Settlement and Alternative Dispute Resolution
Settlement Fundamentals
Nuisance settlements pay an amount below projected defense costs to close a claim the defendant believes lacks merit. The economic logic is defense cost avoidance rather than liability assessment.
They are common in high-volume claim environments.
Alternative Names:
Nuisance Settlement, Cost of Defense Settlement
Why it Matters?
The aggregate effect is what carriers weigh against the individual economics, since a reputation for paying nuisance value attracts claims and the cumulative cost can exceed what defending would have been. Some carriers accordingly defend selected meritless claims through trial to establish that posture. The individual decision is straightforward arithmetic; the portfolio decision is not.
Frequently Confused with
Related terms
Frequently asked questions
What is the logic of a nuisance settlement?
What is the counterargument?
