Refer to: Ricketts DW: Jury verdicts and the medical malpractice insurance crisis (Informed Opinion). West J Med 124: 169-171, Feb 1976
Informed Opinion
Jury Verdicts and the Medical Malpractice Insurance Crisis DONALD W. RICKETTS, Esq., Los Angeles
EDITOR'S NOTE: The author is an attorney whose firm does a substantial amount of malpractice work.-MSMW
OF 80* jury verdicts rendered in medical and dental malpractice cases in the Central District of Los Angeles County, 37 verdicts were for the plaintiffs in the amount of $5,861,046. A settlement could have been effected in many of these 37 cases which would have reduced the payout by $1,522,046. This suggests a cause for the medical malpractice insurance crisis that has been overlooked. The crisis has been framed as a battle between doctors and lawyers. The arguments are, by now, familiar and need not be repeated. But it is fair to ask whether physicians should be pointing their fingers at attorneys and vice versa. Has each side correctly identified the opposition and the cause of the crisis? There is a third party that benefits greatly from this struggle and who, it can be argued, is the real villain-the insurance industry. The cause of the crisis is not jury verdicts and contingent fee contracts nor is it the negligence of doctors. Juries render verdicts and attorneys receive contingent fees in all personal injury cases and a portion of the defendants in all personal injury cases commit negligence. Why then, a "medical malpractice *The survey period was from May 30, 1972, to February 2, 1975. Statistics for seven weeks were not readily available. Information was available for 87 cases but was not complete for six and one other case resulted in a hung jury. These were excluded from the survey. One case resulted in a verdict for plaintiff of $1. This was included as a defense verdict. Another case resulted in a verdict of $1,000,000 but was reduced by the trial judge in a posttrial motion. It is included in the survey figures as a $1-million verdict. Reprint requests to: Donald W. Ricketts, 3303 Wilshire Boulevard, Suite 600, Los Angeles, CA 90010.
crisis" and not a "personal injury crisis"? More to the point, assuming the protestations of unprofitability to be true, why is it unprofitable for insurance companies to write medical malpractice insurance? The insurance carriers have argued that one of the principal causes for the alleged unprofitability, and the necessity for charging large premiums to physicians and hospitals for coverage, is runaway jury verdicts. To test the truth of the argument requires an understanding of why cases are tried (with resulting verdicts) and not settled. Trials occur for one of two reasons. First, and most obvious, a case is tried when the defendant does not feel that there is any liability and is unwilling to make any offer (other than, perhaps, a nuisance or cost-of-suit settlement). When this occurs, the plaintiff must either dismiss the case or try it. Trial invariably results. The second trial situation arises when the defendant does recognize his liability and does make a substantial offer to settle, but is turned down by the plaintiff. A cursory look at the jury verdicts in this study supports the argument of the insurance carriers, if it is assumed that they are always correct in predicting the outcome of trials. As shown in Table 1, the carriers made no substantial offer in 47 of the 80 cases, yet in 17 of these cases the juries returned verdicts totaling $2,853,962. On the other hand, the carriers did make substantial offers totaling $519,200 in 13 cases but received defense verdicts. If, however, the infallibility of insurance carriers is rejected, no firm conclusion can be drawn from the raw figures. They can be THE WESTERN JOURNAL OF MEDIC-INE
169
MEDICAL MALPRACTICE INSURANCE
TABLE 1.-Offers, Demands and Verdicts in Malpractice Cases Los Angeles County Superior Court, Central District, May 30, 1972-February 2, 1975 Number Total Total Total Demands Verdicts of Cases Offers Offer/Result
No substantial offer, defense verdict ...... No substantial offer, plaintiff's verdict .... Substantial offer, defense verdict .... ..... Substantial offer, plaintiff's verdict .... ....
TOTALS
.............................
