By Walter Olson
Look northeast, docs: Late last month, over a veto from Democratic Gov. John Lynch, New Hampshire lawmakers enacted an “early offer” system for medical-malpractice claims that could become a national model — much to the chagrin of trial lawyers everywhere.
Based loosely on the idea of freedom of contract, and adding a dollop of the “loser-pays” legal fee principle long practiced in other nations, the reform promises to put a big dent in the costs of the Granite State’s malpractice system — while leaving genuine victims more satisfied.
Nothing like it has been tried anywhere — but if it works, imitators are sure to follow.
Floating around academic circles for years, early-offer tort reforms have been championed by U. of Virginia law professor Jeffrey O’Connell and others, including New York’s own Lester Brickman of Cardozo Law School. They’re based on the insight that many patients who sue would be happy if someone would just pick up the out-of-pocket costs an injury has dealt them, from lost income to the bill for rehab nursing. Oh, and pick them up quickly.
Much of the lottery angle in litigation comes from guesswork over intangibles like pain and suffering — which lawyers prize because they can provide a hammer for settlement as well as a margin to cover hefty attorneys’ fees.
Yet plaintiffs suffer badly from delay: The average New Hampshire claimant waits more than 3 1/2 years to get paid, and that’s fast compared with many states. Defendants beat many claims at trial, even strong ones. Overhead — lawyers, pricey expert witnesses, appeals — costs a fortune. Most plaintiffs, reformers believe, would be better off if they could resolve their claims quickly for a fast, formula-like payout.
A key selling point for New Hampshire’s law is that it’s strictly voluntary for both sides: Claimants don’t have to request an early offer, and providers are free not to make one. Here’s how it works:
* The potential claimant decides whether to request an early offer. The Granite State law encourages seeing a lawyer about this decision (a possible weak point, since many lawyers will surely try to talk the client out of the option) and even provides for assigning a neutral adviser at defendants’ expense to claimants who choose not to engage lawyers. (That last is one of several angles that help explain why two med-mal insurers opposed the new law.)
* If the claimant doesn’t care to activate the early-offer process, he can file a suit exactly as now. If he does activate it, the medical provider can ask him to take a physical exam and has 90 days to respond.
* If providers want the benefit of the law, their offer must cover the most commonly sued-for “economic” losses: medical costs and lost wages, past and future, plus reasonable attorney’s fees.
In lieu of pain and suffering, they must then add a modest sum based on injury-severity measures that both sides can look up in a standard reference.
* The claimant can then either accept the offer and end the case, or decline it in favor of litigation — but in that case at a real downside risk.
First, claimants who ask for and then reject an early offer must win at least 125 percent of the rejected amount, or pay the loser’s attorney’s fees (this is the echo of the “loser-pays” found in most other countries). And at the outset — again, tracking the practice in some other advanced countries — claimants need to post a bond or similar security to guarantee that indemnity.
Would trial lawyers oppose a reform that gives potential clients an interesting new option — which, again, they’re free not to pursue — without taking away any old options? Of course they would, and quite frantically.
The plaintiff’s bar in New Hampshire denounced as stingy the level of in-lieu-of-pain-and-suffering extras, which currently top out at $117,000, while saying less about how the early offers can amount to millions for claimants with serious economic damages.
If the new law works well, look for it to spread to other states, and — Panic on Court Street! — maybe even other areas of tort litigation, such as car crashes.
Walter Olson is a Cato Institute senior fellow and the author of “The Litigation Explosion” and other books.