Law: The Personal Injury Bar

October 22, 2007

Kurzman’s post provides an interesting opportunity to discuss and relay some random information that I have picked up thus far this semester.As Kurzman said, I don’t really have much of an interest in personal injury work because, although owning a Gulf Stream is nice, not having to explain to your friends how you sleep at night is even better.That said, whenever I hear random tidbits about Med-Mal or PI cases in class, I try to jot them down because the Poly Sci/debater in me finds them interesting. Here are a couple of somewhat relevant somewhat interesting tidbits I have picked up in classes and from speakers.

 First, by and large, jury’s like doctors. This makes sense if you think about it – jurors are people that get sick, those same people go to the doctor, and they trust their doctor to help make them feel better. This plays out in an interesting way. The tendency is for jurors to take the doctors appraisal or word as more credible/believable. An interesting related note though is that jurors also feel bad for people that suffer terrible wrongs – especially the death or serious injury of theirs children, and tend not to hesitate to award large damages in these cases.So what we have as a starting point is that jurors tend to believe doctors, but also tend to award large damages when things go wrong, especially to certain populations.

Next, one of the most plaintiff friendly courts in the country is in Illinois, where Kurzman goes to school. Madison County, a poor area with mostly elected judges is among the most plaintiff friendly courts anywhere in the nation, so my first bit of legal advice to Kurzman would be, practice north of I-88.The econ student in me feels the need to look at the plan that Kurzman has pitched and talk about the positives and negatives.The positive is clear: It saves the hospital time and money in litigating malpractice claims and keeps doctors from making enemies out of their patients.

Similarly, potential plaintiffs are spared the stress of a lawsuit and don’t have to cough up the 1/3 of their award in the form of a contingency fee. The ideal of this system is clear: Assume a world in which each injury has a fair and logical figure (this is somewhat of an abstractioin, so work with me here). This figure represents what would be considered the “most fair” settlement to the patient taking into account all factors. If we take this figure, and deduct 1/3, we get the amount the that the patient would actually receive in their pocket. If we take this figure and add the cost of settling the lawsuit, we get what the suit will cost the hospital. Everything in between these two numbers represents the area within which both parties would be better off settling without the held of lawyers. Let’s take an example:Lets say that a hypothetical injury – YellowSubmarineitis has a fair settlement value of $100K. A patient settling would receive about $66K and the hospital might spend 12K to defend the suit (lets say its really complicated and outside counsel needs to work 20 hours or so on top of other fees). Any settlement figure greater than 66K but less than 112K offers both sides a better deal than litigating, so any settlement within this window is in the best interest of both parties and should facilitate the type of agreements that Kurzman favors.At first glance (and I confess this is a somewhat back of the envelope analysis that I am doing as I haven’t sat and thought about the issue for very long) I can only see one obvious problem.

 The problem I can foresee is that the hospital comes from a distinct negotiating advantage. The hospitals negotiation is represented by its in house counsel (or risk manager or similar position) who not only understands the legal issues involved, but is also a repeat player. Repeat players are at an inherent advantage in these types of negotiations (and future litigations) since they have some reconceived concept of both the likelihood of success at trial, the cost of tying the case, and the potential value of lawsuit. This isn’t a major issue for a small practice, but for a large hospital with full time legal staff, the advantage can be very large. Let’s return to our hypothetical injury. Suppose that the typical YellowSubmarineitis case that goes to trial returns a jury verdict at or around the ideal value of 100K. Knowing this, the hospital has a pretty good idea of the window in which it is negotiating and can avoid long-term losses from negotiation. If the patient demands 180K, the hospital knows it is in their best interest to turn the offer down. If the patient asks for 80, they know they are in a good place, and can negotiate knowing they have already saved.The patient on the other hand has little way of knowing these things. 60K is a lot of money to a lot of people, and perhaps if the injury is not too large a patient would agree to this amount, which represents a net loss for them for no reason other than the fact that they were not represented by counsel.

Most people trust their doctors and don’t want to extract their “pound of flesh” and MAY (not will but may) be willing to take some form of earnest money in exchange for waiving their right to a claim when they could otherwise receive more.Defense side advocates (of which I generally am one) can easily claim that this is a net positive – people get what the feel is enough, not what juries say or lawyers negotiate. This is of course a fair statement, but it seems like one sided logic – the patient getting less than they would otherwise pocket (even after attorney fees) is ok and evidence of fixing a broken system, but does the hospital ever pay more than they would otherwise expect? Doubtful. This is one of the reasons we have legal counsel in these situations – to eliminate the massive advantage that repeat players enjoy. Perhaps the hospitals always offer settlements within the mutually beneficial range – perhaps but doubtful. Perhaps this system represents giving people what they feel is fair and not what a jury says is right – a fairly compelling argument, even if the sacrifices are decidedly one-sided.Regardless of what the Personal Injury bar says, I must say this is an idea that seems long overdue. This idea seems to rest on a sound logical foundation, and from the point of view of the two parties involved, I think this makes great sense, but I do worry for the overall equity of the system – then again, something has to be done to bring medical costs back into check, and this certainly looks like a promising start.I hope some academic picks up this idea and runs with it. I am curious which side is benefiting more from these settlements and if they are almost universally in the “mutual win” territory.

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