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Estimating the Effect of Damages Caps in Medical Malpractice Cases: Evidence from Texas


David A. Hyman


University of Illinois College of Law

Bernard S. Black


Northwestern University - School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)

Charles Silver


University of Texas at Austin - School of Law

William M. Sage


University of Texas at Austin School of Law

February 26, 2009

The Journal of Legal Analysis, Vol. 1, No. 1, pp. 355-409, 2009
U Illinois Law & Economics Research Paper No. 07-16
U of Texas Law, Law and Econ Research Paper No. 106
2nd Annual Conference on Empirical Legal Studies Paper

Abstract:     
Using claim-level data, we estimate the effect of Texas's 2003 cap on non-economic damages on jury verdicts, post-verdict payouts, and settlements in medical malpractice cases closed during 1988-2004. For pro-plaintiff jury verdicts, the cap affects 47 percent of verdicts, and reduces mean allowed non-economic damages, mean allowed verdict, and mean total payout by 73 percent, 38 percent, and 27 percent, respectively. In total, the non-econ cap reduces adjusted verdicts by $156M, but predicted payouts by only $60M. The impact on payouts is smaller because a substantial portion of the above-cap damage awards were not being paid to begin with. In cases settled without trial, the non-econ cap affects 18 percent of cases and reduces predicted mean total payout) by 18 percent. The non-econ cap has a smaller impact on settled cases than tried cases because settled cases tend to involve smaller payouts. The impact of the non-econ cap varies across plaintiff categories. Deceased, unemployed, and (likely) elderly plaintiffs suffer a larger percentage reduction in payouts than living, employed, and non-elderly plaintiffs. We also simulate the effects of different caps, and find substantial differences in cap stringency across states. Different caps reduce aggregate payouts in tried cases (all cases) by between 16 percent and 65 percent (7 percent and 42 percent). Caps on total damages have especially large effects.

Number of Pages in PDF File: 56

Keywords: damages caps, medical malpractice, texas, settlements

JEL Classification: K13

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Date posted: February 26, 2009 ; Last revised: December 24, 2009

Suggested Citation

Hyman, David A. and Black, Bernard S. and Silver, Charles and Sage, William M., Estimating the Effect of Damages Caps in Medical Malpractice Cases: Evidence from Texas (February 26, 2009). The Journal of Legal Analysis, Vol. 1, No. 1, pp. 355-409, 2009; U Illinois Law & Economics Research Paper No. 07-16; U of Texas Law, Law and Econ Research Paper No. 106; 2nd Annual Conference on Empirical Legal Studies Paper. Available at SSRN: http://ssrn.com/abstract=1349829

Contact Information

David A. Hyman
University of Illinois College of Law ( email )
504 E. Pennsylvania Avenue
Champaign, IL 61820
United States
Bernard S. Black (Contact Author)
Northwestern University - School of Law ( email )
375 E. Chicago Ave
Unit 1505
Chicago, IL 60611
United States
512-503-2784 (Phone)

Northwestern University - Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)
European Corporate Governance Institute (ECGI)
Brussels
Belgium
Charles M. Silver
University of Texas at Austin - School of Law ( email )
727 East Dean Keeton Street
Austin, TX 78705
United States
512-232-1337 (Phone)
512-232-1372 (Fax)
William Matthew Sage
University of Texas at Austin School of Law ( email )
727 East Dean Keeton Street
Austin, TX 78705
United States
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