Saturday, June 30, 2012

Does Early Offers Cover Future Lost Wages? Yes.

Over at Litigation & Trial, Max Kennerly has found a problem with the early offer law, but it is not as serious as he first believed. 

Kennerly argues that early offers do not cover future lost wages.  He arrives at this conclusion by noting that the definition of "economic loss" includes wages, but does not include "earning capacity."  His conclusion is that "wages" only means wages that would have been earned at the time the claim is filed.  He then provides an example of someone who lost $50,000 in past lost wages and Kennerly is concerned that he will only receive the $50,000 in lost wages. 

The statute makes it clear that future lost wages are included.  Section 5:19-C:5 provides that future lost wages will be paid.  That section divides payments by the health care provider into section I, covering economic losses previously incurred, and Section II, covering future economic losses.  Subpart b to Section II covers lost wages, and states:  "Payment of lost wages shall be made weekly."  Moreover, the payments are adjusted annually to keep up with inflation. 

What then does "earning capacity" mean?  Kennerly is right that it should have been defined in the statute.  However, I think he arrived at the answer in his updated post that responded to my comment.  Moreover, in so doing, I think he sheds light on the nature of early offers.  He says that "earning capacity" includes "estimates of increased wages due either to individual career advancement or advancement of wages as a whole in a particular sector."  Early offers does include increased wages due to inflation.  What it doesn't include, what it can't include, based on its very nature, is the individualized treatment that Kennerly wants.  

This is the tradeoff.  Tort law generally provides individualized justice.  If you want to push your case far enough, a jury will decide whether the health care provider was liable and how much pain and suffering that the claimant, this particular claimant, suffered.  As a result, it can be slow, averaging about 5 years per med mal case, and expensive, chewing up a lot of transaction costs.  Early offers is based more on an insurance premise.  The claimant gives up the possibility of having a jury take all of her particular circumstances into account for recovery that is certain and much swifter.  Especially when one considers that the most seriously injured claimants often recover only a fraction of their economic loss and claimants lose a large portion (around 80%) of tried med mal cases, the tort route can be daunting for claimants who understand it. 

As I have said before, early offers is not for everyone.  Kennerly proffers a college student client who had no lost wages, but the potential to earn $3 to $5 million.  Absent more information, I would say this client should not request an early offer if one were possible.  But there are claimants for whom it makes sense.  I was a plaintiffs' lawyer, and I can recall any number of clients for whom it would have made sense.  I hope plaintiffs' attorneys in New Hampshire will give it fair consideration as an alternative for those types of clients.

--CJR

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Comments

Well, shucks, I wrote a long reply to your other post before seeing this one. I'll refrain from cutting and pasting that one here, and instead give a crude summary: (1) "lost wages as they accrue" can be discontinued at any point by whoever is hearing claim; (2) lump sum better than drawn out partial payments given time value of money; (3) huge administrative burden to re-prove lost wages every week.

If NH did nothing more than simply move "earnings capacity" from the "non-economic damages" to the "economic damages," they would fix that problem. It's easy and simple to estimate lost earnings capacity; economists do it every day in courtrooms across America. It's even easier to "individualize" this part of the claim than it is to evaluate the claim in the first place.

But my bigger problem, as noted in the comments, is the penalties for requesting an early offer. According to the 2006 Harvard study, one-sixth of meritorious malpractice cases nonetheless lose. If you add fee-shifting and a bond posting requirement, you have essentially killed any chance of a lawyer taking even a meritorious case. It's just too risky.

Want an "early offer" system? Make early offers. Insurers and doctors don't need a law to help them do that. There's a reason malpractice cases settle so close to trial: because that's the first time the insurer has put any real money on it.

Posted by: Max Kennerly | Jun 30, 2012 10:05:15 PM

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