The November 2019 issue of our newsletter included an article by Illinois Circuit Judge Clare E. McWilliams in which she discussed high-low agreements — agreements that set minimum and maximum amounts of damages, thus providing insurance to parties who go to court. If the dollar amount of the judgment rendered is between the agreed maximum and minimum amounts, the plaintiff receives the dollar amount of the jury`s verdict. However, if the judgment is less than the minimum (or compensation) for an amount, the claimant receives the agreed minimum, and if the judgment applies to an amount that exceeds the maximum amount, the claimant receives the agreed maximum. In her article, Justice McWilliams laid out the basics of how high-low chords work, and she also discussed some of the issues to consider with respect to their use. Regardless of the forum, a high-bottom agreement should be considered if the damages are high and liability uncertain. In cases where an excessive verdict was rendered, jurors were often sympathetic and the verdict was not correlated with the damages. As a result, it is advisable to take a step back and evaluate a case before the verdict is rendered, and to consider a high-low agreement if the course of the case dictates the need for it. High-low chords are a smart alternative. This article will pick up where Justice McWilliams` article left off and continue to address agreements from top to bottom. This article first examines issues related to the applicability of high-low agreements; Next, it explores questions of whether high-low agreements could encourage more jury trials, what impact the agreements might have, who uses them, and why they are used. Shortly before the trial, the plaintiff and Niagara entered into a high-low agreement with a maximum of $185,000 and a minimum participation of $155,000.
Thus, Niagara`s undertaking – beyond the minimum it had already agreed to pay – was capped at $30,000, a range that the Court of Appeal described as „fairly narrow,” suggesting that the plaintiff`s and Niagara`s real reason for entering into the agreement was to gain a tactical advantage at Garlock`s expense. Moving from a below-median gap to a greater gap to a higher-median gap when litigation costs are expected to be high (in other words, replacing HC-LV claims with HC-HV claims) increases the likelihood of a high-low discussion or agreement on average by more than 4 times. what happens in all eventualities. Since these are contracts under Illinois` contractual principles, ambiguous terms are interpreted against the author of the disputed contractual provision. Contractual terms are ambiguous if they can reasonably be interpreted in more than one way due to lack of clarity or double meaning. Just because the parties disagree on a term does not mean that it is ambiguous. The Maryland Special Court of Appeals ruled in Maslow v. Vanguri, 896 A.2d 408 (Md. Ct. Spec. App.), confirmed, 903 A.2d 416 (Md. 2006), that a plaintiff`s appeal after an adverse judgment lost the defendant`s obligation to pay under a high-low agreement.
The high-bottom agreement expressly provided that the parties would waive any right of appeal with a jury verdict. After the plaintiff lost on appeal, the plaintiff attempted to enforce the high-bottom agreement. The defendant argued that the appeal constituted a material breach that allowed the agreement to be terminated, and the court agreed, noting that the breach of the duty not to appeal allowed the defendant to seek annulment. (2) On the second category of questions: This article provides an overview of the main findings of a recent study (and the corresponding article articulating the results of the study) conducted by J.J. Prescott, Kathryn E. Spier and Albert Yoon („Trial and Settlement: A Study of High-Low Agreements”) . In this study, the authors first articulate a theoretical model of high-low chords. Then, using data on claims from a national insurance company, they describe the characteristics of these agreements and empirically examine „the factors that may influence whether litigants discuss or enter into them.”  Their empirical results are consistent with the predictions of their theoretical model. The study looks at whether the agreements encourage more jury trials, what impact the agreements might have, who uses them, and why they are used.
Among their various conclusions is the conclusion that top-down agreements actually significantly favor the resolution of cases in a court case rather than through a full settlement. Parties are more likely to go to court than if there were no high-level agreements. These and other results are explained in more detail below. As defined in Black`s Law Dictionary, a high-low agreement is „[a] settlement in which a defendant agrees to pay the plaintiff a minimum refund in exchange for the plaintiff`s consent to accept a maximum amount, regardless of the outcome of the trial.” Black`s Law Dictionary 797 (9th edition 2009). Any result between the agreed limits must be accepted by the parties. Parties and lawyers should consider high to weak agreements when evaluating their options in their cases; There are many situations in which such agreements may be desirable. Moreover, it is encouraging for those who recognize the various benefits of jury trials to see that there is evidence that high-low agreements actually favor jury trials. To the extent that we want to avoid the extinction of jury trials, promoting the use of top-down agreements could very well be a step in the right direction. High-low agreements are a viable comparison alternative.
While such agreements tend to prevent full settlements during the discovery process and encourage parties to go to court, the top-down is attractive and useful for insuring against excessive judgment by the defendant. They are also attractive to plaintiffs to protect plaintiffs in cases that have potential for a not guilty verdict. Top-down agreements also work in binding arbitration. In this regard, the costs of litigation can be kept low by moving to binding arbitration with a high-low agreement where the only issue to be decided is liability. If the defendant is found not guilty, the plaintiff gets the lower back; If he is guilty, the plaintiff recovers the high. This type of litigation is similar to „night baseball.” There are many different factors that affect whether a case is heard or settled. In the case of misconduct lawsuits, the case may go to court despite the amount of potential damages and despite the fact that the defense may be problematic. Often, neither the defendant doctor nor the insurance company wants to settle down.
However, sometimes the defendant only wants to reach an agreement because of the risk of excessive judgment, as in the case study above. With only a million dollars of policy and a possible verdict of more than $12 million, the risk is great. .