casesim-settlement-vs-trial-ev-calculator

name	casesim-settlement-vs-trial-ev-calculator
description	Use when an attorney or client needs to compare the expected value of accepting a settlement offer against the expected value of proceeding to trial — incorporating P(win), damages range, costs to trial, loser-pays rules, discount rate, and strategic or reputational factors. Produces an EV comparison (trial vs. settlement), a recommendation (take/counter/decline), and a sensitivity analysis showing which assumptions matter most. Always disclaimed as a probabilistic estimate. Always paired with the outcome probability estimator.
license	MIT
metadata	{"id":"casesim.settlement-vs-trial-EV-calculator","category":"casesim","jurisdictions":["__multi__"],"priority":"P1","intent":["settlement","ev","client-counseling","litigation-strategy"],"related":["casesim-outcome-probability-estimator","casesim-opposing-counsel-simulator","casesim-judge-bench-perspective","casesim-client-q-and-a-prep"],"source":"Louis — HAQQ Legal AI (github.com/sboghossian/mini-claude-for-legal)","version":"1.0"}

Settlement vs. Trial EV Calculator — Should You Take the Offer?

When to use this

Invoke when:

• Opposing counsel has made a settlement offer and the client asks "should we take it?"
• A litigation team is preparing for a settlement conference and needs an internal floor / ceiling analysis
• A client's board asks for a "go / no-go" recommendation on litigation versus early resolution
• An attorney needs to explain the settlement vs. trial decision in quantitative terms to a client who wants numbers
• A funding decision for continued litigation needs to be made

This skill works alongside [[casesim-outcome-probability-estimator]], which generates the P(win) and damages range inputs. Use both together for a complete client counseling package.

Inputs

Input	Required	Notes
Settlement offer amount	Yes	The net figure the client would receive (or pay)
P(win at trial)	Yes	From [[casesim-outcome-probability-estimator]] or attorney's own assessment
Damages range at trial (low / mid / high)	Yes	If liability established, what would the court award?
Costs to trial (own side)	Yes	Estimate to judgment; separate from costs already spent
Loser-pays rule	Yes	Does the forum apply loser-pays (English rule) or each side bears its own costs (American rule)?
Discount rate	Optional	Default: 5–8% depending on jurisdiction and client risk profile
Time to judgment	Optional	Months from today to expected judgment date
Strategic / reputational factors	Optional	Confidentiality value, business relationship, precedent-setting risk, management distraction
Appeal probability	Optional	Will opposing counsel appeal a first-instance win?

Calculation methodology

EV(Trial) — Expected Value of Going to Trial

EV(Trial) = [P(win) × E(award | win) - Costs(own)]
            + [P(lose) × -Costs(own)]
            ± [Loser-pays adjustment]
            × [Time discount factor]

Where:

• E(award | win) = probability-weighted average across the low / mid / high damages scenarios
• Costs(own) = estimate of legal fees and disbursements to trial
• Loser-pays adjustment:
  • If win: add recovery of opponent's costs (partial — typically 60–70% recovery in English-rule forums)
  • If lose: subtract payment of opponent's costs
• Time discount: apply the discount rate over the expected time to judgment

Example:

Variable	Value
P(win on liability)	65%
Expected award (mid scenario)	USD 800,000
Costs to trial (own)	USD 120,000
Loser-pays rule	English rule (DIFC)
Opposing costs if lose	USD 100,000
Discount rate	6%
Time to judgment	18 months

EV(Trial) = [0.65 × (800,000 + 0.65 × 100,000) - 120,000] + [0.35 × -(120,000 + 100,000)] discounted at 6% over 18 months ≈ [0.65 × 865,000 - 120,000] + [0.35 × -220,000] × 0.915 = [562,250 - 120,000 - 77,000] × 0.915 = 365,250 × 0.915 ≈ USD 334,200

EV(Settlement) — Expected Value of Accepting Settlement

EV(Settlement) = Settlement amount - Costs already spent (sunk) + [Optional: value of strategic benefits]

Note: sunk costs do not affect the forward-looking decision. The only relevant comparison is future EV(Trial) against the net benefit of settlement from today. Costs already spent are the same whether the client settles or litigates; they do not change the calculus.

However, where the client is framing the question as "what do I net from this whole matter?" — include sunk costs in the total cost presentation (not in the EV comparison but in the client narrative).

Net Comparison

Settlement advantage / disadvantage = EV(Settlement) - EV(Trial)

• Positive: settlement is worth more (in expected value terms) than going to trial
• Negative: trial has higher expected value; settlement offer is below fair value
• Near zero: the decision turns on strategic / non-quantitative factors

Sensitivity analysis

The most important output after the EV comparison is the sensitivity analysis: which assumption matters most?

Louis generates a table showing how the recommendation changes as key variables shift:

Variable	Base case	Sensitivity test	Effect on recommendation
P(win)	65%	55% / 75%	At 55%, settlement more attractive; at 75%, trial clearly preferred
Costs to trial	USD 120k	USD 80k / USD 180k	Higher costs make settlement more attractive
Time to judgment	18 months	12 months / 30 months	Longer time = greater discounting = settlement more attractive
Award (mid scenario)	USD 800k	USD 600k / USD 1M	Affects the upside case significantly

This tells the attorney: "The decision is most sensitive to P(win). If we have reason to believe our win probability is above 70%, we should push back on this offer. If it's below 60%, the settlement looks fair."

Recommendation framework

Based on the EV calculation and sensitivity analysis, Louis outputs one of:

TAKE — settlement offer exceeds or approximates EV(trial)

• Recommended when: settlement is within 10–15% of EV(trial) and strategic factors favor resolution
• Key message to client: "The offer is fair value. The certainty of settlement is worth the small discount versus the expected trial outcome."

COUNTER — settlement offer is below EV(trial) but trial is not clearly superior

• Recommended when: settlement offer is 20–40% below EV(trial) but costs, time, or strategic risks make trial unattractive
• Key message to client: "Push back. Make a counter at [X], which reflects a reasonable settlement range. Trial is an option but not our preference given [costs / timing / relationship]."

DECLINE — EV(trial) materially exceeds the settlement offer

• Recommended when: settlement offer is more than 40% below EV(trial) and the case is strong
• Key message to client: "This offer does not reflect the value of your claim. Proceed to trial unless opposing counsel substantially improves their position."

Strategic and non-quantitative factors

The EV calculation captures the financial dimension. These factors may change the recommendation:

Factor	Effect
Confidentiality	If reputational or commercial harm from a public trial is material, settlement has a premium beyond its financial value
Business relationship	Settlement may preserve a commercial relationship that has ongoing value
Precedent / principle	A public judgment may be worth litigating for even if the EV is comparable — signals to other potential claimants or deters future breach
Management distraction	Litigation absorbs executive time; cost is real but hard to quantify
Counterparty financial risk	Is the counterparty likely to be able to pay a judgment? An insolvent win has limited value

Mandatory disclaimer

Every output of this skill must include: "This expected value analysis is a probabilistic planning tool, not a prediction of actual outcomes. Legal proceedings involve inherent uncertainty. All assumptions should be reviewed with qualified legal counsel before making any decision."

Related skills

• [[casesim-outcome-probability-estimator]]
• [[casesim-opposing-counsel-simulator]]
• [[casesim-judge-bench-perspective]]
• [[casesim-client-q-and-a-prep]]