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

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 prejudgment and postjudgment 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 in 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.

Juries and Medical Malpractice Claims: Empirical Facts versus Myths

“…Several studies report some of the largest malpractice awards that made headlines ultimately resulted in settlements that were only between 5% and 10% of the original jury verdict [18,39,41,42]. Using closed-claim files from Texas, Hyman et al found that 75% of plaintiffs received a payout less than the verdict [18].…”

“…Using closed-claim files from Texas, Hyman et al found that 75% of plaintiffs received a payout less than the verdict [18]. The average settlement for all cases was 29% less than the verdict; and the larger the verdict amount, the greater was the reduction during posttrial proceedings.…”

“…For plaintiffs with verdicts equaling or exceeding $2.5 million, 98 received less than the verdict, averaging approximately 56% of the verdict. Hyman et al [18] found that insurance policy limits were the most important factor involved in the reductions. Of the Florida medical malpractice cases involving verdicts of $1 million or more, the mean settlement was 67% of the original jury verdict [42].…”

Do damages caps reduce medical malpractice insurance premiums? A systematic review of estimates and the methods used to produce them

“…For example, Hyman et al (2007) use data on 7 Note that these studies acknowledge that the causality may be reversed-instead of reforms improving insurer profitability, insurer behavior may determine a states' willingness to enact reforms. The mechanisms through which tort reforms influence premiums are important to understand so that empirical models can account for the complexities.…”

Plaintiphobia in State Courts? An Empirical Study of State Court Trials on Appeal

“…Setting aside purely strategic appeals, some degree of settlement activity results from the normal forces at work in litigation at the posttrial stage (Hyman et al 2007). Moreover, on some level, appeals settlement …”