Wednesday, February 10, 2010

Black, Hyman, & Silver on the Effects of "Early Offers" in Medical Malpractice Cases

Professor Bernard S. Black (Northwestern University School of Law), Professor David Hyman (University of Illinois College of Law), and Professor Charles Silver (University of Texas School of Law) have posted "The Effects of 'Early Offers' in Medical Malpractice Cases: Evidence from Texas" on SSRN.  It is also published in the Journal of Empirical Legal Studies, Vol. 6, pp. 723-67 (2009).

The abstract states:

Medical malpractice litigation is costly and time-consuming. Professor Jeffrey O'Connell, with various coauthors, has long advocated 'early offer' rules that would encourage defendants to offer to settle for economic damages plus attorney fees, and punish plaintiffs who refuse such offers. Using detailed closed claims data from Texas for 1988-2005, we simulate the effects of these 'early offers.'

We find that defendants will normally not make early offers in cases with large economic damages (over $500,000 in 1988 dollars) because doing so will increase payouts. Early offers will normally reduce payouts, and hence will be made, in cases with small economic damages (under $100,000 in 1988 dollars). Defendants may also make offers in cases with moderate ($100,000-500,000) economic damages, depending on case characteristics and the plaintiff’s chances of prevailing. 

An early offer program will (i) sharply reduce payouts in cases with small economic damages; (ii) will not materially affect predicted payouts in other cases; (iii) will have very different effects on different types of plaintiffs, with large payout reductions for elderly and deceased plaintiffs and much smaller effects for newborns and employed adult plaintiffs; and (iv) will overlap substantially in its effects with statutory caps on non-economic damages, and hence have a smaller effect in states with these caps. 

Our mixed results contrast sharply with dramatic claims by O’Connell and co-authors, who predict 70% reductions in payouts and defense costs. Their estimates reflect the compound effects of a series of unreasonable assumptions.

This article, in part, responds to Hersh, O’Connell and Viscusi, An Empirical Assessment of Early Offer Reform for Medical Malpractice, 36 Journal of Legal Studies s231-s259 (2007).

Hersch, O’Connell and Viscusi reply to this article in Reply to the Effects of 'Early Offers' in Medical Malpractice Cases: Evidence from Texas, 7 Journal of Empirical Legal Studies (forthcoming 2010), working paper version available at http://ssrn.com/abstract=1487681

We extend our analysis and respond to Hersch, O’Connell and Viscusi in Black, Hyman, and Silver, O’Connell Early Settlement Offers: Toward Realistic Numbers and Two-Sided Offers, 7 Journal of Empirical Legal Studies (forthcoming 2010), available at http://ssrn.com/abstract=1503125.

~clf


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