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The High-Low Agreement

You’ve got a case that could be a big winner.

Damages are high. But establishing liability is iffy.

Your client is nervous about paying all the doctors and the costs of the trial.

It may be time for a high-low agreement.

A high-low agreement sets a ceiling and floor to recovery. The parties agree that the plaintiff cannot receive less that a minimum amount, and a defendant is guaranteed a cap on what might have to be paid.

Armed with such an agreement, both sides can proceed confidently to trial knowing they have a little more control over the outcome of the case.

A high-low “takes away the uncertainty and fear of going to trial,” said Louisa lawyer Michael C. Kildoo.

“For a plaintiff, it means you won’t have a bad day and get a zero from the jury,” he said.

And for defendants, “it means you won’t get slammed,” Kildoo said.

Veteran personal-injury lawyers interviewed by Virginia Lawyers Weekly outlined some of the basis elements of such an agreement.

What’s the right case?

In most instances, lawyers say, it is the defendant who first broaches the issue of a high-low.

Frequently that move comes from a concern about an excess verdict. Take the example of a case where insurance policy limits are low and the plaintiff’s damages are high. Establishing liability may be dicey, but if the plaintiff rings the bell, then the individual defendant will be looking at a big personal liability once the limits are exhausted.

George J. Dancigers of Norfolk, a defense lawyer, said that his insurance company clients take that factor into account.

The carrier may well want to “do the responsible thing” for its policyholder, he said. And he recalled that under ethics rules, he or his colleagues may be paid by a carrier, but their client is a person.

“You want to protect the [individual] from a big excess verdict,” he said.

Other defense lawyers echoed this concern: “We use [a high-low] as often as we can to protect a client from personal exposure,” said John P. Cattano, a Charlottesville attorney who primarily represents defendants.

When policy limits are an issue, the high value in an agreement likely would be set at the dollar figure of available coverage.

Coverage limits prompted the parties to use a high-low agreement in a recent case tried by Roanoke lawyer Monica L. Taylor. An auto-accident plaintiff alleged neck injury and headaches, according to Taylor, who defended the case. The defendant admitted liability.

The plaintiff had over $14,000 in medical bills, but there were some questions about her prior medical history. She wanted at least $50,000 to settle the case, but the defendant’s highest offer was $40,000, which included a $12,500 offset for advances made to the plaintiff and her health care providers prior to litigation.

In this case, “there was only a limited amount of liability insurance. Being able to cap the damages is particularly useful in insurance defense cases where the amount sought is more than available” coverage, Taylor said.

Protecting the client from a verdict in excess of coverage limits was a “crucial element” that prompted the proffer of a high-low, she said.

While available insurance coverage is a big factor is determining whether a case is a good candidate for a high-low, contributory negligence also can play a big role.

Charlottesville lawyer R. Frazier Solsberry cited a case he tried last November. His client was a pedestrian who suffered ankle injuries when she was struck by the defendant’s vehicle. Two of six eyewitnesses saw the plaintiff in the crosswalk both before and after impact. The plaintiff testified that she was hit once in the crosswalk and then hit again. A police officer and a paramedic found the plaintiff partially in the crosswalk.

But two defense witnesses’ stories changed over time, according to Solsberry, and one of the defense witnesses, a prominent local official, ultimately testified at trial that the plaintiff was crossing a busy street perpendicular to the cross walk.

The parties went to trial with a high-low of $25,000-$50,000. Although the jury returned a verdict of $75,000, Solsberry was satisfied with the policy limits of $50,000.

Issues to cover

As one of the terms of a high-low agreement, both parties commonly agree to waive any appeal in the case. But neither side can assume such a waiver is automatic, and the scope of a waiver should be spelled out.

Despite using a high-low agreement, the parameters of the agreement could be far enough apart to make either side think an appeal might be worthwhile.

If the case raises a novel issue of law, a party might not want to forfeit having an appellate court examine the issue.

Or a lawyer might be concerned that the case could just take a wrong turn at trial, and a seriously prejudicial error could not be corrected, if an appeal has been waived.

The parties could narrow the waiver, and simply agree not to appeal any error relating to the amount of damages. Or the parties could agree that the plaintiff still has the right to appeal any verdict that came in at exactly the amount of the special damages, reversible under Bowers v. Sprouse (VLW 097-6-119).

