Document Type

Article

Publication Title

Vanderbilt Law Review

Publication Date

2006

Page Number

2015

Keywords

litigation theory, parties to actions, insurance companies

Disciplines

Insurance Law | Law | Litigation

Abstract

Insurers play a critical role in the civil justice system. By providing liability insurance to parties who would otherwise be untenable as defendants, insurers make litigation possible. Once litigation materializes, insurers provide representation, pay legal fees, and often play a central role in resolving disputes through settlement or adjudication. In this paper, we explore empirically how these key litigation players make important decisions in the litigation process, like evaluating a case, deciding whether to settle, and if so, on what terms. We find that insurers, though not entirely immune to the effects of cognitive illusions that have been shown to distort litigation decision making, appear to make decisions in a more economically rational fashion than other litigation players. This finding, though preliminary, casts new light on litigation theory and practice.

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