IDEAS home Printed from
   My bibliography  Save this article

The Impact of Fee-Shifting Tort Reform on Out-of-Court Settlements


  • Lisa L. Posey


Among the goals of proponents of tort reform is the goal of encouraging out of- court settlement of claims, rather than burdening the court system. Congressional discussions of tort reform have included a proposal aimed at promoting out-of-court settlement by making the party rejecting an offer not improved upon at trial responsible for the other party’s attorney’s fees as well as litigation costs. This plan is similar to Federal Rule 68, adopted in 1938 and infrequently used. This paper analyzes the impact of Rule 68 on the optimal range of settlement offers. Under certain conditions, the settlement range—the range of settlements over which the plaintiff and defendant are willing to negotiate—is qualitatively different than previously shown. The range may be shifted upward, in favor of the plaintiff in that the lowest (greatest) offer that the plaintiff (defendant) has an incentive to accept (make) may be greater than the expected payoff at trial after the offer is rejected. Comparative statics are performed to show how changes in attorneys’ fees, court costs, and the probability of a high judgment affect the characteristics of the outcome.

Suggested Citation

  • Lisa L. Posey, 2000. "The Impact of Fee-Shifting Tort Reform on Out-of-Court Settlements," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 23(2), pages 124-139.
  • Handle: RePEc:wri:journl:v:23:y:2000:i:2:p:124-139

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wri:journl:v:23:y:2000:i:2:p:124-139. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (James Barrese). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.