If you've suffered a significant injury, you may be terrified of the prospect of a stressful courtroom trial, being cross-examined on a witness stand, and waiting years for a verdict. You are likely asking: "Do insurance companies prefer to settle out of court?" The definitive answer is yes, insurance companies overwhelmingly prefer out-of-court settlements. In fact, data shows that upwards of 95% of all personal injury and workers' compensation cases are resolved before a trial date is ever set (as detailed in our article on how often lawsuits win). Insurance corporations are risk-averse financial institutions. A trial represents unacceptable financial risk. Understanding exactly why insurers hate trials is the key to leveraging their fear and forcing them to offer you a maximum out-of-court payout.
Reason 1: Trials Destroy Cost Control
Insurance companies exist to make a profit. To do that, they must accurately project their quarterly losses and reserve specific amounts of money for impending claims. When they settle out of court, they control exactly how much money leaves their bank account. For example, if they offer you a $50,000 settlement (read about $50,000 settlement deductions here), they know their exact financial liability.
If they go to trial, they lose all control. Juries are notoriously unpredictable. A sympathetic jury might look at a plaintiff who suffered a catastrophic injury and award a $5,000,000 verdict when the insurance company only projected a $200,000 loss. Insurers despise unpredictability more than they despise paying a slightly higher negotiated settlement.
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Start Free Review →Reason 2: The Staggering Cost of Litigation
Trials are incredibly expensive for the defense. While a plaintiff's attorney works on a contingency fee (meaning they only get paid if they win), defense attorneys are paid by the hour. A corporate defense attorney can easily charge $300 to $600 per hour.
Taking a case to a full jury trial requires hundreds of hours of defense work, including taking depositions, reviewing thousands of pages of medical records, filing motions, and paying $5,000+ per day for their own medical experts to testify. It is not uncommon for an insurance company to spend $50,000 just to defend a case in court. If the case is only worth $75,000 to begin with, spending $50,000 to fight it is a terrible business decision. They would rather give that money to you in a settlement and close the file.
Reason 3: The Threat of Bad Faith Claims
Insurance adjusters are bound by law to act in "good faith." This means they must attempt to settle claims reasonably when liability is clear. If an insurance company refuses to settle a valid claim, takes it to trial, and the jury awards a massive verdict against their policyholder, the insurer can be sued for "bad faith."
Bad faith lawsuits can result in punitive damages against the insurance corporation that vastly exceed the limits of the original policy. The mere threat of a bad faith claim is often enough to make a stubborn adjuster reconsider their lowball offer and agree to an out-of-court resolution.
How to Use Their Fear Against Them
Knowing that the insurance company wants to avoid trial is useless unless you know how to use it as leverage. If an adjuster knows you are desperate for money or afraid of court, they will offer you a fraction of your case's true value. To maximize your settlement, you must present a credible threat of litigation.
1. Hire a Trial Attorney: Adjusters use software (like Colossus) to value claims, and they absolutely factor in your attorney's track record. If you hire a "settlement mill" firm that never goes to court, the adjuster will offer less. If you hire an aggressive trial attorney with a record of winning jury verdicts, the adjuster will increase their offer simply to avoid facing that lawyer in court.
2. Prepare the Case for Trial from Day One: The best way to avoid a trial is to prepare for one. By gathering irrefutable evidence, securing rock-solid medical expert testimony, and proving all four elements of negligence, you make it mathematically impossible for the defense to win at trial, forcing them to settle.
Frequently Asked Questions
It is highly unlikely unless liability is completely disputed (they say the accident never happened or was entirely your fault), or if your demand vastly exceeds the policy limits and the insurer refuses to yield.
Absolutely not. You are the boss. Your attorney can advise you on whether an offer is fair, but they cannot accept or reject a settlement without your explicit permission. If you feel the offer is too low, you have the right to reject it and proceed to trial.
A negotiated out-of-court settlement can often be finalized within 3 to 9 months of you reaching Maximum Medical Improvement (MMI). A case that goes to a full jury trial can take 2 to 4 years due to court backlogs, discovery phases, and potential appeals.