A new study published in the Columbia Business Law Review suggests that “there are strong advantages to a system in which businesses facing personal injury lawsuits could promptly pay injured parties for out-of-pocket medical expenses and lost wages while avoiding long court battles, high legal fees and “pain and suffering” damages.” The study of court settlements in personal injury lawsuits against businesses estimated companies could save an average total of $114,000 per claim or $670,000 for severe injuries by promptly settling cases instead of fighting them in court.
What proponents of the proposed system are not emphasizing is that the “early offer” system would prohibit injured victims from seeking compensation in the courts – essentially replacing your right to a jury trial with a compensation schedule much like worker’s compensation programs – unless “gross misconduct” could be proved. Even the law professors who authored the study admit this is a rarely proved in lawsuits.


wall street.jpgThe study, which was published this month in the Columbia Business Law Review, also projected $32,000 in savings from lower legal expenses, or about $211,000 for cases involving severe injuries. Law School Professor Jeffrey O’Connell and colleague Patricia Born of California State University-Northridge, analyzed court settlements of businesses facing personal injury cases between 1988 and 2004 in Texas and Florida, including those for defective products.
The study based the projections on how much it would cost businesses to make “early offers” to pay out-of-pocket medical expenses and wage losses of injured claimants. The quick settlements would reduce legal fees for both sides, but more importantly to those injured, eliminate “pain and suffering” damages. In most states, “pain and suffering” damages are the non-economic damages which include loss of quality of life, permanent disfigurement and in many case, permanent disability.
O’Connell considers himself a co-founder of no-fault automobile insurance laws, a system of insurance used in Colorado for many years but replaced with the “tort system” in 2003. O’Connell argues that tort lawsuits are “fraught with uncertainty for both sides, which causes long delays and large legal fees.” However, Colorado state law was changed back to a pure tort system. In contrast to the old “no-fault” system, the new “fault” or “tort-based” system requires the insurance company of the driver who is at fault for the accident to pay the damages arising out of the accident, including paying the victim’s medical expenses, loss of wages, and pain and suffering.
Now O’Connell is advocating a similar “no fault” arrangement for victims of accidents caused by the negligence of corporations or businesses.
“Offers could be turned down by claimants, but only in cases where the defendant’s injurious acts were the result of gross misconduct provable beyond a reasonable doubt,” O’Connell said. “Thus a crucial element of the tort system’s deterrence mechanism is retained: Injured parties could still win suitably large monetary awards under the early offers model for both economic and non-economic damages in clear cases of aggravated error. But our study finds that in today’s business liability cases, only 4 percent are even allegedly the result of any gross misconduct.”
It should be noted that in traditional tort law, the party only must prove a claim with a preponderance of the evidence – the “beyond a reasonable doubt” standard is used in criminal cases, and has no place in tort law.
The report not only assessed the likely impacts of early offers reform by type of injury (fatality or severe injury, for example), but examined the effects of including a minimum early offer either of $100,000, $250,000 or $500,000 in cases of death or severe injury. The study ultimately argues against such minimums because a minimum of $250,000 would, for example, reduce the number of early offers to severely injured claimants by 40 percent, leaving the rest of the cases to “the uncertainties and expense of the tort system for both sides.” That is, businesses would be more likely to subject the victim to a long court battle rather than agree to pay at least a minimum settlement amount for “severely injured” victims.

Categories: Legal Myths
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