A waiver of appeal can be advantageous to both sides.

Most important for plaintiffs is the fact that a check from the insurance company typically arrives in a day or two.

The fact that any verdict gets “paid right away” can be a tremendous relief to a plaintiff, Kildoo said.

Matthew B. Murray of Charlottesville concurred. He cited a client who had been treated by a doctor after an accident, and she needed to return for more care.

But she owed him a great deal of money. A high-low was used in her case and after the jury’s verdict she got her check immediately, resolved the doctor’s bill and received the additional treatment she needed, he said.

Sometimes defendants prefer to have the resolution on record as a settlement, instead of a jury verdict, which does not usually trouble Solsberry.

“Our goal is not to punish the defendant, but to recover for the plaintiff,” he said.

Dancigers observed that he will seek a dismissal order in cases involving a high-low. That way, there is not a judgment of record against the defendant, a fact that can create credit problems.

Dancigers raised another point that should be covered in a high-low: What happens if there is mistrial or a hung jury?

“If you have to start over, then what?” he asked. Those contingencies need to be discussed and consensus reached as part of the negotiations, he said.

Telling others

Lawyers differ on whether a judge or other decision-maker should know about any high-low agreement.

Sometimes it’s simply a question of trying to intuit what the particular judge would prefer.

Sometimes lawyers think it’s better to inform the judge at the outset of trial, as a courtesy.

In one case in which he used a high-low agreement, plaintiff’s lawyer Russell W. Updike, of Covington, said the parties told the judge about the agreement, but did not disclose the range agreed to.

“The judge may want to know, or may not want to know,” he said.

“Typically, we don’t tell the judges,” said Timothy H. Hankins of Newport News. The information may be provided, where the parties think the judge wants to know. In federal court, especially, disclosure of a high-low might bring on more pressure to settle a case, he said.

Other lawyers are pretty sure that the judge would not want to know about a high-low agreement because of the small chance of a perception that knowing about the agreement could somehow taint the proceedings.

For instance, if the high-low contains the typical waiver of appeal, there might be an impression that any rulings during the course of the trial were insulated from appeal. Or the judge may wonder why, if the parties have agreed on a high-low, the lawyers can’t just go on and settle a case.

Arlington lawyer Thomas G. Smith, who represents med-mal plaintiffs, said that he recently served as one of three arbitrators in a case that involved a high-low agreement. The arbitrators did not know about the agreement, and Smith thinks it’s better that way, because of the tendency of a decision-maker to “split the baby” once they have a range of numbers acceptable to both sides.

When to negotiate

Most times, the parties set their high-low agreement before trial. But cases reported to Lawyers Weekly demonstrate that it is never too late to play “Let’s Make a Deal.”

In the 1997 Portsmouth case, Mraz v. Exposaic Industries Inc., celebrated for its $20 million jury verdict, the parties entered into a high-low agreement at the time of closing arguments.

The levels were set at a low of $4 million and a high of $17.5 million. The case involved a 35-year-old counselor of emotionally disturbed children who was catastrophically injured when a concrete wall fell off a truck and crushed his car. The jury came back with a $20 million verdict — the state record in a p.i. case.

However, it is possible to wait too late to talk about a high-low.

Murray related the story of a wrongful death case he tried in Harrisonburg. The fact pattern was a classic for a high-low: Questionable liability and massive damages, well over the million dollars available as policy limits, he said.

He and his co-counsel put on a very strong case for damages, so strong that the defense lawyers approached him after the jury retired. If you’ll cap damages at $750,000, we’ll set a floor of $50,000, they said, according to Murray.

The parties were in the middle of drafting a hand-written agreement in the hallway when the jury returned with a defense verdict, Murray said.

The client’s view

Most lawyers said they had little difficulty selling a high-low to their clients.

For defense lawyers, the suggestion may come from the insurance carrier.

Settling the case within the limits of available insurance coverage may be the safest course for a carrier, as well as its insured. If the plaintiff is on record as willing to settle the case within policy limits, it is not just the insured who runs the risk of an excess verdict.

“If you knock a home run that’s way over the policy limits, and you have let the carrier know you have been willing to settle within policy limits,” the carrier might fear being sued for bad faith, Hankins said.

