The Legislature Should Increase Sanctions Related to Qualified Settlement Offers
In Indiana, courts prefer parties to reach settlement resolutions instead of taking cases to trial. Doing so helps parties reduce litigation costs and increases efficiency in the courts by reducing the number of cases pending in the court system.
In an effort to encourage settlement, Indiana created a statute that codified qualified settlement offers. Ind. Code §34-50-1. The Indiana Code defines a qualified settlement offer as “an offer of full and final settlement to resolve all claims and defenses at issue between the offeror and the recipient.” A qualified settlement offer should incentivize the parties to come to the bargaining table with fair terms. If the offeror makes a qualified settlement offer and the recipient rejects the offer, the court will award attorney’s fees, costs, and expenses to the offeror. The court views the attorney’s fees as a sanction against the recipient for being unreasonable.
How to Create a Qualified Settlement Offer
A party may offer a qualified settlement offer from the time the complaint is filed in civil court up until thirty days before trial.
A qualified offer must:
- Be in writing;
- Be signed by the offeror or the offeror’s attorney;
- Be designated as a qualified settlement offer;
- Be delivered to each recipient or recipient’s attorney either by registered/certified mail or any method that verifies the date of receipt;
- Set forth the complete terms of the settlement;
- Include the name and address of the offeror and the offeror’s attorney; and
- Expressly revoke all prior qualified settlement offers made by the offeror to the recipient.
Acceptance of a qualified offer must be:
- In writing
- Signed by the accepting recipient or recipient’s attorney; and
- Delivered by registered/certify mail or by means that verifies the date of receipt to the offeror or offeror’s attorney within thirty days of receiving the qualified settlement offer.
Why the Qualified Settlement Offer Needs More Sanctions
If the case does not settle through a qualified settlement offer because the recipient rejected an offer and the recipient of the offer receives a judgment for a lower amount than what was offered in the qualified settlement offer, the court reduces the recipient’s judgment by the offeror’s attorney’s fees. In theory, this practice incentivizes parties to properly value cases and settle to avoid high litigation costs. However, the statute caps attorney’s fees at $1,000. In all but the smallest cases, because attorney’s fees would easily exceed $1,000, the cap renders the sanction provision of the statute essentially meaningless.
If the statute instead required recipients to pay a higher portion, like 50% of the opposing party attorney’s fees, recipients would be more cautious when rejecting a settlement offer. Proceeding to trial then presents a greater risk to the recipient.
Settlement negotiations succeed when both parties come to the table with reasonable expectations. Increasing the penalty for refusing fair offers would likely reduce the number of plaintiffs who reject otherwise reasonable settlement offers in the hope they will receive an unreasonably large payout. Moreover, if both parties pursue reasonable settlement terms from the beginning, both parties will save time on settlements in general.
Indiana should raise the cap on attorney’s fees for qualified settlement offers to encourage parties to enter into productive settlement negotiations. Encourage local legislators to make meaningful changes to this statute to ensure qualified settlement offers are effective. Find the contact information for your local legislators.