Setoff reduces what a non-settling defendant pays by crediting amounts the plaintiff already received for the same injury. The mechanics depend on the state's approach to joint liability and its comparative fault regime.
Two common methods exist: a pro tanto credit reducing the judgment dollar for dollar by settlement amounts, and a proportionate share credit reducing it by the settling party's allocated percentage of fault.
Alternative Names:
Offset, Settlement Setoff
Why it Matters?
Which method applies determines whether early settlements by codefendants help or hurt the remaining defendant. Under pro tanto, a low settlement leaves the non-settling defendant exposed for the balance. Under proportionate share, a low settlement is the settling party's problem. This drives whether a defendant should settle early, hold out, or seek a good-faith settlement determination.
Frequently Confused with
Related terms
Frequently asked questions
What is the difference between pro tanto and proportionate share setoff?
Does setoff apply to collateral source payments?
