How much should we reserve for this lawsuit?
A single expected value hides what a case can actually cost. This template multiplies a 55% chance of liability by a full damages range, then layers on defense costs and prejudgment interest, so you can see the tail number a reserve has to survive.
Legal Advanced Monte Carlo Pro engine
After you install, this is the model to open.
What Could the Lawsuit Cost Us?
- In your spreadsheet, click the Sortia icon in the strip of icons down the right-hand edge. No strip? Click the arrow at the bottom-right to open it. You can also use Extensions, then Sortia, then Open Sortia.
- Click Start from a template and put that name in the search box.
- Pick the card with that name and click Load this template. It arrives on a new tab with real numbers already in it.
This one runs on a Pro engine, and every free install includes five full-quality runs on your own numbers, shared across all five Pro engines rather than five for each. After that, Pro is $199/year.
The answer
10,000 simulated verdicts produce a two-humped exposure curve: defense costs only when you win, damages plus interest stacked on top when you lose.
- Expected exposure (mean)
- $4.1M across 10,000 trials
- P95 exposure
- $9.7M the reserve benchmark
- Best-case band
- $0.8M P5: defense win, costs only
- Trials above $5M
- 41% a mean-based reserve fails
Expected exposure is $4.1M, but the P95 is $9.7M, roughly 2.4 times the mean. About 41% of simulated outcomes land above a $5M reserve, so booking the average leaves the company short in nearly half the world where it loses. Reserve to the tail, then tighten the damages range as discovery narrows it.
The model
Five assumptions drive it: a weighted 0/1 liability verdict, PERT damages from discovery, triangular defense costs, time to resolution, and a fixed prejudgment interest rate.
| Chance court finds liability | 55% liable / 45% defense win (uncertain) |
| Damages if liable | $1.5M – $4M – $12M (uncertain) |
| Defense costs through trial | $600K – $950K – $1.5M (uncertain) |
| Years to resolution | 1.5 – 2.5 – 4.0 (uncertain) |
| Prejudgment interest rate | 5% simple per year |
Once it is in your sheet
- The model arrives with real numbers in it and runs as it stands, so you can press the button first and understand it second.
- Change the numbers to yours. The sheet marks which cells are inputs and which hold formulas, and most labels carry a note explaining the row.
- Press the run button at the bottom of the panel. It is labeled for the tool you are in, and the result lands on its own tab, with a written reading of it beside the figures.
Never used Google Sheets? Start here goes the whole way, in seven steps, and assumes nothing.
Next question
- What range can a lost profits opinion actually support?How Much Are the Lost Profits Worth?
- Whose cost to complete should you believe?Is the Cost to Complete Claim Credible?
- Did that delay actually push the finish date?
- Will your reserve cover a bad claims year?How Big Could the Claims Year Be?
- Who is actually carrying the month?Which Lawyer Takes Which Matter?
- Why is your average claim the wrong number?What Do Claims Actually Cost?
Every model like this one, and the method behind them: Monte Carlo simulation.