Settlement negotiations play a key role in legal disputes. They can be a quick and efficient way to resolve or avoid a lawsuit. Generally, if you’re negotiating a settlement and it doesn’t work out, those talks are confidential and can’t be used in court. This rule is in place to encourage people to attempt settling disputes without fearing that their settlement offers will be used against them as an admission of fault.
Imagine you’re in a car accident and decide to offer the other driver money to avoid an insurance claim. This act of goodwill can’t later be used as evidence that you caused the crash. If it could, it would discourage people from trying to resolve issues amicably without court intervention.
Exceptions to Confidentiality in Settlement Negotiations
Like many legal rules, there are exceptions to the totality of confidentiality. Sometimes, you can refer to settlement negotiations in court for reasons other than indicating fault.
- Proving Awareness of a Dispute: If you’re in a dispute with a business over a dangerous condition and they later deny knowing about it, you can use evidence of failed settlement talks to show they were aware of the problem.
- Evidence of Bad Faith in Insurance Negotiations: If an insurance company makes a lowball offer to settle a claim and then denies the claim in court, evidence of this initial offer can be used to show they were negotiating in bad faith.
- Demonstrating Good Faith Negotiations: Conversely, if an insurance company is accused of not negotiating fairly, they can use evidence of their settlement offers to prove they did try to settle in good faith.
Case Example: Misuse of Settlement Offers
The Ninth Circuit Court has addressed scenarios where parties mislabeled communication as a “settlement offer” to keep it confidential. In Cassino v. Reichhold Chemicals, an employer’s offer of a severance package conditional upon an employee not suing was not considered a genuine settlement offer. The court allowed evidence of this exchange because it was seen as an improper condition, i.e., not a real attempt to settle.
Given these exceptions, there are times when it might be wiser to make a verbal offer or not document an offer at all, especially if you think it could be used against you. But usually, settlement offers are a great way to avoid the time and expense of going to court.
Every legal situation is unique. If you’re facing a legal dispute, consider reaching out to our attorneys at Clear Counsel Law Group for a free consultation. We can help you navigate settlement negotiations and legal disputes, ensuring you make informed decisions every step of the way.