Settlement and Alternative Dispute Resolution (ADR)

• Author: Michael H. Barr/Burton N. Lipshie/Sharon Stern Gerstman
• Pages: 453-508

Chapter 40

SETTLEMENT AND ALTERNATIVE

DISPUTE RESOLUTION (ADR)

QUICK VIEW

Scope of Chapter:

Settlement. How to evaluate a case for settlement. How to negotiate towards settlement (both from a plaintiff’s

perspective and from an insurer’s perspective). Offers of compromise. The role of courts in settlements. The

mechanics of settlements. The enforceability of settlements.

Alternative Dispute Resolution. Mediation and arbitration, including both court initiated (non-voluntary)

arbitration and contractual arbitration.

Strategies and Tactics:

Settlement. The settlement process is integral to the practice of law since most cases by far are settled. Prepare

settlement with care, and maintain an awareness of what will be convincing to the other side.

Alternative Dispute Resolution. Mediation and arbitration provide increasingly popular alternatives to the

choice of trial or settlement through negotiations by the parties. Parties in contractual relationships may include

provisions for mediation or arbitration of disputes in their contracts, but even without a prior contractual

requirement, parties may choose mediation or arbitration at any time.

Statutes and Rules:

Settlement. CPLR 908, 1207, 1208, 2104, 3219, 3220, 3221,4533-b, 4547, 5003-a; EPTL 5-4, 7-1.12; Gen Oblig

L 15-108; 22 NYCRR §§603.7, 691.20, 1022.2, 1022.3.

Alternative Dispute Resolution. CPLR Article 75; 22 NYCRR §28.1 et seq.

Related Topics: Taking the Case, Ch 1; Presuit Activities, Ch 2; Parties, Ch 14; Defaults and Dismissals, Ch 39.

Forms: See digital access for the following forms:

• Form 40:10, Petition for Order of Compromise (Infant’s Claim).

• Form 40:20, Affidavit in Support of Application to Compromise Infant’s Claim.

• Form 40:30, Order of Compromise (Infant’s Claim).

• Form 40:40, Affidavit Authorizing Execution of Settlement Check.

• Form 40:50, Settlement Agreement.

• Form 40:60, Stipulation for Discontinuance After Settlement.

• Form 40:70, Release.

• Form 40:80, Confession of Judgment.

• Form 40:90, Contract Arbitration Clause.

NEW YORK CIVIL PRACTICE BEFORE TRIAL 40-2

TABLE OF CONTENTS

I. Settlement

A. Case Evaluation

1. WHY TRY TO SETTLE?

§40:01 Most Cases Settle

§40:02 Benefits Not Achievable by Litigation

§40:03 Financial Considerations for Client

§40:04 Financial Considerations for Attorney

2. WHEN SHOULD YOU SETTLE?

§40:10 Key Times

§40:11 Know the Case

§40:12 When Not to Settle

3. TAX CONSEQUENCES

§40:20 Personal Injury and Wrongful Death Settlements Generally Not Taxable

§40:21 Workers’ Compensation

§40:22 Discrimination Actions

§40:23 Interest Payments

§40:24 Punitive Damages

4. IMPACT ON GOVERNMENT BENEFITS

§40:30 Settlements Remove Medicaid and SSI Eligibility

§40:31 Preserving Medicaid, Social Services, and SSI Benefits

5. IMPACT ON UNDERINSURANCE COVERAGE

§40:40 Notice of Claim

§40:41 Notice of Offer of Settlement

6. LIENS

§40:50 General Points

§40:51 Workers’ Compensation Insurer Lien

§40:52 Medicare, Medicaid or Social Services Lien

§40:53 No-Fault Lien

§40:54 Health Insurer Lien

§40:55 Attorneys’ Liens

7. ETHICAL RESPONSIBILITIES

§40:60 Settlement Authority

§40:61 Duty to Keep Client Informed

§40:62 Duty to Provide Advice

§40:63 If the Client Is Incompetent

§40:64 Safekeeping of Client’s Property

§40:65 Confidentiality Clauses

B. Negotiation

1. GENERAL POINTS

§40:70 Method & Style

§40:71 Keep Authority Clear

40-3 SETTLEMENT AND ALTERNATIVE DISPUTE RESOLUTION (ADR)

§40:72 Communicate All Offers

§40:73 Protecting Your Client’s Confidences

§40:74 Offers of Settlement Not Admissible

2. PLAINTIFF’S PERSPECTIVE

a. Settlement Letters

§40:80 General Points

§40:81 Liability Statement

§40:82 Documentation of Liability

§40:83 Documentation of Damages

§40:84 Demand Statement

§40:85 Set a Time Limit

b. Negotiations With Insurers

§40:90 Know the Motivating Factors

§40:91 Reserves

§40:92 High Balling and Low Balling

§40:93 Learn the Policy Limits

c. Negotiations With Third Parties

§40:100 Underinsured Motorist Coverage

§40:101 Lienholders

3. INSURER’S PERSPECTIVE

§40:110 Attorney’s Duties

§40:111 Insurer’s Duties

§40:112 Rights of Third Parties

§40:113 Bad Faith Actions

§40:114 Damages for Bad Faith

§40:115 Duty to Defend

C. Special Offers

1. TENDER

§40:120 Purpose

§40:121 Applicability: Contract Actions

§40:122 Procedure

2. OFFER TO LIQUIDATE DAMAGES

§40:130 Purpose

§40:131 Applicability: Contract Actions

§40:132 Procedure

3. OFFER TO COMPROMISE

§40:140 Purpose

§40:141 Applicability: Most Actions

§40:142 Procedure

D. Court’s Role in Settlements

1. SETTLEMENTS REQUIRING COURT APPROVAL

a. Minors or Incompetents

§40:150 Settlement Unenforceable Without Court Approval

§40:151 Appointment of Guardian ad Litem