprocity in adjusting demands and counteroffers. The problem is that many adjusters think plaintiffs have no ceiling on the amount that they can demand, whereas defendants can offer nothing less than zero. For this reason, arguments that “We’ve come down by $100,000 so you need to come up $100,000” often fall on deaf (adjuster or defense lawyer) ears.

settlement negotiation

Defense lawyers often set up mediations better than personal injury lawyers. The defendant’s lawyer will call you and ask for a demand. Be reasonable. So when you show up at the mediation, the range is between reasonable and zero. That is the wrong psychology to settle a case.
The best way to address this problem: if a defendant puts you in this game, don’t be above the game with your reasonableness. Your opening demand under this dynamic should mirror the defendants’ maximum exposure. Most states now have caps on non-economic damages. Add up your economic damages: past and future medical expenses, past and future lost wages, loss of earning capacity, vocational training, and/or rehabilitation. Add that number to the amount allowed under the applicable non-economic damages cap. This should be a good approximation of the maximum exposure on the claim. With any luck, you will be right around the amount of the reserve the insurance carrier has set for the claim. This should help in estimating the settlement value of the case on the continuum between the maximum value and zero. This will let you calibrate your demands to where you want to end up on a case, not necessarily to match the other side amount for amount.

This tactic only works in a case where it is possible a jury would give such an award. Not likely, but “best day possible.” If you are demanding the cap in a soft tissue injury claim, you are also sending the wrong message. Similarly, when you demand $5 million in a case where your cap is $2 million, you are sending the same “I’m not exactly sure what I’m doing” message.

  • Every insurance company is different. Know who you are dealing with what makes them tick.  We give our thoughts on negotiating with each insurance company
  • The “this is my last offer” tactic.  How to use it and what to do when someone is using it on you.
  • Miracle verdicts: the only way to get more than the policy limits


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