Noise and the Decision to Settle Within Insurance Policy Limits

In a blog post earlier this year, I discussed the problem of “noise” – or randomness – in professional judgments, in particular judgments regarding the value of claims and lawsuits. A recent case from the United States Court of Appeals for the Seventh Circuit illustrates the danger and cost of this noise with regard to insurance policy limits and the decision whether to settle. It provides a valuable lesson for policyholders facing lawsuits and liabilities that may exceed their insurance policy limits.