TortsProf Blog

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

Early Offers

                On Wednesday, the legislature in New Hampshire voted to override Governor Lynch’s veto of the early offers bill.  Despite some imperfections in the bill, it was a good decision.  Because all of the criticism is coming from the claimants’ perspective, I specifically state that the early offers law is good for claimants.  I defended an earlier version of the bill from the claimants’ perspective here.

                In a post on Wednesday, The Pop Tort pronounced early offers “horrendous.”  Unlike the editors of many torts-related blogs, I don’t know the people who write for The Pop Tort.  I don’t always agree with their positions, but I admire their dedication to victims of tortious conduct.  This is a major reason why I want to respond to their early offers post.  I would like those typically supportive of claimants to seriously consider endorsing early offers.

                Because the bill has changed since I last defended it, I will start by briefly explaining the version that is now the law of New Hampshire.  Pursuant to the bill, a patient who believes she is the victim of malpractice may send a notice of injury to the heath care provider requesting an early offer.  The provider has 90 days to decide to extend an early offer and can ask the patient to undergo a physical exam.  If extended, the offer must cover all economic loss—medical bills and lost wages.  There are modest amounts of pain and suffering damages included based on classification of the injury as determined using the National Practitioner Data Bank severity scale.  Moreover, the offer includes payment of the claimant’s attorney.  The patient then has 60 days to accept or reject the early offer.  If she accepts the offer, the case is over.  However, if she rejects the offer and pursues a tort claim, she must be awarded at least 125 percent of the early offer or have to pay the defendant’s attorney’s fees.  To ensure these fees can be paid, a bond must be posted.

                I begin by examining the specific points of opposition in the post. 

                1.            Early offers provides extremely limited compensation.

This depends on what is meant.  To be considered an early offer, the health care provider must offer to pay all economic loss plus a modest, set amount for pain and suffering.  For catastrophic injuries involving tremendous economic loss, an early offer could be millions of dollars.  I assume that what is meant is that the amounts for pain and suffering are limited.  It is true that the amounts for pain and suffering are less than are theoretically available under tort law, but compensation is much swifter and more certain.  That is the trade-off.  Moreover, empirical studies, including some specific to malpractice, routinely find that the most severely injured claimants recover only a portion of economic loss.  Thus, for the most severely injured patients, the recovery of full economic loss, which is mandatory under early offers, would be an improvement. 

Other commentators have argued that early offers would be unfair to claimants who did not have a lot of medical bills or lost wages; regarding lost wages, this would be particularly true of children, those who are retired, and those who do not work outside the home.  The response to this point is that early offers may not be beneficial for everyone.  If the claimant does not have a lot of economic loss, there may not be a pressing need for a financial recovery.  Under such conditions, the claimant may decide the better course is to pursue a tort claim.  Although, it may be significant to claimants who do not work outside the home that “replacement services” are available as economic loss.

In a similar vein, The Pop Tort quotes an editorial from the Union Leader complaining that early offers featured “absurdly low caps.”  Damages are not capped.  Pursuant to a cap, the claimant would still have to go through the normal litigation process.  At the end of the process, if the claimant had managed to achieve a verdict in excess of the amount of the cap, then the cap would reduce the recovery.  Instead, this is a trade-off of swift and certain recovery for economic loss and a small, set amount for pain and suffering. 

                2.            Early offers provides incentives to reject portions of the claimant’s damages.

The Pop Tort post states, “the injured patients’ ability to collect what amounts to a severely-capped compensation would be infected by conflicts of interest at every single step, beginning with allowing the medical provider to choose its own doctor to decide a patient’s damages.”  Perhaps this is what is meant by “lowballed,” which appears repeatedly in commentary on early offers (including in the editorial quoted by The Pop Tort).  It is the only definition of the term that makes sense.  A health care provider cannot “lowball” a claimant in the sense of offering anything less than economic loss plus the modest amount for pain and suffering indicated by the National Practitioner Date Bank’s severity scale.  An offer that is less than that does not qualify as an early offer and the provisions of the law would have no effect on the claimant. 

Thus, I will assume “lowballed” to mean that the health care provider will formally offer economic loss, but then reduce real economic loss because of conflicts of interest.  The law provides safeguards for that danger.  For instance, the claimant must agree to the physician suggested by the health care provider to examine the claimant’s injuries.  If no agreement is reached, the hearing officer will select the physician.  The physician conducting the examination “shall not be affiliated directly or indirectly in any way with the medical care provider alleged to have caused the injury.”  Moreover, any time a claimant requests payment of economic loss and that payment is rejected, the health care provider must notify the claimant in writing about the basis for denial and inform the claimant about the appeal process. 

Claimants have the right to request a hearing officer to resolve a dispute at any time.  A hearing officer is “a person of judicial and/or legal training, common sense, and a respect for the law, chosen by the agreement of the parties from a list of neutral persons maintained by the judicial branch office of mediation and arbitration.”  If no agreement is reached, a hearing officer is selected at random from the list.  No hearing officer may be employed by the insurance department (a change from an earlier version of the bill made to mollify opponents) or shall serve if the officer would have a conflict under the state’s legal and judicial ethics codes.  The health care provider must pay for the hearing officer and if the hearing officer determines the health care provider’s position was frivolous, he or she can force the health care provider to reimburse the claimant for the costs of the hearing up to $1,000 or, if the claimant is unrepresented, pay the claimant double the amount that was frivolously disputed or denied.

                3.            Claimants are asked to sign away their rights in a consent process that “violates even the most basic precepts of what constitutes a voluntary program.”

