Settlement Credit

A settlement credit is a reduction of a jury verdict to account for money the plaintiff already received from other defendants or sources for the same injury. How the credit is figured, dollar for dollar or by each settling party's share of fault, depends on state law.

Origin

Credits come from the rule against double recovery for one injury and from state contribution and apportionment laws. States have adopted different methods over time, particularly as they moved from joint and several liability toward comparative fault.

Significance in Asbestos Context

Asbestos cases often involve many defendants, and most settle before trial. If the case goes to verdict against the remaining defendants, the settlement credit rules decide how much of the earlier settlements are subtracted. Under a dollar-for-dollar (pro tanto) approach, the verdict is reduced by the amount paid. Under a fault-based approach, the verdict is reduced by the percentage of fault the jury assigns to settled parties, regardless of what they paid, so a good early settlement does not help the non-settling defendant. Some states use a per-capita share. Payments from asbestos bankruptcy trusts raise their own questions: some states allow a credit or allow the jury to assign fault to bankrupt companies, and some have laws requiring trust claims to be disclosed during the lawsuit. These rules affect settlement strategy, because they change the value of settling with one defendant versus going to trial against others.

Example Sentence

The jury awarded $2 million, but after the settlement credit for the earlier settlements and trust payments, the judgment against the remaining defendant was smaller.

Related Terms

Joint and Several Liability, Comparative Negligence, Nonparty Fault, Bankruptcy Trust Transparency, Empty Chair Defense, Release, Collateral Source Rule

Notes

• Your lawyer will track every settlement and trust payment; keep copies of anything you receive directly.
• Ask how your state's credit rules affect the value of settling with some defendants before trial.