Chris Guthrie (Vanderbilt) and Jeff Rachlinski (Cornell) recently circulated an interesting paper, "Insurers, Illusions of Judgment & Litigation," that presents results from original research on insurers' abilities to resist indulging in cognitive illusions that pose a threat to legal decision making. An excerpted abstract follows.
"Once litigation materializes, insurers provide representation, pay legal fees, and often play a central role in resolving disputes through settlement or adjudication. In this paper, we explore empirically how these key litigation players make important decisions in the litigation process, like evaluating a case, deciding whether to settle, and if so, on what terms. We find that insurers, though not entirely immune to the effects of cognitive illusions that have been shown to distort litigation decision making, appear to make decisions in a more economically rational fashion than other litigation players. This finding, though preliminary, casts new light on litigation theory and practice."