The Value Dilemma: Present Value vs. Future Value in Personal Injury Cases

If you have been through a financial class, statistics, or done some investing, you understand the terms of Present Value and Future Value. I am not going to work through PV at present: PV = FV r·PV = FV/(1+r). However,  "a bird in the hand is worth two in the bush," is a much simpler term for me to understand.

I recently went through two mediations back to back and this analogy and/or theme seemed to prevail throughout the whole process. I find it interesting that many of my clients never want to "sue" anyone but they also want top dollar for their claim without ever having to file a complaint and undergo the litigation process.  That can be done but there are certain compromises that have to be made due to the present value vs. future value dilemma.

Working exclusively on personal injury cases in civil trial court, I work on a contingency fee basis for my clients. This means I work for free UNLESS I negotiate, take to trial, or otherwise render them a lump sum payment for the wrong that they have incurred as a result of someone or something's negligence.  If I am able to provide them with a lump sum payment, my firm receives a percentage of that settlement, usually between 33.33%-40%, plus any costs that we have advanced on behalf of the client, ie medical records, depositions, court fees, expert testimony, etc. These costs grow exponentially once a lawsuit is filed and discovery of that lawsuit initiates.

More work, more time, more rules, more evidentiary backing and factual proof, more expenses, and more contentious interactions come with litigation, or filing a lawsuit.  Therefore, I always like to discuss the amount on the table today vs. the amount we would have to get on the table 2 years from now to be almost equal. For example:

  • $150,000.00 offer to settle in the pre-litigation stage would net the client close to $100,000.00 (-) a couple hundred dollars in projected costs.
  • If that same client was not happy with the offer and wanted to file a lawsuit, they would have to wait anywhere from 1 1/2 - 2 years for their day in court. Then they would allow 12 strangers on a jury to determine the outcome of their case. Practically this could lead to a defense verdict where they receive $0 or they could be awarded a higher amount. (We will use $200,000.00 for this example). The attorney fee would be at a higher percentage (40%), the discovery costs would be between $5,000.00-$10,000.00, and the client would then net $110,000.00. 
  • If there was a mediation and it potentially could settle less than 1 year after filing, the defendant offers a little more at $175,000.00, however, the attorney fee most likely went up, so did discovery costs as referenced above, and the client made between $95,000.00-$100,000.00. 

Sometimes, these values are never offered so there is no Present Value vs. Future Value Dilemma to discern.  I love going to court and doing trials, however, I want to make sure my clients brag about me and promote me to their friends, family, and/or loved ones in a time of need.  That is why I always address the Present Value vs. Future Value Dilemma when it arises.

For those Biblical scholars:

For to him that is joined to all the living there is hope: for a living dog is better than a dead lion. -- Ecclesiastes 9:4
 

Trackbacks (0) Links to blogs that reference this article Trackback URL
http://www.scinjurylawjournal.com/admin/trackback/111274
Comments (0) Read through and enter the discussion with the form at the end