The other day one of my partners and I were discussing a case which was set for trial. In the case, the defendant was clearly at fault, and the question became: what is the threshold settlement value, i.e.: at what value do we recommend to our client that they should settle the case?
The case involved a husband and wife who were injured in a car accident. The case is pending in a very conservative venue (the juries do not render large verdicts). The medical bills were somewhere in the neighborhood of $7,500 – $10,000. Ten years ago, we would have recommended a settlement to the clients in the $25,000 – $30,000 range. Today, we discussed a settlement of $15,000-$20,000. Why? Tort reform and changes in the laws.
Ten years ago, we had a law in Alabama called the “Collateral Source Rule”. This rule provides that the defendant cannot put into evidence the fact that the injured party had health insurance to cover his medical bills. This rule has now been abolished. So, the defendant’s attorney can ask the injured party if his medical bills have been paid and by whom. The jury not only hears that the medical bills were paid by the health insurance company, let’s say BlueCross BlueShield (BCBS), but also how much they paid.
How does this devalue the case? BCBS has contracts with all of the medical providers, and they never pay the full amount of the bill. For example, if the hospital and doctor charges were $10,000, BCBS might only pay $4,000-$5,000 pursuant to their contract with the hospital and doctor, and the rest is written off aside from any co-pays and deductibles paid out of the injured party’s pocket. Consequently, the jury hears that the actual payment for the bills was only $4,000-$5,000, and those bills have been paid. So, instead of showing the jury the medical charges for the services rendered, the jury sees what the health insurance company paid for those charges. Therefore, instead of seeing the $10,000 bill, the jury sees the $4,000 payment, and the case value has been lowered significantly.
Is this right? We argue that it is not only not right, but it is unconstitutional. If the injured party had no health insurance, the bill would be $10,000 or the value that the medical providers put on their services. The defendant is benefitting from the fact that the injured party has health insurance and has paid premiums for health insurance. If the injured party didn’t have health insurance, the case would be worth more. Is that right?
Additionally, while the defendant can tell the jury the injured party had health insurance, the injured party is NOT allowed to tell the jury that the defendant had car insurance. Is that right? Shouldn’t the jury get to know all of the facts and circumstances? Why do we hide this fact? Insurance companies argue that if the jury knows the defendant has health insurance, that knowledge will prejudice the jury into awarding a larger sum of damages. Is that not the same type of prejudice as having the jury know that the plaintiff has health insurance, and thus, the verdict will be lower?
On top of that, BCBS is entitled to get their money back that they paid out for the bills from any settlement or verdict rendered. This is called subrogation. If the jury looks at the damages as $4,000 and gives a verdict of $4,000 based upon what BCBS paid, the injured party will get nothing, and BCBS will get some of their money back. On the other hand, if the jury sees the charges as $10,000 and renders a $10,000 verdict, BCBS would get their $4,000, and $6,000 would still be available. Is that right?
Finally, in such a situation where a jury renders a verdict for the amount of the medical bills, that verdict would not take into consideration the pain and suffering and mental and emotional distress suffered by the injured party. We make light of these types of damages, but they are serious damages. A person who is injured as a result of someone else’s neglect is required to: take off work, go to doctor’s appointments, feel pain, and change the way they do daily activities, if they can still do them at all. Isn’t that worth something?
Who benefits from this change in the law? Insurance companies. If the defendant has automobile insurance to pay for these damages, the insurer benefits from paying less out to the injured party. Over the last several years, insurers have been paying less and less on these types of claims. Are they reducing their premiums? Very little if at all.
Insurance companies also benefit because attorneys refuse to take some cases now for injured individuals due to the fact that they are not profitable economically, and when that is the case, we cannot help those individuals. What do I mean? If a client comes into the office with $2,500 in medical bills and BCBS paid $1,000, the insurance companies will only offer $3,000-$4,000 to settle the case. Such a settlement is usually not satisfactory to the client after the fees, expenses and subrogation are paid. Furthermore, the case would cost more than it’s worth to take it to court. Consequently, these people are left to deal with experienced insurance adjusters on their own.
Who loses? Attorneys lose because the value of cases is lower? Yes. There is no question that we make less money on a contingent fee case when the values are lower. There is no question that we, as attorneys, gain from higher settlements and verdicts. We also are not ashamed of this. We pay for all the expenses and take the risk of losing a case in exchange for a contingent fee contract. We work for that fee, and we are entitled to be paid for the work we perform just as anyone would be entitled to be paid for work performed.
Who really loses? People who are physically injured. Lost in all of the tort reform battles are the victims of carelessness, neglect, and out and out wrongful behavior. We, as a society, put much more emphasis on money and money issues as opposed to life issues. When we focus on money, we make decisions based upon money but which affect other areas of life.
Our focus as attorneys for injured parties is on the harm done to a person and that person’s family. Money is a means to an end for us, and that end is making the injured party’s life a little easier. It’s a way to try to help the person get back on her feet. It’s a way to provide more physical therapy. It’s a way to help the person get some more education in order to change a career to something that is less physically demanding. It’s a way to get the person the medical equipment she needs. It’s a way to help her keep her house while she’s out of work. It’s a way to help her hire people to assist with various household duties.
When the public fails to pay attention to certain changes in laws lobbied for by various companies, they suffer the consequences down the line. In this case, those consequences are suffered by injured people. Which is more important: insurance company profits or those who are physically injured?