Most lawsuits are settled or otherwise resolved before trial. If a party cannot prevail through pretrial motions, they will typically enter into some level of settlement negotiation to try to resolve the case. Often the parties will utilize some form of case evaluation, mediation or facilitation, where an outside party (or panel of mediators) will help them evaluate their case and reach a settlement.
Contrary to the impressions the insurance industry works very hard to create, the so-called "frivolous case" is a rarity. Lawyers don't bring cases unless they expect to make money, and thus competent lawyers don't bring frivolous cases. There are unusual circumstances, such as where a client has lied to the lawyer, leading the lawyer to overestimate the value of a case. And as with any profession, there are some incompetents who don't understand why a particular case is without merit, and some bottom feeders who will file any case in the hope of achieving even a very small "nuisance" settlement. However, the courts are pretty good at weeding out the week cases long before trial, resolving them through summary disposition or dismissal.
Under normal circumstances, the strongest cases settle in advance of trial, and the weakest cases are either dismissed or resolved short of trial or result in a "nuisance settlement" (a small settlement to "make it go away"). In the majority of cases, the defense is aware that the plaintiff has a plausible case and, no matter how strong their defenses, may ultimately prevail at trial. Similarly, plaintiffs lawyers are aware that unexpected events at trial, or an unexpected decision by a jury, may result after trial in an inadequate verdict or a judgment for the defense. Settlement removes the uncertainty of what might happen at trial.
Sometimes when you settle a case, by operation of law you will extinguish your claim against another defendant. For example, in a dram shop case (where both a drunk driver and the bar that served him are being sued by an injury victim) some jurisdictions will dismiss a claim against the bar if the plaintiff settles the case with the drunk driver, unless the bar expressly consents to the continuation of the litigation post-settlement.
Additionally, there may be contractual provisions in your own insurance coverage which are triggered by settlement. For example, underinsured motorist policies (where an injury victim can obtain additional benefits from his own auto insurance policy in the event that the defendant's coverage is not sufficient to provide adequate compensation for injuries suffered) typically require that the injured driver obtain the insurance company's consent before settling a case with the defendant driver. Even where the settlement does not affect the insurer's obligation, failure to abide by the policy terms can be fatal to the claim for underinsured coverage.
Your attorney should be attuned to the law of settlements, and how the settlement of one part of your case might affect your remaining claims and remedies.
There are a number of reasons why cases don't settle. Possible reasons include:
The Defendant's Offer - The plaintiff may view the defendant's best settlement offer as unreasonably low.
The Plaintiff's Demand - The defendant may view the plaintiff's best settlement offer as unreasonably high.
Preserving Issues for Appeal - There may have been a preliminary ruling by the judge which one of the parties wishes to challenge on appeal, but which would no longer be subject to appellate review in the event of a settlement.
Personal Animosity - Sometimes one or more of the attorneys and parties become angry or enraged at another party or lawyer, and they force the matter to trial in the hope of "teaching the other side a lesson".
Creating a Paradigm (Setting an Example) - Sometimes, one of the parties hopes that a clear victory at trial will either help with the settlement of other, similar litigation, or will discourage others from engaging in similar conduct or bringing similar litigation.
Impressions of Sympathy - Sometimes a defendant will believe that the jury (or judge) hearing the case is sympathetic to its position, and similarly sometimes the plaintiff will believe that it is the beneficiary of such sympathy. For example, statistically speaking, juries tend to find in favor of doctors in malpractice cases, causing some to believe they sympathize with the defense. A party may believe that these sympathies will result in a verdict that is more favorable than what they would otherwise regard as a reasonable settlement offer from the other side.
There have been some very notable cases where the failure to settle a case has been followed by a staggering jury verdict, or the jury's returning a $0 "no cause" verdict, or a $1 "nominal damages" verdict. For example, in the infamouns "McDonald's Coffee Case" where a woman filed suit after being burned by spilled coffee, before trial the defendant turned down what in retrospect must have seemed like a relatively modest settlement demand from the plaintiff. Similarly, there are many cases in which the plaintiff has rejected a settlement offer, large or small, only to have the jury find in favor of the defense.