Abstract

http://ssrn.com/abstract=1884744
 
 

References (14)



 


 



Three-Party Settlement Bargaining with Insurer Duty to Settle: Structural Model and Evidence from Malpractice Claims


Kowsar Yousefi


Institute for Management and Planning Studies

Bernard S. Black


Northwestern University - School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)

May 2015

nearly final version; Journal of Law, Economics and Organization, 2015, Forthcoming

Abstract:     
Prior efforts to specify and then empirically estimate structural models of the outcomes of tort lawsuits involve only two parties – plaintiff and defendant. We incorporate the defendant’s insurer and its “duty to settle” into a settlement model. In medical malpractice cases, there is both anecdotal and quantitative evidence that policy limits and the insurer’s duty to settle are central parts of settlement bargaining. We estimate the model using a Texas database of closed, paid claims. Both the data and our model predict a mass of cases with a settlement offer by the plaintiff exactly at limits; a smaller but still sizeable mass of cases with payout exactly at limits (both before and after trial), and substantial haircuts (payout < damages) in tried cases with damages > limits. In counterfactual analysis, we predict that, as duty-to-settle liability becomes stricter, there will be: more at-limits offers, fewer trials, fewer at-limits payments in tried cases, more insurer payments above limits, and smaller haircuts.

Number of Pages in PDF File: 55

Keywords: tort litigation, settlement models, insurer duty to settle, bargaining model, structural estimation, maximum likelihood


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Date posted: October 23, 2011 ; Last revised: May 21, 2015

Suggested Citation

Yousefi, Kowsar and Black, Bernard S., Three-Party Settlement Bargaining with Insurer Duty to Settle: Structural Model and Evidence from Malpractice Claims (May 2015). nearly final version; Journal of Law, Economics and Organization, 2015, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1884744 or http://dx.doi.org/10.2139/ssrn.1884744

Contact Information

Kowsar Yousefi (Contact Author)
Institute for Management and Planning Studies ( email )
Neyavaraan
Tehran, Iran
Tehran, Tehran
Iran
+98(912)5037783 (Phone)
HOME PAGE: http://sites.google.com/site/yousefi.kowsar
Bernard S. Black
Northwestern University - School of Law ( email )
375 E. Chicago Ave
Unit 1505
Chicago, IL 60611
United States
512-503-2784 (Phone)

Northwestern University - Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)
European Corporate Governance Institute (ECGI)
Brussels
Belgium
Feedback to SSRN


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