used to argue either that the juries have run wild or that the insurance carriers are not predicting with reasonable accuracy what a jury will do with a given case. It is reasonable to assume that juries sometimes do less than justice. Any system administered by men will have some error. The problem is determining what amount of jury verdicts can be considered to be unreasonably excessive, if any. This of course is problematical. Attorneys who regularly deal with personal injury cases frequently differ on the fair value of cases. (This is of course a very good reason for preserving the jury system.) But if the reasons why cases are tried and not settled are borne in mind, a fair analysis can be made. Thirty-seven of the 80 cases in the survey resulted in verdicts for the plaintiffs. In 20 of these the defendants made substantial offers, indicating that they felt that a verdict for the plaintiff was proper but that the only true area of disagreement was the amount to be paid. In five of these cases the verdict fell between the amount the defendants had offered and the amount the plaintiffs had demanded to settle. Two others fell below the amount of the offer. It is generally considered that if a verdict falls between the amount of the offer and the demand, it is "in line." The total of these seven judgments ($268,911) therefore can be subtracted from the $5,861,046 total, leaving $5,592,135 to be considered. Of the remaining 13 cases (of the 20 in which the defendants made substantial offers) the total judgments were $2,738,173, the defendants had offered $882,000, and the plaintiffs had demanded $1,31 1,000. Inasmuch as these were cases in which the defendants were willing to pay substantial sums to settle, by no stretch of the imagination can the total of the verdicts be considered excessive. Clearly, the amounts the defendants indicated they would pay would be the minimum reasonable verdict. But the plaintiffs' attorneys in these cases would argue that their 170
FEBRUARY 1976 * 124 * 2
30 17 13 20
$
23,000 9,000 519,200 985,000
$ 940,000
80
$1,536,200
$
0
2,350,000
2,853,962
1,073,000 1,989,000
0 3,007,084
$6,352,000
$5,861,046
demands were closer to the verdicts and were thus more realistic and a better approximation of the fair value of the cases. There is a third school that holds that the fair value of a case is what a jury says it is and that therefore no amount of these verdicts should be considered excessive. While not necessarily agreeing with this last proposition, it is the appropriate rule to be applied here. The defendants recognized (by making substantial offers) that these were cases in which they were liable. With that proposition settled, it became incumbent on the insurance companies to realistically evaluate the cases. They did an extremely poor job, missing the jury verdicts by $1,856,173. Plaintiffs' lawyers were much more realistic, and in any event gave the insurance companies the opportunity to settle these cases for $1,427,173 less than the verdicts. The function of attorneys and insurance companies in litigation is to realistically assess the risk-the exposure-their clients face at the hands of a jury. In these cases the insurance carriers had the opportunity to settle at reasonable figures and did not do so-either because of errors of judgment or vindictiveness. They should not now be allowed to ignore their bad judgment and complain that juries are not agreeing with it. They should not be allowed to complain that any portion of this $2,738,173 in verdicts is excessive. Deducting this sum from the remaining total of $5,592,135 leaves $2,853,962 to be considered. This sum is accounted for by those 17 cases in which the plaintiffs received a verdict and the defendants did not admit that they were liable by making a substantial offer. Let us concede, for the sake of argument, that in rendering a portion of these verdicts in favor of the plaintiffs the juries committed some error. Insurance companies are quick to argue that juries commit error in rendering verdicts against them. Fairness would seem to dictate that they should also concede that juries commit error by
MEDICAL MALPRACTICE INSURANCE
rendering verdicts in their favor. In the 43 cases where verdicts in favor of defendants were rendered, the insurance companies made substantial offers in 13 of them. If the judgment of the insurance companies was sound in making these offers, the juries in rendering defense verdicts erred 30 percent of the time. It would seem to be proper, then, to conclude that the juries also erred 30 percent of the time in rendering verdicts for the plaintiffs. Translating this into dollars, of the $2,853,962 in verdicts arguably erroneously assessed, in fact only $856,188.60 of the total amounts awarded can be assumed to be excessive. However, it would also be fair to balance out the juries' "mistakes" subtracting from the amount "erroneously" awarded to plaintiffs, the amount
"erroneously" saved for the insurance carriers by those cases in which the defendants had made substantial offers but received defense verdicts. The offers in these cases were $519,200 which, subtracted from the $856,188.60 assumed to be excessive, leaves $336,988.60. A "net error" of approximately 6 percent can hardly be considered unreasonable. The jury system should not be used as a whipping boy by the insurance carriers to cover up their own errors of judgment. The answer to the medical malpractice crisis is not legislation limiting the rights of plaintiffs nor is it increased premiums for malpractice coverage. The answer lies in a thorough review by the insurance companies of their procedures for evaluating and settling claims.
CORRECTION In the Medical Staff Conference "Pericarditis," which was in the December 1975 issue, the legends for three of the figures were incorrect as they appeared. The legend for Figure 4 should have read "Electrocardiogram of a normal young man." The legend for Figure 5 should have read "Electrocardiogram of same person as in Figure 4 following exercise." The legend for Figure 6 should have read "Late pattern of pericarditis."
