In the English Rule, the losing party in a lawsuit pays all legal costs. It is accepted worldwide; however, in the United States, it was replaced by the American Rule. In the American Rule, both the plaintiff and defendant in a lawsuit pay their own legal costs. Of course, there are exceptions.
In theory, the American Rule encourages meritorious lawsuits and discourages frivolous and even malicious ones. It is noteworthy that, before the contingency fee, with the American Rule, there were far fewer medical malpractice claims.
Medical malpractice plaintiff attorneys effectively junked the American Rule in favor of the contingency fee, in which 30% to 40% of any judgment is theirs if they win and, if they lose, they get nothing. Their rationale is that the American Rule stifles claims when a party, legitimately injured by a doctor, cannot afford the cost of litigation.
Plaintiff attorneys are not so altruistic. They choose to represent cases with minimum merit but maximum value for damages. They would reject cases with maximum merit if there are minimum damages. Hence, rather than discouraging frivolous lawsuits, as was the case with the American Rule, these lawyers encourage them.
Their mantra is, “You don’t pay if we don’t win.” What is left unsaid in this mantra is “depending on the value of the case and if we represent you.”
Because of the contingency fee and the rejection of the American Rule, medical malpractice lawsuits skyrocketed. Formerly, there were less than 1,000 medical malpractice claims per year; now, there are 86,000. Formerly, there were a handful of malpractice carriers; now, there are over 50 plus many more self-insurance plans. Formerly, malpractice premiums were affordable; now, they are so draconian that doctors are willing to sacrifice their patients and their very autonomy in return for coverage.
Defense attorneys in medical malpractice litigation are not so innocent, either. They are hired by the malpractice carrier and are paid by the hour, regardless of the merits of a claim. Not only do defense attorneys have an innate conflict of interest between the carrier and the doctor, both of whom are clients, but they make a tremendous amount of money. These cases, traditionally, linger on for years and have lots of billable hours. This also favors malpractice carriers. Over time, carriers charge more premiums and increase their tax-exempt reserves.
Damages, whether legitimate or not, increase. Legal transaction costs increase. Premiums increase. More doctors become medical experts or “hired guns” for medical malpractice attorneys. Malpractice carriers regard doctors as the “goose that lays the golden egg” because premiums are always paid. What emerges from this chaos is an entire medical liability litigation cartel, which earns in excess of $30 billion per year. All this and more because plaintiff attorneys rejected the American Rule.
Most negatively impacted are patients who legitimately are injured by a medical error. They are typically older. Damages are limited by life expectancy, which probably, is shortened by the injury. It does not take much to make such a person, who was independent before being a victim of a medical error, an infirm invalid after a medical error. Yet, this victim cannot find a lawyer, even though the cause of the injury is a bona fide medical error. Damages are simply not worth a plaintiff attorney’s time or effort to represent. All this and more because of the contingency fee.
The most lucrative claim for a medical malpractice plaintiff attorney would be a neurologic condition in a newborn, even if such a condition is a random spontaneous error of nature, which would have happened in any event. Plaintiff attorneys salivate over this kind of client because the damages are massive. Such was the case in Byrom vs Bayview Hospital, which resulted in a $229 million verdict that was later reversed for lack of merit.
These cases take years to resolve when, in fact, they can be remedied in a single investigation. I know this because I developed the methodology for such an investigation, which is discussed in earlier posts and available for anyone interested.
Employing this methodology in medical malpractice litigation will not change standard legal practices, but it will improve them by making them more efficient and effective. Among other things, it makes defendants, plaintiffs, and their lawyers immediately aware of the strengths and weaknesses of their cases and enables the expeditious settlement of a meritorious claim and the prompt dismissal of a frivolous one. This will take weeks, not years. It reduces legal transaction costs, total costs of claims and premiums, which together account for $443 billion or 2.15% of the GDP. It reduces the cost of health care itself today by $4.5 trillion. It restores ethical principles in the legal and medical professions and makes the American health care system the undisputed envy of the world.
Finally, it restores the American Rule, but in a new rendition. Both sides will pay their own legal costs. As always, medical malpractice insurance protects doctors as defendants, but there would be a counterpart insurance that protects lawyers as advocates. Defense legal costs will be paid by malpractice insurance. Doctors, as defendants, will continue to pay these premiums. However, plaintiff legal costs will be paid by plaintiff litigation insurance or trial insurance, purchased on a case-by-case basis by plaintiff attorneys. The plaintiff attorney’s client will pay these premiums. This replaces the contingency fee.
This approach is not so novel. It is already a pilot project in Canada, which has only a fraction of medical malpractices compared to the United States. Frankly, I am surprised that this is a Canadian initiative and not one of the United States. It is time to end the tyranny of plaintiff malpractice attorneys and not buy into their mantra of “you don’t pay if we don’t win.” Because of them, everyone pays. What happens next is up to us.
Howard Smith is an obstetrics-gynecology physician.
