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Where does the money come from? The malpractice insurance for obstetricians in my area is near or over $100k. Then insurance companies want to pay doctors pennies on the dollar (based on published fair and reasonable charges) for procedures.
I'm not quite sure what you mean by this statement. Though, you must bear in mind that malpractice insurance is a lot different, because in such cases, the doctor really is completely at fault. If the doctor repeatedly is being sued for malpractice, at some point in time an insurance company will drop them. This is different from a large company, which has a mega policy in place.
There's a common game being played. Lawyers file suit for outrageous amounts. They know what it will cost the defendants to bring the case to trial. They offer to accept slightly less and insurance companies settle for that ignoring the actual merits of the case. I've seen this happen to close friends.
The actual amount of money stated in a complaint is irrelevant. In fact, many jurisdictions simply require you to state that the amount of money you are seeking exceeds a certain amount to remove yourself from small claims. Plaintiffs' attorneys will rarely ask for a specific amount of money with the expectation of actually receiving that amount of money (or believing that the case is worth that amount of money). Settlements and actual monies received are typically dictated by the severity of the accident and past experiences as well as what amount of money an insurance company is willing to put on the table. If the amount asked for is excessive and mediation between plaintiff and co-defendants fail, a client or insurance company may ask someone to fight the claim.
A small company may have a very small liability amount or no insurance at all, in which case, a PI lawsuit is a terrible thing for them. However, a larger defendant (and BNSF is a VERY large defendant) is bound to have an insurance policy of one sort or another and considering how hazardous trains are, in and of themselves, BNSF is bound to have a gigantic insurance policy for accidents.
Moreover, settling, regardless of the merits of the case, makes business sense. If it costs $X to settle and $X+$20000 to litigate the case to trial, plus potentially more if the defendant loses the trial, what's the point of going through all of that? It just costs time and money. If it's cheaper in the long run to get the case out of the way with a settlement, an insurance company will go for it. At the end of the day, an insurance company isn't worried about wounded pride.
Then again, sometimes a company wants to fight every lawsuit possible (because the insurance will pick up the tab) simply to make sure that they aren't viewed as an easy target. This is especially true in heavy machinery and construction machinery where accidents happen all the time.
It should also be noted that many settlements occur just prior to trial either at court-mandated settlement conferences/mediation and sometimes the day of trial. Trials are expensive and either the insurance company or the defendant doesn't want to go through trial.