When evaluating a case, it’s easy to identify risks individually—but the real challenge lies in understanding how those risks compound.

Too often, negotiators focus on isolated risks—the likelihood of losing a motion or an issue at trial—without considering how those risks interact. This can lead to inaccurate settlement expectations. The result? Missed opportunities for resolution.

Consider this scenario:

• The case involves multiple legal issues, each carrying unique risks. One of those risks is whether the court will allow a claim for punitive damages.
• There’s uncertainty about whether the trial court will grant summary judgment.
• Damages could fall within a fairly broad range.

If you evaluate these risks separately, you might underestimate the likelihood of unfavorable outcomes stacking up. Conversely, an overreliance on a “big win” scenario can inflate expectations, complicating resolution efforts.

Let’s look at an example Assume:

• Summary Judgment Risk: There’s a 60% chance the court will deny summary judgment.
• Punitive Damages: There is only a 20% the court will permit a claim for punitive damages.
• Trial Outcomes: There is a 30% chance that a jury would award $1,000,000 in compensatory damages and $1,000,000 in punitive damages.

What are the odds of a $2,000,000 verdict? You have to compound the risks. There is only a 60% chance that the case makes it to trial. There is only a 20% chance that the court allows a punitive damages claim. That means there is only an 18% chance of a verdict of $1,000,000 in compensatory damages. There is only a 5.4% chance of recovering $1 million in punitive damages.

However, once the court rules on the summary judgment issue, the case value shifts dramatically. The risks also shift depending on the punitive damages ruling. As you prepare for a mediation, you should ask yourself:

• How would partial losses on legal issues affect the case’s value?
• What’s the cumulative impact of a procedural setback, like summary judgment, combined with trial risk?
• If I wait to mediate until one or more of the issues are resolved, will it be easier or harder to settle the case?

As a mediator, I frequently guide attorneys through this process, helping them see the bigger picture. By addressing compounding risks, you gain a clearer understanding of the settlement value—and a stronger position for negotiation.

Takeaways for Attorneys

To better navigate compounding risks in case evaluations, consider these practical tips:

1. Use Decision Trees: Visual tools can help map out risk scenarios and clarify how probabilities interact.
2. Discuss Cascading Effects Early: Collaborate with your mediator to explore how procedural rulings might shift negotiation dynamics.

How do you evaluate compounding risks in your cases? Share your approach or questions below—I’d love to hear your thoughts!