George Jetson, an employee of Spacely Construction Company, claims to have injured his back as a result of a fall while repairing the roof at of the 1313 Mockingbird Lane Apartments. He filed a lawsuit against Herman Munster, the owner of 1313 Mockingbird Lane Apartments, asking for damages of $1,500,000. George claims that the roof had rotten sections and that his fall could have been prevented if Mr. Munster had told Spacely Construction about the problem. Mr. Munster notified his insurance company, Dewey, Cheatem and Howe Insurance (DCH), of the lawsuit. DCH must defend Mr. Munster and decide what action to take regarding the lawsuit.
Some depositions and a series of discussions took place between both sides. As a result, George Jetson offered to accept a settlement of $750,000. Thus, one option is for DCH to pay George $750,000 to settle the claim. DCH is also considering making George a counteroffer of $400,000 in the hope that he will accept a lesser amount to avoid the time and cost of a trial. DCH’s preliminary investigation shows that George’s case is strong; DCH is concerned that George may reject their counteroffer and request a jury trial. DCH’s lawyer spent some time exploring George’s likely reaction if they make a counteroffer of $400,000.
The lawyer concluded that its is adequate to consider three possible outcomes to represents George’s possible reaction to a counteroffer of $400,000: (1) George will accept the counteroffer and the case will be closed; (2) George will reject the counteroffer and elect to have a jury decide the settlement amount; or (3) George will make a counteroffer to DCH of $600,000. If George does make a counteroffer, DCH decided that they will not make additional counteroffers. They will either accept George’s counteroffer of $600,000 or go to trial.
If the case goes to a jury trial, DCH considers three outcomes possible: (1) the jury may reject George’s claim and DCH will not be required to pay any...
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