Early Offers
On Wednesday, the legislature in New Hampshire voted to override Governor Lynch’s veto of the early offers bill. Despite some imperfections in the bill, it was a good decision. Because all of the criticism is coming from the claimants’ perspective, I specifically state that the early offers law is good for claimants. I defended an earlier version of the bill from the claimants’ perspective here.
In a post on Wednesday, The Pop Tort pronounced early offers “horrendous.” Unlike the editors of many torts-related blogs, I don’t know the people who write for The Pop Tort. I don’t always agree with their positions, but I admire their dedication to victims of tortious conduct. This is a major reason why I want to respond to their early offers post. I would like those typically supportive of claimants to seriously consider endorsing early offers.
Because the bill has changed since I last defended it, I will start by briefly explaining the version that is now the law of New Hampshire. Pursuant to the bill, a patient who believes she is the victim of malpractice may send a notice of injury to the heath care provider requesting an early offer. The provider has 90 days to decide to extend an early offer and can ask the patient to undergo a physical exam. If extended, the offer must cover all economic loss—medical bills and lost wages. There are modest amounts of pain and suffering damages included based on classification of the injury as determined using the National Practitioner Data Bank severity scale. Moreover, the offer includes payment of the claimant’s attorney. The patient then has 60 days to accept or reject the early offer. If she accepts the offer, the case is over. However, if she rejects the offer and pursues a tort claim, she must be awarded at least 125 percent of the early offer or have to pay the defendant’s attorney’s fees. To ensure these fees can be paid, a bond must be posted.
I begin by examining the specific points of opposition in the post.
1. Early offers provides extremely limited compensation.
This depends on what is meant. To be considered an early offer, the health care provider must offer to pay all economic loss plus a modest, set amount for pain and suffering. For catastrophic injuries involving tremendous economic loss, an early offer could be millions of dollars. I assume that what is meant is that the amounts for pain and suffering are limited. It is true that the amounts for pain and suffering are less than are theoretically available under tort law, but compensation is much swifter and more certain. That is the trade-off. Moreover, empirical studies, including some specific to malpractice, routinely find that the most severely injured claimants recover only a portion of economic loss. Thus, for the most severely injured patients, the recovery of full economic loss, which is mandatory under early offers, would be an improvement.
Other commentators have argued that early offers would be unfair to claimants who did not have a lot of medical bills or lost wages; regarding lost wages, this would be particularly true of children, those who are retired, and those who do not work outside the home. The response to this point is that early offers may not be beneficial for everyone. If the claimant does not have a lot of economic loss, there may not be a pressing need for a financial recovery. Under such conditions, the claimant may decide the better course is to pursue a tort claim. Although, it may be significant to claimants who do not work outside the home that “replacement services” are available as economic loss.
In a similar vein, The Pop Tort quotes an editorial from the Union Leader complaining that early offers featured “absurdly low caps.” Damages are not capped. Pursuant to a cap, the claimant would still have to go through the normal litigation process. At the end of the process, if the claimant had managed to achieve a verdict in excess of the amount of the cap, then the cap would reduce the recovery. Instead, this is a trade-off of swift and certain recovery for economic loss and a small, set amount for pain and suffering.
2. Early offers provides incentives to reject portions of the claimant’s damages.
The Pop Tort post states, “the injured patients’ ability to collect what amounts to a severely-capped compensation would be infected by conflicts of interest at every single step, beginning with allowing the medical provider to choose its own doctor to decide a patient’s damages.” Perhaps this is what is meant by “lowballed,” which appears repeatedly in commentary on early offers (including in the editorial quoted by The Pop Tort). It is the only definition of the term that makes sense. A health care provider cannot “lowball” a claimant in the sense of offering anything less than economic loss plus the modest amount for pain and suffering indicated by the National Practitioner Date Bank’s severity scale. An offer that is less than that does not qualify as an early offer and the provisions of the law would have no effect on the claimant.
