The Effects of “Early Offers” in Medical Malpractice Cases: Evidence from Texas

Bernard Black, David A. Hyman and Charles Silver

Journal of Empirical Legal Studies, 2009, vol. 6, issue 4, 723-767

Abstract: Medical malpractice litigation is costly and time consuming. Professor Jeffrey O'Connell, with various co‐authors, 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.” Under a base set of assumptions, early offers will sharply reduce payouts in cases with small economic damages (under $100,000, all amounts in 1988 dollars); will moderately reduce payouts in currently tried cases with economic damages from $100,000–$200,000 and would normally increase payouts (and therefore will not be made) in tried (settled) cases with economic damages over $200,000 ($100,000). Overall, we predict that early offers will be made in 72 percent of all cases, and will result in a 16 percent (20 percent) decline in payouts in tried (settled) cases. Almost all this effect comes from the sharp decline in payouts in cases with small economic damages. Defense costs will drop by roughly 60 percent (20 percent) in currently tried (settled) cases in which an early offer is made, and by about 13 percent overall. An early offer program will have very different effects on different types of plaintiffs, with especially large payout reductions for elderly and deceased plaintiffs. An early offer program also overlaps substantially in its effects with a statutory cap on noneconomic damages (which 26 states already have). Defendants in many of these states have already realized large reductions in payment of noneconomic damages; the additional reductions from an early offer program are modest and would often affect plaintiffs whose recoveries were already limited by damage caps. Our mixed results contrast sharply with dramatic claims by O'Connell and co‐authors, who predict 70 percent reductions in both payouts and defense costs. Their estimates reflect the compound effects of a series of unreasonable assumptions.

Date: 2009
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https://doi.org/10.1111/j.1740-1461.2009.01158.x

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Persistent link: https://EconPapers.repec.org/RePEc:wly:empleg:v:6:y:2009:i:4:p:723-767

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