For plaintiff’s lawyers, if the high-low’s parameters correspond to the range at which the lawyer already has valued the case, and the lawyer explains the advantages to the client, particularly in how the agreement will help cover costs and fees, the client readily accepts the lawyer’s advice.

Litigation costs are a big factor, especially in a med-mal case, Smith said. Figure in the number of experts a plaintiff needs, travel for depositions, obtaining blow-ups of records and audio-visual displays, and an ordinary med-mal case can cost a plaintiff $40,000 to $50,000. And with med-mal cases, the plaintiff already is bumping up against the statutory cap on damages.

“Most clients are not motivated to get into the individual defendant’s pocket,” said Updike. There may not be much of a pocket anyway, lawyers said.

Through routine discovery, the plaintiff may have some general idea of a defendant’s personal financial condition, but a plaintiff cannot really explore a defendant’s assets until she has a judgment in hand.

Typically, there is “limited information about the defendant. You may be able to paint a picture,” by asking about home ownership, business ownership, occupation and employment history and spouse’s employment, said Solsberry. But unless there is a viable claim for punitive damages, defense lawyers would object to more specific questions about the defendant’s net worth, the value of a home and whether there was a mortgage.

In negotiating a high-low and presenting it to a client, the lawyer may want to recall his own early gut feeling about the case.

When setting high-low parameters, “a lot of it depends on where the plaintiff’s attorney has valued the case and the offer range in the first place,” Solsberry said.

“I look at my case, and try to think what I feel like the jury will award, and then I set the high higher, and the low closer to that amount, so the settlement range comes in at high and much higher,” Hankins said.

“The low has to be high enough to generate a reasonable amount of cash, and net proceeds for the client,” Solsberry said.

“It could be a small amount, if it’s a case we’ve had limited expectations for going in,” he said. Trial could be a big risk to the client, who may have outstanding medical bills and trial costs. “The worst thing that could happen is getting a defense verdict, and the client is stuck with bills, or the plaintiff’s verdict is too low to cover those bills,” he said.

And Solsberry is frank to raise with his clients, the fact that a high-low agreement also would benefit him, by covering his own fees.

By taking the time to lay out the options for the client, Solsberry does not have to resort to anything stronger than gentle persuasion when he thinks a high-low is in the client’s best interests.

“The most important thing is to have a solid handle on the value of your case, to be realistic and hard-nosed about it,” Solsberry said.

Settlement tool?

Once the parties get some numbers on the table, in the form of talk about a high-low, that process may or may not grease the wheels for eventual settlement.

Dancigers said that he believes a high-low can facilitate actually getting to a settlement.

The two sides might set their figures then realize maybe they’re not that far apart, he said.

Or sometimes just the process of getting “the high-low talk” going can be fruitful to reaching resolution short of trial, he added.

But at least one plaintiff’s lawyer said that high-lows can work against plaintiffs, at least when trying to settle.

Updike said that he has only limited experience with high-lows, because he has found that they “[take] the pressure off the defense” to settle the case.

For that reason, several attorneys counseled that discussions of a high-low should start only after settlement talks have reached an impasse or failed.

Future of high-lows

In the past several years, lawyers and judges have been seeking creative ways to resolve cases. Mediation and arbitration have been on the rise, and courts have been encouraging these newer ways to resolve disputes economically and quickly.

Anecdotally, the use of high-lows appears to be increasing. The number of these agreements reported in Trial Reports published in Virginia Lawyers Weekly rose steadily throughout the late 1990s.

Lawyers on both sides of litigation tend to view the high-low in a positive light. It is another valuable tool to have and use when appropriate.

“I try to keep it in my repertoire as a way to benefit the client,” said Bruce C. Phillips of Fredericksburg

For a plaintiff’s lawyer, a high-low means that the client will get something, he said.

And for a defense lawyer who might be staring down the possibility of a big excess verdict, an agreement means “the lawyer can sleep the night before trial,” he added.

Alexandria plaintiff’s lawyer J. Hunt Brasfield took an even broader view.

In an era when and in a state where juries “are increasingly conservative and increasingly suspicious,” high-low agreements “are a really good idea,” he said.

“Obviously, it depends on the deal you can cut,” he concluded.

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