Contrary to this suggestion, I think New Hampshire went to great lengths to protect claimants.  Here is the process mandated by the law.  At the time the early offer is requested, the claimant is given a document that informs her that her right to seek a jury trial may be affected; that there is a right to consult an attorney (who will be paid by the health care provider in the event of an accepted early offer); that the claimant is free to pursue a tort claim if no early offer is made.  Moreover, if the claimant is not represented by counsel, the medical provider must appoint a neutral advisor to explain the difference between early offers and the tort system.  The claimant is then given several days after meeting with the advisor to withdraw the notice of claim.  In other words, no claimant will sign the waiver without either the advice of counsel or the advice of the neutral advisor.

                4.            If the claimant requests and rejects an early offer, then he or she must receive 125 percent of the offer in the tort system or pay the health care provider’s attorney’s fees.

A penalty is needed to keep claimants from “gaming the system” by requesting an early offer without being serious about accepting it.  If claimants continually asked for and rejected early offers, health care providers would have no incentive to spend the time and effort necessary to offer them.  The alternative system would break down, and tort would be the only option for claimants.  Candidly, I would have preferred forcing the claimant to prove negligence to a clear and convincing standard, but the House rejected that idea.  Keep in mind that the claimant is only forced to pay the health care provider’s attorney’s fees after she has voluntarily requested an offer and decided she wanted more than complete coverage of economic loss, plus a small amount for pain and suffering and then failed to prove to a jury that she was damaged more than 125% of that amount (previously alleged to be extremely limited).  If the case was subsequently settled, the attorney’s fees would likely become a component of the settlement agreement.

                Early offers allows, but does not force, a claimant to bypass the tort system.  Tort law has virtues, but among them are not certainty and swiftness.  Because of an understandable focus on individual justice, the tort system can be very uncertain and slow, with significant transaction costs.  There are many claimants who would prefer to have their claims resolved along insurance principles—with more certain payment for economic loss, taking care of the their urgent needs.  I have sat at the hospital bed of a catastrophically injured loved one.  After his health, my main concern was that he not be bankrupted by the enormous costs of life-saving care. 

                Some claimants have the resources to wait out a five-year malpractice struggle.  Some claimants may enjoy the adversarial proceedings of depositions, interrogatories, and cross examinations.  But all do not, and early offers gives them a possible way around them, while providing for basic economic loss much more swiftly.  Although it may not be for all claimants, I don’t think early offers are horrendous.  Not all tort reforms are bad.

--CJR

Assumption of the Risk - Alligators on Golf Courses...

There's a great hypo in here:  The Georgia Supreme Court recently ruled that a golf club and homeowners' association was not liable for the wrongful death of an elderly woman killed by an alligator in 2007.  Although the Court of Appeals had allowed the suit, the Georgia Supreme Court reversed.

The Supreme Court's majority decision, written by Justice Harold D. Melton, stated that even though no warning signs were posted at the lagoons, the homeowners association had warned residents in its publications and on its website that alligators were present and could be dangerous. Thus, Williams assumed the risk when she went out for an evening walk near the lagoons.

More from Daily Report.

- SBS

NH: Early Offers Veto Overridden

It is not yet being confirmed by the media, but it appears that the legislature has overridden Governor Lynch's veto, making New Hampshire the first state to adopt an early offers law.

Updated:  The veto override is confimed by the New Hampshire Union Leader.

--CJR

Oberdiek on Combining Formalism and Instrumentalism

John Oberdiek (Rutgers-Camden) has posted to SSRN Method and Morality in the New Private Law of Torts.  The abstract provides:

The just-christened New Private Law is especially intriguing, for it self-consciously aspires to draw insight from both instrumentalism and formalism. In his ambitious and illuminating "Palsgraf, Punitive Damages, and Preemption," for example, Benjamin Zipursky could not be any more forthright in combining instrumentalist and formalist themes. On his view, the New Private Law’s methodology is sensitive to both the functions and the concepts internal to law. Thus the New Private Law promises to be the elusive third way. And in Zipursky’s hands, it seems to me, the New Private Law of Torts makes good on that promise, offering a sound approach to the adjudication of vexing questions at the frontier of tort law. But Zipursky nevertheless falters in eschewing consideration of the approach’s moral foundations. In addition to explicating just what a commitment to the New Private Law of Torts comes to, then, it is the aim of this essay to assess where normative and specifically moral considerations do, should, and must come into play in the New Private Law of Torts.

--CJR

A Slip and Fall Case "Worthy of Jerry Springer"

A woman chasing her ex-husband for unpaid alimony slipped and fell at the motel where she found him "holed up" with his girlfriend.  The ensuing lawsuit returned a defense verdict.

Daily Report has the full story (which includes outstanding warrants and a pick up truck).

Thanks to Lisa Smith-Butler for the alert. 

- SBS

Solomon on a Normative Basis for Civil Recourse Theory

Jason Solomon (W&M) has posted to SSRN Civil Recourse as Social Equality.  The abstract provides:

In the past decade, civil recourse theory has emerged as an important way of thinking about tort law as individual justice, and private law more broadly. But it has also been criticized as lacking an adequate normative foundation. On its face, the right to civil recourse seems like a form of retaliation or vengeance, and it seems unlikely that this is an appropriate part of a modern liberal state.

In prior work, I explained how the idea of equal accountability was an attractive moral norm and conceptual foundation for the right to recourse. This paper explores whether there are conceptions of equality that might support the right to recourse as a matter of political theory. Specifically, I argue that the right to recourse can be justified by drawing on two related notions of equality — a distributive one and a relational, or social, one.

I argue that these two conceptions of equality relate in the following way. The right to hold accountable those who have wronged you is a good subject to principles of distributive justice. And this good is something that the state provides to help constitute a community that aspires to social equality — where individuals relate to one another as equals. My task here is to explain what I mean in drawing on these two conceptions of equality, and how they relate to civil justice.

--CJR