THE WESTERN JOURNAL OF MEDICINE
171
Informed Opinion
Jury Verdicts and the Medical Malpractice Insurance Crisis DONALD W. RICKETTS, Esq., Los Angeles
EDITOR'S NOTE: The author is an attorney whose firm does a substantial amount of malpractice work.-MSMW
OF 80* jury verdicts rendered in medical and dental malpractice cases in the Central District of Los Angeles County, 37 verdicts were for the plaintiffs in the amount of $5,861,046. A settlement could have been effected in many of these 37 cases which would have reduced the payout by $1,522,046. This suggests a cause for the medical malpractice insurance crisis that has been overlooked. The crisis has been framed as a battle between doctors and lawyers. The arguments are, by now, familiar and need not be repeated. But it is fair to ask whether physicians should be pointing their fingers at attorneys and vice versa. Has each side correctly identified the opposition and the cause of the crisis? There is a third party that benefits greatly from this struggle and who, it can be argued, is the real villain-the insurance industry. The cause of the crisis is not jury verdicts and contingent fee contracts nor is it the negligence of doctors. Juries render verdicts and attorneys receive contingent fees in all personal injury cases and a portion of the defendants in all personal injury cases commit negligence. Why then, a "medical malpractice *The survey period was from May 30, 1972, to February 2, 1975. Statistics for seven weeks were not readily available. Information was available for 87 cases but was not complete for six and one other case resulted in a hung jury. These were excluded from the survey. One case resulted in a verdict for plaintiff of $1. This was included as a defense verdict. Another case resulted in a verdict of $1,000,000 but was reduced by the trial judge in a posttrial motion. It is included in the survey figures as a $1-million verdict. Reprint requests to: Donald W. Ricketts, 3303 Wilshire Boulevard, Suite 600, Los Angeles, CA 90010.
crisis" and not a "personal injury crisis"? More to the point, assuming the protestations of unprofitability to be true, why is it unprofitable for insurance companies to write medical malpractice insurance? The insurance carriers have argued that one of the principal causes for the alleged unprofitability, and the necessity for charging large premiums to physicians and hospitals for coverage, is runaway jury verdicts. To test the truth of the argument requires an understanding of why cases are tried (with resulting verdicts) and not settled. Trials occur for one of two reasons. First, and most obvious, a case is tried when the defendant does not feel that there is any liability and is unwilling to make any offer (other than, perhaps, a nuisance or cost-of-suit settlement). When this occurs, the plaintiff must either dismiss the case or try it. Trial invariably results. The second trial situation arises when the defendant does recognize his liability and does make a substantial offer to settle, but is turned down by the plaintiff. A cursory look at the jury verdicts in this study supports the argument of the insurance carriers, if it is assumed that they are always correct in predicting the outcome of trials. As shown in Table 1, the carriers made no substantial offer in 47 of the 80 cases, yet in 17 of these cases the juries returned verdicts totaling $2,853,962. On the other hand, the carriers did make substantial offers totaling $519,200 in 13 cases but received defense verdicts. If, however, the infallibility of insurance carriers is rejected, no firm conclusion can be drawn from the raw figures. They can be THE WESTERN JOURNAL OF MEDIC-INE
169
MEDICAL MALPRACTICE INSURANCE
TABLE 1.-Offers, Demands and Verdicts in Malpractice Cases Los Angeles County Superior Court, Central District, May 30, 1972-February 2, 1975 Number Total Total Total Demands Verdicts of Cases Offers Offer/Result
No substantial offer, defense verdict ...... No substantial offer, plaintiff's verdict .... Substantial offer, defense verdict .... ..... Substantial offer, plaintiff's verdict .... ....
TOTALS
.............................
