“Do Insurance Companies settle cases within their policy limits to avoid trial?”
Yes, but that is only part of the answer that Insurance Companies offer to settle cases within their policy limits. First, Insurance Companies are obligated by law to try to settle legitimate claims against their insured. Insurance Companies also are obligated to defend their insured by paying lawyers to defend their insured’s interests in Court. Thus, if an insurance company has determined that the claim is legitimate and the claim is larger than the amount of the insured’s policy limits, then the carrier will offer to settle within the policy limits to avoid the costs of defense and jeopardizing a judgment against their insured.
But insurance companies do NOT offer their insured’s the policy limits to settle all claims. Insurance companies make money by collecting premiums and minimizing the amount they pay in claims. Thus, insurance companies are constantly evaluating the potential defense costs and exposure of their insured before paying a settlement. Some Insurance Companies use sophisticated statistical models to predict settlements like baseball teams use metrics to hire players for a team.
