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http://ssrn.com/abstract=914415
 
 

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Do Defendants Pay What Juries Award? Post-Verdict Haircuts in Texas Medical Malpractice Cases, 1988-2003


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)

Kathryn Zeiler


Georgetown University Law Center

Charles Silver


University of Texas at Austin - School of Law

William M. Sage


University of Texas at Austin School of Law


as published in Journal of Empirical Legal Studies, Vol. 4, No. 1, pp. 3-68, 2007
U Illinois Law & Economics Research Paper No. LE06-028
U of Texas Law, Law and Economics Research Paper No. 68
1st Annual Conference on Empirical Legal Studies

Abstract:     
Legal scholars, legislators, policy advocates, and the news media frequently use jury verdicts to draw conclusions about the performance of the tort system. However actual payouts can differ greatly from verdicts. We report evidence on post-verdict payouts from the most comprehensive longitudinal study of matched jury verdicts and payouts. Using data on all insured medical malpractice claims in Texas from 1988-2003 in which the plaintiff received at least $25,000 (in 1988 dollars) following a jury trial, we find that most jury awards received "haircuts." Seventy-five percent of plaintiffs received a payout less than the adjusted verdict (jury verdict plus pre-judgment and post-judgment interest), 20 percent received the adjusted verdict (within + 2 percent), and 5 percent received more than the adjusted verdict. Overall, plaintiffs received a mean (median) per-case haircut of 29 percent (19 percent), and an aggregate haircut of 56 percent, relative to the adjusted verdict. The larger the verdict, the more likely and larger the haircut. For cases with a positive adjusted verdict under $100,000, 47 percent of plaintiffs received a haircut, with a mean (median) per-case haircut of 8 percent (2 percent). For cases with an adjusted verdict larger than $2.5 million, 98 percent of plaintiffs received a haircut with a mean (median) per-case haircut of 56 percent (61 percent). Insurance policy limits are the most important factor explaining haircuts. Caps on damages in death cases and caps on punitive damages are also important, but defendants often paid substantially less than the adjusted allowed verdict. Remittitur accounts for a small percentage of the haircuts. Punitive damage awards have only a small effect on payouts. Out-of-pocket payments by physicians are rare, never large, and usually unrelated to punitive damage awards. Most cases settle, presumably in the shadow of the outcome if the case were to be tried. That outcome is not the jury award, but the actual post-verdict payout. Because defendants rarely pay what juries award, jury verdicts alone do not provide a sufficient basis for claims about the performance of the tort system.

Number of Pages in PDF File: 66

Keywords: Jury verdict, malpractice, payout, haircut

JEL Classification: K13, K41

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Date posted: July 6, 2006  

Suggested Citation

Hyman, David A. and Black, Bernard S. and Zeiler, Kathryn and Silver, Charles and Sage, William M., Do Defendants Pay What Juries Award? Post-Verdict Haircuts in Texas Medical Malpractice Cases, 1988-2003. as published in Journal of Empirical Legal Studies, Vol. 4, No. 1, pp. 3-68, 2007; U Illinois Law & Economics Research Paper No. LE06-028; U of Texas Law, Law and Economics Research Paper No. 68; 1st Annual Conference on Empirical Legal Studies. Available at SSRN: http://ssrn.com/abstract=914415

Contact Information

David A. Hyman (Contact Author)
University of Illinois College of Law ( email )
504 E. Pennsylvania Avenue
Champaign, IL 61820
United States
Bernard S. Black
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
Kathryn Zeiler
Georgetown University Law Center ( email )
600 New Jersey Avenue, NW
Washington, DC 20001
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)
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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