Criteria for Settlement Amounts in Product Liability Cases

No one can predict just how much compensation you’ll receive when you settle a lawsuit over a defective or dangerous product, but it helps to understand the factors that go into arriving at settlement amounts.

By , Legal Editor

If you've been harmed by a defective or dangerous prescription drug, medical device, or other consumer product, you probably want to know how much you could receive in compensation for your losses in a product liability lawsuit. You might already know that most of these cases (if they're successful at all) end in settlement rather than at trial. But how do the two sides in the lawsuit come up with the dollar amount for a settlement?

This article explains the factors that go into settlement amounts in product liability cases, and how settlements work when your case is part of "mass tort" litigation, where many other consumers have also sued over the same product.

Factors Affecting Settlement Amounts in Individual Product Liability Claims

The process of arriving at a settlement amount in an individual product liability lawsuit is similar to negotiating a settlement in other personal injury cases. Both sides will take into account the chances that you would win your case if you went to trial, as well as the extent of your damages (what you've suffered or lost as a result of using the defective or dangerous product).

Likelihood of Winning at Trial

There are many advantages to settling a personal injury case—including a product liability claim—for you as well as the defendant (usually the manufacturer). Settling can avoid the expense, time and uncertainty of going to trial. Even though trials are unpredictable, the defendant will try to gauge your chances of winning at trial before making a settlement offer. Similarly, when you're deciding whether to accept the offer or negotiate for more, you should consider the strength of your case—for instance, whether you have solid evidence that the product was defective or unreasonably dangerous, and a clear medical diagnosis linking your harm to the product.

Extent of Your Damages

The amount of your settlement can hinge not only on whether you might win at trial, but also on how much a jury might award you. That, in turn, depends largely on the nature and extent of your damages, including:

  • the cost of medical bills for treating the illness or injuries caused by the product, including the expected cost of future treatment
  • the income that you lost because of your illness or injuries, including an estimate of your future lost earnings if your ability to make a living has been affected
  • your pain and suffering
  • any emotional distress (such as anxiety, sleep loss, and depression) that you experienced as a result of your illness or injuries, and
  • loss of consortium or companionship, if your illness or injuries had a negative impact on your relationship with your spouse.

Other Factors Affecting Settlement Amounts

When there have been trials in other cases involving the same product that caused your illness or injuries, both you and the defendant might use the outcome of those trials as a rough gauge for estimating the settlement value of your case. For instance, if other plaintiffs with similar circumstances lost their cases, the defendant might offer you a small settlement—or none at all. But if those trials have resulted in jaw-dropping awards for the plaintiffs, that probably puts you in a stronger position to negotiate a substantial settlement amount.

Sometimes, the timing of your lawsuit and the defendant's assets may affect the amount you receive in a settlement. For instance, some of the settlement funds set up in asbestos/mesothelioma lawsuits started running out of money as companies that manufactured or installed asbestos went out of business. That meant that plaintiffs who filed their lawsuits later on received lower settlements than they otherwise might have, given the extent of their damages.

Product Liability Settlements in Class Actions and Multidistrict Litigation

In a product liability case, you're often up against a big corporation with a small army of attorneys who can draw out the legal skirmishes until you (and your lawyer) run out of money to keep going. One way to level the playing field is to join with a large number of other plaintiffs in a single class action lawsuit against the product manufacturer or distributor. In order to qualify for a class action, the plaintiffs must have suffered the same type of injury. If there's a settlement, it will apply to all members of the class (unless they've taken steps to opt out). The judge must approve the settlement as adequate and fair to the class members.

However, the injuries caused by some defective or dangerous products can be very different from one person to the next. For instance, a pharmaceutical drug may cause mild adverse reactions in one patient but result in another person's death. So a different type of mass tort litigation known as multidistrict litigation (MDL) is often used in product liability cases. In an MDL, after a number of individual plaintiffs file separate lawsuits against the same defendant over similar facts (such as being injured after using the same product), the cases are consolidated and transferred to one federal judge, who oversees the discovery process and works to encourage settlement.

Even if your case is consolidated in an MDL, you and your lawyer might reach a separate settlement with the defendant. Often, however, a group of attorneys who've been appointed to take the lead in representing the plaintiffs will negotiate with the defendant to reach a mass or "global" settlement. Unless you happen to be represented by one of these lead attorneys, you and your lawyer won't be actively involved in settlement negotiations.

If the lead attorneys in a large MDL are having trouble reaching a settlement, the judge will typically transfer one or more representative cases back to the original court for trial. The outcomes in these test cases (known as "bellwether trials") can help nudge both sides into an agreement, with the amount of any awards serving as a guide for coming up with a mass settlement amount.

You won't be bound by a global MDL settlement unless you agree to it. (Usually, a certain percentage of plaintiffs have to opt in to a proposed settlement before any money will be paid out.) If you opt in, you'll receive an amount out of the settlement funds based on a formula that takes into account your individual circumstances, especially the extent of your damages. Normally, you'll see the formula in advance, so you can estimate how much you would receive before you decide whether to be part of the settlement. If you don't agree to the settlement—or if there isn't a global settlement at all—the judge will send your case back to the original court for a trial.

Unlike in class action lawsuits, the judge doesn't usually need to approve the global settlement in an MDL. But approval may be required in some situations, such as when a proposed settlement intends to cover future potential plaintiffs who haven't filed a lawsuit yet.

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