Settlements and Set-Offs: What Happens When One Defendant Settles but the Case Goes to Trial with Another Defendant?

What Business Owners, Executives, and Professionals Need to Know About Set-Offs in New York Litigation

When disputes arise—whether in a business breakup, a trust and estate controversy, or a complex financial matter in divorce—multiple parties are often named as defendants. But litigation rarely unfolds neatly. Some parties settle early. Others go to trial. And when a damages award is issued, the question becomes: how do those earlier settlements affect the final judgment and damage award? Simply stated, they count as payments made on the final damage award.

In New York litigation, this issue is governed primarily by General Obligations Law (GOL) § 15-108 and certain provisions of the Civil Practice Law and Rules (CPLR). Understanding how these rules work is important for all parties, whether plaintiffs, settling defendants, and non-settling defendants alike.

What is a Set-Off?

A “set-off” is a legal credit. If a plaintiff settles with one defendant, the amount recovered in that settlement is applied as a credit to reduce the final damages awarded against the remaining defendants at trial. This prevents a plaintiff from recovering more than their actual loss—commonly referred to as avoiding double recovery.

The Governing Rule: GOL § 15-108 

Under GOL § 15-108(a):

If a plaintiff gives a release or covenant not to sue to one of multiple parties liable for the same injury, that release:
Does not discharge other liable parties unless the release says so, and
Reduces the plaintiff’s claim against the remaining defendants by the greatest of:

The amount stipulated in the release,
The amount actually paid, or
The settling party’s equitable share of the damages.

This applies in tort actions, including those involving personal injuries, property loss, wrongful death, and other types of civil harm.

An Example

Imagine a business dispute where two companies are sued by a former partner company. One company settles with the plaintiff before trial for $300,000. The second company goes to trial, and the jury awards the plaintiff $1 million in total damages.

If the second company (which went to trial) is found 50% responsible, and the settling company’s equitable share is determined to be 50%, the court must reduce the $1 million verdict. The reduction will be the greatest of:

$300,000 (amount paid),
$300,000 (stipulated in the release), or
$500,000 (50% of $1 million).

Here, the verdict would be reduced by $500,000, and the remaining defendant would owe the plaintiff the other $500,000.

But what if the jury awarded plaintiff only $400,000? Then the $300,000 is a credit and the second company would owe only $100,000.

If the jury awarded plaintiff $300,000 or less? Then the second company would not have to pay anything to plaintiff.

The Aggregate Approach: When There Are Multiple Settlements

Courts in New York favor the aggregate method when calculating set-offs. That means all the settlement amounts are added together and compared to the combined equitable share of all settling defendants. The set-off is the greater of the total settlement paid or total share of liability assigned to those parties.

This approach promotes fairness, ensuring plaintiffs are made whole—but not more than whole—while non-settling defendants pay only their proportionate share, no more.

Special Considerations

Timing matters: To preserve the right to a set-off, defendants typically must assert it in their answer as an affirmative defense. However, courts can allow post-verdict motions if doing so causes no prejudice to the plaintiff.
Social Security or other collateral sources: Under CPLR 4545, defendants may seek additional offsets for benefits paid to the plaintiff from certain collateral sources, like insurance or government benefits. This requires separate application and evidence.

Effect on contribution rights: Under GOL § 15-108(b), a settling defendant is shielded from contribution claims by non-settling defendants. Once a party settles in good faith, he or she is out of the case—and out of reach for any further payments from other defendants.

Key Differences Between Plaintiffs and Defendants

Plaintiffs must weigh carefully whether to settle with one party and proceed against others. Strategic settlements may lock in value while preserving the right to trial—but could limit total recovery if not structured properly.
Settling defendants may benefit from certainty, limit future liability, and exit the litigation—but must ensure the release complies with GOL § 15-108 to protect against contribution claims.
Non-settling defendants should track all settlements closely, demand disclosure, and assert their right to a set-off early. If other defendants have paid large sums, those amounts could significantly reduce their exposure at trial.

What You Should Do

Whether you are a business owner resolving internal disputes, an executive involved in an employment or contract dispute, or a trustee or beneficiary entangled in a complex estate fight, this area of law can have significant financial consequences.

Before deciding whether or not to settle, speak with litigation counsel who understands how GOL § 15-108 and related provisions apply to your situation. In high-value disputes, the math matters—and a strategic approach to settlements can be the difference between a fair resolution and a costly mistake.

Our litigation team advises businesses, professionals, and fiduciaries across New York in high-stakes disputes. If you have a question about litigation strategy, verdict exposure, or settlement risks, we are here to help.

We can help you in Albany, Buffalo, Rochester, New York City, and everywhere in between.

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This blog post is for informational purposes only and does not constitute legal advice. For specific legal counsel, please contact our office directly.