High-Low Agreements In Lawsuits Are Becoming More Common

A “high-low” agreement is an agreement entered in to prior to a trial by the parties in a case. It is an agreement that assures the injured party in a lawsuit that they will receive a recovery, regardless of the jury’s verdict, but these agreements actually give a level of protection to both sides in the litigation. The agreement can be made at any time during the course of the litigation, even up to the point before a jury renders its verdict. The high-low agreement sets a limit on the amount the injured plaintiff can recover from the party at fault, regardless what the jury might ultimately award. However, the agreement also caps, or limits, the amount the defendant would have to pay, regardless of the jury’s verdict.

For example, assume the plaintiff and defendant have entered into an agreement with a low figure of $100,000 and a high figure of $300,000. Thereafter, if the jury’s verdict is for an amount between the agreed-upon low figure and high figure, i.e. $250,000, the injured plaintiff would get the actual amount ($250,000) awarded by the jury. However, if the jury awards less than $100,000, the plaintiff would get at least that amount. At the same time, if the jury awards more than the high figure in the agreement, i.e. $400,000, the defendant would ultimately pay no more than the high figure ($300,000). The jury is not permitted to know of the existence of such an agreement.

The theory behind these agreements is that the plaintiff and the defendant insure the other against an excessive verdict. These agreements are not always appropriate but when used, essentially protect each party against their worst-case scenario.