The “Trial Tax”: Why Insurance Companies Pay More the Second a Jury Is Picked in a Injury Case?
In personal injury cases, experienced attorneys and clients often notice a curious phenomenon: insurance companies tend to increase settlement offers dramatically once a trial is imminent. This is commonly referred to as the “trial tax.”
Why It Happens
Insurance companies operate strategically to minimize payouts. In Texas, insurers are not technically required to pay anything until a verdict is rendered against them in court. While doctrines like Stowers exist to prevent insurers from acting in bad faith by unreasonably delaying payment, insurance companies often test the resolve of the claimant and their attorney by offering low initial settlements.
The Psychology Behind the Trial Tax
Testing the Lawyer:
Insurance adjusters gauge whether the attorney is willing to take the case to trial. If the lawyer shows hesitation, they may hold out, hoping the client will accept a lower settlement.The Deadline Effect:
Trial marks the first moment the insurer is truly exposed to a potential jury verdict. At this point, they know a jury could award a substantial sum, sometimes far exceeding prior offers. The risk of a high verdict motivates them to settle quickly rather than face the uncertainty of trial.Jury Risk Awareness:
Insurance companies understand that juries can be unpredictable. Even strong defenses can be undermined by emotional appeals, graphic evidence, or sympathetic testimony. The threat of a jury “going wild” often triggers their largest settlement offers, usually right as jury selection begins or during the trial itself.
Bottom Line
The “trial tax” demonstrates that patience, preparation, and a willingness to go to trial can significantly increase the value of your settlement. Insurance companies often pay more at the last moment because that’s when they face the most risk of a substantial verdict.
