Have you ever wondered why some lawsuit settlements are in the millions of dollars, while others hover around six figures or less?
Well, the truth is, it’s not always about how bad your case is.
In fact, the biggest part of understanding lawsuit settlements and how they work has everything to do with one specific thing:
Precedent.
The reality is, every single time a multi-million dollar lawsuit is settled (or a case goes all the way to trial), it sets a new precedent for your case down the road. So if you are trying to figure out what your personal injury or other type of claim is actually worth, understanding how these legal precedents impact cases is essential.
In this article:
- How prior cases affect your settlement
- The types of precedents that matter
- What recent cases reveal
- Three ways to use this to your advantage
Precedents: The Hidden Power Behind Settlement Amounts
When your lawyer is negotiating a settlement, they aren’t randomly pulling settlement amounts out of thin air.
In fact, they’re likely basing the numbers off of the following: other cases that have already gone before yours.
Past cases, the precedents, will act as a measuring stick to help everyone involved arrive at a fair number.
So how does this work, exactly?
Insurance companies, lawyers, and both plaintiff and defense counsel often refer to online settlement calculators and legal databases full of previous precedent-setting cases. When used, these powerful tools estimate what a personal lawsuit is worth based on thousands of past settlements. They use a combination of factors to determine a range that’s low, high, and average, including all of the following:
- Specific case facts
- Similar types of injuries and accidents
- Jurisdiction
- Insurance coverage and
- Available assets.
The point is, settlement amounts aren’t pulled out of nowhere. Every trial verdict that’s published becomes part of the legal universe moving forward. In 2024 alone, class action settlements totaled $42 billion, the third straight year above that mark. Case in point: these huge settlements set precedents of their own.
Three Kinds of Precedents That Legally Matter
The reality is, certain cases will carry more weight with your settlement amount than others. While some lawsuits might influence what a jury could award, others won’t matter AT ALL.
Here are the three legal precedents that matter most to your case.
- Trial verdicts
- Similar case settlements
- Appellate rulings.
Trial Verdicts
As mentioned above, if a personal injury lawsuit actually goes to trial and a jury returns a verdict in favor of the plaintiff, that trial verdict carries a LOT of weight as a precedent.
The reason? Because the jury is made up of 12 regular people from the community who heard all the evidence and decided what the case was actually worth. And since 90% of lawsuits settle before trial, when one does make it to a jury, the result is often given a lot of consideration by future lawyers and jurors.
Similar Case Settlements
Cases with facts that are identical or very similar to yours create the strongest type of precedent.
If someone suffered the exact same injury in the exact same way a year ago and settled for $500,000, that creates a “this is what was paid last time” type of mindset. Lawyers know this and will often refer to this type of case if one exists.
Appellate Decisions
Decisions by higher courts can rewrite entire areas of law and act as a precedent for thousands of cases in the future.
If an appeals court or supreme court rules one way or another, they often end up setting the tone for what type of arguments work and don’t work in future cases with similar facts. This is the type of precedent that will often “make or break” a case.
How Do Precedents Actually Change Your Settlement Amount?
Now let’s get into how all of this actually affects you…
When your attorney is prepping for settlement negotiations, they will do a bunch of legal research and build out a case file that they’re going to present to the other side.
This file will likely include prior similar cases that they deem relevant as a part of their effort to build a persuasive argument.
If the plaintiff (injury victim) has strong precedents going for them in their case, the defense knows it’s a risk for them to go to trial. That leads to higher settlement numbers.
On the other hand, if the precedents are less favorable for the plaintiff, the defense company can feel more confident offering a smaller number.
Precedents act as leverage.
Your attorney will use them as proof to justify that your claim should be valued higher based on what similar cases have settled for or what juries have awarded in the past. If you have cases where millions of dollars were paid by corporations to avoid bad press, those are strong precedents that your attorney can use in their leverage.
The other side is doing the exact same thing, by the way, but in reverse. They are also finding precedents that will support lower settlement figures. It’s a game of strategy.
Real Case Examples that Changed the Landscape
So what are some recent real-life cases that have set precedents which now impact settlements moving forward?
Tobacco company settlements in the 1990s totaled an astounding $206 billion dollars. A huge precedent that changed how companies deal with consumer safety and product liability.
BP Oil spill settlement of $20.8 billion set new standards for environmental disaster cases.
Cyber breach cases have exploded in recent years. When large companies are hacked and customer info is stolen, settlements are influenced by what other companies have paid out previously.
Breakdown of Why Precedents Don’t Always Apply
But here’s something few people know…
Precedents do not apply the same way in every case. For example, a court can distinguish your case from previous ones based on small fact patterns that differ.
Maybe the injury isn’t quite the same. Maybe the defendant’s actions were more egregious (or less) than in the original case that set the precedent.
Smart lawyers know which precedents to push and which ones to let slide.
That’s why identical cases sometimes receive wildly different settlement offers. The precedents that are available in that jurisdiction are a factor, state laws vary, and the specific facts of each case are unique combinations that the precedent only partially covers.
Three Ways to Use Precedent Knowledge to Maximize Settlements
Curious how to use precedent information to your advantage? Here’s the inside scoop.
First, inquire with your lawyer about similar cases they know of and their outcomes. A good personal injury attorney or other plaintiff counsel will be able to point you to three to four similar precedents as a minimum that support the value of your claim.
Second, be reasonable with your expectations. If every single precedent in the type of case you have is settling for $50,000 to $100,000, it’s unreasonable to demand $500,000. Precedents create ranges, and your case will likely fall in line somewhere.
Third, new precedents count more. Meaning, cases from last year will carry more weight than those from 2010 or earlier.
Finally, pay attention when a new string of cases work AGAINST you. If several recent cases in your state are getting dismissed or small verdicts, know that it affects your leverage.
The more bad precedents that pile up, the more it makes sense to settle your case quickly.
Bringing it all together
The truth is, precedent plays a MUCH bigger role in your settlement amount than you might think. Knowing how past cases affect your current situation gives you an incredible advantage. You’ll know when you are being offered a fair settlement, what arguments your lawyer should be making to drive up your award, and what’s possible versus hoping for the stars and beyond.
So the next time you hear about a multi-million-dollar lawsuit getting settled or going to trial, take note. That is the case that will likely set a precedent that will influence your claim’s value down the road. The more you know about these trends, the better off you will be.