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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; University of Texas at Austin - School of Law; McCombs School of Business, University of Texas at Austin; 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



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.

Keywords: damages caps, medical malpractice, texas, settlements

JEL Classifications: K13

Accepted Paper Series

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

Suggested Citation

Hyman, David A., Black, Bernard S., Silver, Charles M. 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


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Contact Information

Bernard S. Black (Contact Author)
Northwestern University - School of Law ( email )
375 E. Chicago Ave
Chicago, IL 60611
United States
512-503-2784 (Phone)

Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)
University of Texas at Austin - School of Law ( email )
Austin, TX 78705
United States
512-471-4632 (Phone)
McCombs School of Business, University of Texas at Austin
Austin, TX 78712
United States
European Corporate Governance Institute (ECGI)
Brussels Belgium
David A. Hyman
University of Illinois - College of Law ( email )
504 E. Pennsylvania Avenue
Champaign, IL 61820
United States
William Matthew Sage
University of Texas at Austin School of Law ( email )
727 East Dean Keeton Street
Austin, TX 78705
United States
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)
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