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TORT REPORT: Offers of judgment versus offers of settlement

By Matthew Rosek

Wisconsin Statute 807.01 provides the framework for offers of judgment and offers of settlement in civil litigation. Both offers have unique benefits for the party using them.

Offers of judgment are submitted by defendants and provide that the plaintiffs can take judgment against them for the stated amount plus statutory costs and attorney/expert fees. Offers of settlement are sent from the plaintiffs to the defendants and also include statutory costs and attorney/expert fees.

Statutory offers can be sent after all parties have answered the initial pleadings and up to 20 days before trial. Parties that receive a statutory offer must submit an answer within 10 days after receipt or it is deemed rejected.

The technical form of each type of statutory offer is virtually identical. The parties must reference the statute and the timing of when to respond. The offers must also state that it is a “statutory offer.” In addition, the offers must specify which party it is being directed to.

If a case has more than one plaintiff an offer of judgment must be sent to each plaintiff separately assuming their claims are different. For instance, in a simple personal injury case where the spouse of the injured plaintiff is making a claim for loss of consortium, a separate offer of judgment must be made to the spouse even though his or her claim is derivative.

Similarly, in a multi-defendant case, barring some unique issues concerning joint and several liability, separate offers must be made.

What are the benefits of submitting statutory offers? If a party rejects an offer of settlement or judgment and the party that sent the offer receives a verdict more favorable then the amount offered, the party can recover costs and statutory attorney and expert fees (these fees are limited to a few hundred dollars for each plaintiff represented and few hundred dollars for each expert to testify). In a simple auto or personal injury action, taxable costs typically range from $2,500 to $4,000. In more complex matters, taxable cost can range from $20,000 to $60,000, or more.

It is worth noting that statutory offers are more valuable to plaintiffs than defendants. If an offer of settlement is not accepted and the plaintiff receives a judgment equal to or more than the initial offer, the plaintiff is entitled to 12 percent interest on the amount of verdict from the date the offer was made and double taxable costs. As indicated above, these numbers can be quite substantial depending on the type of case involved. The same benefits do not apply to offers of judgment from defendants. Defendants are only entitled to recover their taxable costs and fees under the same circumstances presented above.

As a defendant, an offer of judgment can persuade a plaintiff to resolve a questionable lawsuit while giving the plaintiff an opportunity to recover their taxable costs. It also provides a defendant the means to put his or her best offer on the table so a plaintiff can assess whether he or she is willing to commit to ongoing litigation.

Ultimately, however, statutory offers are considerably more valuable to plaintiffs.

Settlement offers force defendants to seriously consider the taxable costs to be incurred and the substantial risk of being hit with a sizable interest expense depending on the plaintiff’s potential damages. Whereas an offer of judgment may push a wavering plaintiff towards a reasonable resolution, it does not have the penalties or risks associated with an offer of settlement. Offers of settlement on the other hand, can be used as a substantive negotiation tool, even after the time has passed for acceptance, due to the potential increased exposure for the defendant.

Despite the inequity between the two types of statutory offers, they both provide useful tools for the negotiations of claims depending on the situations presented to the litigants.

Matthew Rosek is a senior associate at McCoy Law Group SC, Waukesha.  The firm has a civil litigation practice that includes insurance defense, construction disputes and commercial/business litigation.

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