NEGOTIATING SUBROGATION SETTLEMENTS Thomas Regan and David Brisco COZEN O’CONNOR

Dwight & Andy

10 Techniques for Making and Responding to Settlement Offers

1. HAVE A PLAN Do not make or respond to an offer without an estimation of where you want to end up, i.e., your settlement goal This goal can change as offers and arguments are exchanged, but you must have an original goal in mind to guide your negotiations See “Negotiation Planning Instrument” Article

2. SUBROGATION SPECIALIST’S GOAL Keep in mind our goal as a subrogation professional: get the money (nobody wins cases that go to trial) Negotiation strategy – must be cooperative, not adversarial

3. KNOW YOUR CASE Earns Respect Provides Credibility to Offers

4. THE OPENING DEMAND Cardinal Rule – “Your opening offer should be a large enough jump that it invites the other side to respond, while at the same time, maintaining an aggressive posture of your case.”

OPENING DEMAND Example: $200,000 product liability fire case wherein your experts tell you the fire started from a 7 year-old product, but you cannot determine the defect that caused the fire. After weighing the liability and damage pros/cons, you project a goal of $80,000 In the example above, if your opening offer is $198,000, the defendant will be “offended” (not invited) and will not respond. As a result, you may be required to make a follow-up offer

OPENING DEMAND The worst thing you can do is make a “follow-up/additional offer” as opposed to a “counter-offer.” Loses credibility! Fishing Analogy The defendant will likely respond with a “low ball” offer. That is ok; all you need is a counter-offer to continue the dance.

5. ALWAYS OPEN THE SETTLEMENT DOOR Keep the option for settlement open throughout litigation. Take advantage of various “turning points” or “new events” to reopen the door to negotiation; you will not look weak if you try to reopen the door during these events.

6. RESPECT THE DANCE Each move/jump must be diminishing in size, otherwise you lose credibility in your position that you are getting closer to your “holding point.” “Holding Point” – the amount at which you will no longer make any settlement offers

RESPECT THE DANCE Every settlement offer is designed to give credibility in your holding point (i.e., avoid the line “this is my final offer,” unless it really is).

RESPECT THE DANCE “Holding Point” Holding Point DefendantPlaintiff

7. SPLITTING THE BABY Watch out for the danger in splitting the baby at the beginning of the case. It is wiser to leave this for a way to resolve a stalemate, rather than at the beginning of the case. Otherwise, you have already admitted you are willing to move half-way right off the bat. Also, be certain to advise the defense that “this is not a split the baby case.”

8. GETTING PAST NO If your settlement offer is rejected, use the following strategies to get past NO A) Don’t React: Go to the Balcony B) Don’t Argue: Step to Their Side i) Listen Actively ii) Acknowledge Differences with Optimism

GETTING PAST NO C) Don’t Reject: Reframe i) Everything should be framed as a positive/benefit for the other side, i.e., % discount they are receiving from the total exposure (interest, costs, etc.); i.e., $ a confidential settlement saves them regarding future claims

GETTING PAST NO D) Don’t Push: Build Them a Golden Bridge i) Rather than pushing for the opposing side’s unilateral movement, build them a bridge so the know where to move ii) i.e., “If you can get your client to move to X, I may be able to get my client to move to Y.”

GETTING PAST NO E. Don’t Escalate: Educate i) Rather than threatening the adverse, educate the other side on the negative consequences for everyone if there is no agreement ii) i.e., if no agreement is reached, these are the costs we can all expect to incur in litigation/trial iii) Avoid threats – “I will bury you in paper work” “your client will pay through the nose”

9. I’M ON YOUR SIDE Take advantage of any opportunity to make the other side believe you are on their side (the less adverse you personally appear, the more credible your offers/settlements become).

I’M ON YOUR SIDE Become the Mediator - Good Cop/Bad Cop If you sense the potential for hostile negotiations, becoming the mediator can mitigate argument which may otherwise terminate the negotiation Example – “I hear what you are saying and I have conveyed that to my client, but my client still feels that X, Y & Z make this a winnable case.”

10. RELEASE ISSUES Clear these issues up in your final offer/acceptance. Consider making your acceptance conditioned on terms in the release, i.e., “I can accept that offer, but only if there is no indemnity language in the release.” This will prevent a breakdown of the settlement after $$ is agreed to.

MOCK NEGOTIATION Team up with another person for minute mock negotiation Each Plaintiff and Defendant will have their own fact pattern Do not exchange fact patterns as some information is secret/not to be disclosed Write down all offers and counter-offers made and a settlement, if any

REPUTATION - CREDIBILITY Goal – “Aggressive, but Fair/Reasonable” “Straight Shooter” Small Community Remember Dwight flipping Andy’s car for profit. Will Andy ever trust Dwight again? Keep in mind that Reputation is Important