What We Know About Malpractice Settlements
52 Pages Posted: 21 Mar 2006
The enclosed Article is the first comprehensive synthesis of two decades of empirical research on medical malpractice settlement. The portrait that emerges from this synthesis is both more reassuring and more complex than popular portrayals. Although the fit is not perfect, the merits generally drive the settlement process. Weak claims consistently fare the worst, toss-ups cases do better, and strong cases have the most success.
Prior scholarship on malpractice outcomes has understated the strength of this correlation because it has focused principally on the impact of negligence on the settlement rates and has largely ignored the importance of settlement amount. The studies examining the relationship between settlement rate and case quality have invited mixed reactions because they have found a correlation that, while strong, leaves room for improvement. In 10-20 percent of the weakest cases, the plaintiff receives a settlement payment. In a similar fraction of the strongest cases, the plaintiff recovers nothing.
Yet, settlement rates, standing alone, paint a misleading picture. Equally important is the relationship between the strength of the plaintiff's case and the size of the payment received in settlement. As long as the payments received by the plaintiffs in weak and toss-up cases are appropriately discounted to reflect case quality, then settlement of the case is fully consistent with fair treatment of the defendant. For that reason, settlement rate data inherently overstates the prevalence of error. Settlement size must be considered as well.
In malpractice litigation, the amount paid to settle a case is routinely adjusted to match the strength of the plaintiff's case. Although only a few studies have collected this data, they show that payments in weak and toss-up cases are heavily discounted. In fact, the data on settlement size suggest that defendants are able to extract an even deeper discount than is warranted by the merits. The ability of insurance companies to extract this discount suggests that malpractice defendants enjoy a systematic advantage in bargaining power. Although the source of this asymmetry has yet to be determined, the studies justify several interesting hypotheses.
Keywords: malpractice, medical, settlement, bargaining power
Suggested Citation: Suggested Citation