Thus, I will assume “lowballed” to mean that the health care provider will formally offer economic loss, but then reduce real economic loss because of conflicts of interest. The law provides safeguards for that danger. For instance, the claimant must agree to the physician suggested by the health care provider to examine the claimant’s injuries. If no agreement is reached, the hearing officer will select the physician. The physician conducting the examination “shall not be affiliated directly or indirectly in any way with the medical care provider alleged to have caused the injury.” Moreover, any time a claimant requests payment of economic loss and that payment is rejected, the health care provider must notify the claimant in writing about the basis for denial and inform the claimant about the appeal process.
Claimants have the right to request a hearing officer to resolve a dispute at any time. A hearing officer is “a person of judicial and/or legal training, common sense, and a respect for the law, chosen by the agreement of the parties from a list of neutral persons maintained by the judicial branch office of mediation and arbitration.” If no agreement is reached, a hearing officer is selected at random from the list. No hearing officer may be employed by the insurance department (a change from an earlier version of the bill made to mollify opponents) or shall serve if the officer would have a conflict under the state’s legal and judicial ethics codes. The health care provider must pay for the hearing officer and if the hearing officer determines the health care provider’s position was frivolous, he or she can force the health care provider to reimburse the claimant for the costs of the hearing up to $1,000 or, if the claimant is unrepresented, pay the claimant double the amount that was frivolously disputed or denied.
3. Claimants are asked to sign away their rights in a consent process that “violates even the most basic precepts of what constitutes a voluntary program.”
Contrary to this suggestion, I think New Hampshire went to great lengths to protect claimants. Here is the process mandated by the law. At the time the early offer is requested, the claimant is given a document that informs her that her right to seek a jury trial may be affected; that there is a right to consult an attorney (who will be paid by the health care provider in the event of an accepted early offer); that the claimant is free to pursue a tort claim if no early offer is made. Moreover, if the claimant is not represented by counsel, the medical provider must appoint a neutral advisor to explain the difference between early offers and the tort system. The claimant is then given several days after meeting with the advisor to withdraw the notice of claim. In other words, no claimant will sign the waiver without either the advice of counsel or the advice of the neutral advisor.
4. If the claimant requests and rejects an early offer, then he or she must receive 125 percent of the offer in the tort system or pay the health care provider’s attorney’s fees.
A penalty is needed to keep claimants from “gaming the system” by requesting an early offer without being serious about accepting it. If claimants continually asked for and rejected early offers, health care providers would have no incentive to spend the time and effort necessary to offer them. The alternative system would break down, and tort would be the only option for claimants. Candidly, I would have preferred forcing the claimant to prove negligence to a clear and convincing standard, but the House rejected that idea. Keep in mind that the claimant is only forced to pay the health care provider’s attorney’s fees after she has voluntarily requested an offer and decided she wanted more than complete coverage of economic loss, plus a small amount for pain and suffering and then failed to prove to a jury that she was damaged more than 125% of that amount (previously alleged to be extremely limited). If the case was subsequently settled, the attorney’s fees would likely become a component of the settlement agreement.
Early offers allows, but does not force, a claimant to bypass the tort system. Tort law has virtues, but among them are not certainty and swiftness. Because of an understandable focus on individual justice, the tort system can be very uncertain and slow, with significant transaction costs. There are many claimants who would prefer to have their claims resolved along insurance principles—with more certain payment for economic loss, taking care of the their urgent needs. I have sat at the hospital bed of a catastrophically injured loved one. After his health, my main concern was that he not be bankrupted by the enormous costs of life-saving care.
Some claimants have the resources to wait out a five-year malpractice struggle. Some claimants may enjoy the adversarial proceedings of depositions, interrogatories, and cross examinations. But all do not, and early offers gives them a possible way around them, while providing for basic economic loss much more swiftly. Although it may not be for all claimants, I don’t think early offers are horrendous. Not all tort reforms are bad.
–CJR