Insurers, Illusions of Judgment & Litigation

34 Pages Posted: 21 Dec 2006

See all articles by Chris Guthrie

Chris Guthrie

Vanderbilt University - Law School

Jeffrey J. Rachlinski

Cornell Law School

Abstract

Insurers play a critical role in the civil justice system. By providing liability insurance to parties who would otherwise be untenable as defendants, insurers make litigation possible. Once litigation materializes, insurers provide representation, pay legal fees, and often play a central role in resolving disputes through settlement or adjudication. In this paper, we explore empirically how these key litigation players make important decisions in the litigation process, like evaluating a case, deciding whether to settle, and if so, on what terms. We find that insurers, though not entirely immune to the effects of cognitive illusions that have been shown to distort litigation decision making, appear to make decisions in a more economically rational fashion than other litigation players. This finding, though preliminary, casts new light on litigation theory and practice.

Keywords: litigation, settlement, heuristics and biases, experts, insurance, anchoring, framing, self-serving bias

Suggested Citation

Guthrie, Chris and Rachlinski, Jeffrey John, Insurers, Illusions of Judgment & Litigation. Vanderbilt Law Review, Forthcoming, Vanderbilt Law and Economics Research Paper No. 06-28, Available at SSRN: https://ssrn.com/abstract=952493

Chris Guthrie (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-322-6823 (Phone)
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Jeffrey John Rachlinski

Cornell Law School ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States
607-255-5878 (Phone)
607-255-7193 (Fax)

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