used to argue either that the juries have run wild or that the insurance carriers are not predicting with reasonable accuracy what a jury will do with a given case. It is reasonable to assume that juries sometimes do less than justice. Any system administered by men will have some error. The problem is determining what amount of jury verdicts can be considered to be unreasonably excessive, if any. This of course is problematical. Attorneys who regularly deal with personal injury cases frequently differ on the fair value of cases. (This is of course a very good reason for preserving the jury system.) But if the reasons why cases are tried and not settled are borne in mind, a fair analysis can be made. Thirty-seven of the 80 cases in the survey resulted in verdicts for the plaintiffs. In 20 of these the defendants made substantial offers, indicating that they felt that a verdict for the plaintiff was proper but that the only true area of disagreement was the amount to be paid. In five of these cases the verdict fell between the amount the defendants had offered and the amount the plaintiffs had demanded to settle. Two others fell below the amount of the offer. It is generally considered that if a verdict falls between the amount of the offer and the demand, it is "in line." The total of these seven judgments ($268,911) therefore can be subtracted from the $5,861,046 total, leaving $5,592,135 to be considered. Of the remaining 13 cases (of the 20 in which the defendants made substantial offers) the total judgments were $2,738,173, the defendants had offered $882,000, and the plaintiffs had demanded $1,31 1,000. Inasmuch as these were cases in which the defendants were willing to pay substantial sums to settle, by no stretch of the imagination can the total of the verdicts be considered excessive. Clearly, the amounts the defendants indicated they would pay would be the minimum reasonable verdict. But the plaintiffs' attorneys in these cases would argue that their 170
FEBRUARY 1976 * 124 * 2
30 17 13 20
$
23,000 9,000 519,200 985,000
$ 940,000
80
$1,536,200
$
0
2,350,000
2,853,962
1,073,000 1,989,000
0 3,007,084
$6,352,000
$5,861,046
demands were closer to the verdicts and were thus more realistic and a better approximation of the fair value of the cases. There is a third school that holds that the fair value of a case is what a jury says it is and that therefore no amount of these verdicts should be considered excessive. While not necessarily agreeing with this last proposition, it is the appropriate rule to be applied here. The defendants recognized (by making substantial offers) that these were cases in which they were liable. With that proposition settled, it became incumbent on the insurance companies to realistically evaluate the cases. They did an extremely poor job, missing the jury verdicts by $1,856,173. Plaintiffs' lawyers were much more realistic, and in any event gave the insurance companies the opportunity to settle these cases for $1,427,173 less than the verdicts. The function of attorneys and insurance companies in litigation is to realistically assess the risk-the exposure-their clients face at the hands of a jury. In these cases the insurance carriers had the opportunity to settle at reasonable figures and did not do so-either because of errors of judgment or vindictiveness. They should not now be allowed to ignore their bad judgment and complain that juries are not agreeing with it. They should not be allowed to complain that any portion of this $2,738,173 in verdicts is excessive. Deducting this sum from the remaining total of $5,592,135 leaves $2,853,962 to be considered. This sum is accounted for by those 17 cases in which the plaintiffs received a verdict and the defendants did not admit that they were liable by making a substantial offer. Let us concede, for the sake of argument, that in rendering a portion of these verdicts in favor of the plaintiffs the juries committed some error. Insurance companies are quick to argue that juries commit error in rendering verdicts against them. Fairness would seem to dictate that they should also concede that juries commit error by
MEDICAL MALPRACTICE INSURANCE
rendering verdicts in their favor. In the 43 cases where verdicts in favor of defendants were rendered, the insurance companies made substantial offers in 13 of them. If the judgment of the insurance companies was sound in making these offers, the juries in rendering defense verdicts erred 30 percent of the time. It would seem to be proper, then, to conclude that the juries also erred 30 percent of the time in rendering verdicts for the plaintiffs. Translating this into dollars, of the $2,853,962 in verdicts arguably erroneously assessed, in fact only $856,188.60 of the total amounts awarded can be assumed to be excessive. However, it would also be fair to balance out the juries' "mistakes" subtracting from the amount "erroneously" awarded to plaintiffs, the amount
"erroneously" saved for the insurance carriers by those cases in which the defendants had made substantial offers but received defense verdicts. The offers in these cases were $519,200 which, subtracted from the $856,188.60 assumed to be excessive, leaves $336,988.60. A "net error" of approximately 6 percent can hardly be considered unreasonable. The jury system should not be used as a whipping boy by the insurance carriers to cover up their own errors of judgment. The answer to the medical malpractice crisis is not legislation limiting the rights of plaintiffs nor is it increased premiums for malpractice coverage. The answer lies in a thorough review by the insurance companies of their procedures for evaluating and settling claims.
CORRECTION In the Medical Staff Conference "Pericarditis," which was in the December 1975 issue, the legends for three of the figures were incorrect as they appeared. The legend for Figure 4 should have read "Electrocardiogram of a normal young man." The legend for Figure 5 should have read "Electrocardiogram of same person as in Figure 4 following exercise." The legend for Figure 6 should have read "Late pattern of pericarditis."
THE WESTERN JOURNAL OF MEDICINE
171
