Advertisement

Journal of Risk and Uncertainty

, Volume 4, Issue 4, pp 403–423 | Cite as

Uncertainty, information and resolution of medical malpractice disputes

  • Frank A. Sloan
  • Thomas J. Hoerger
Insurance Liability Symposium—Part I

Abstract

This study assesses the role of defendant liability in determining whether the plaintiff receives payment, relationship of compensation to economic loss, and stage of dispute resolution. An options pricing model explains how information acquired affects both decisions to drop or continue and settlement values, as well as the role of pecuniary motives for claiming. Cases in which a panel of physician evaluators thought defendant(s) to be innocent were much more likely to be dropped, as were cases in which innocence became more apparent as the case developed. Compensation was much less than economic loss on average. Questionable defendant liability meant reduced compensation.

Key words

options pricing model stage of dispute resolution compensation liability 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Bebchuk, Lucian A. (1964). “Litigation and Settlement Under Imperfect Information,” Rand Journal of Economics 15, 404–415.Google Scholar
  2. Bombaugh, Robert L. (1971). “The Department of Transportation's Auto Insurance Study and Auto Accident Compensation Reform,” Columbia Law Review 71, 207–240.Google Scholar
  3. Cornell, Bradford. (1990). “The Incentive to Sue: An Option-Pricing Approach,” Journal of Legal Studies 19, 173–187.Google Scholar
  4. Danzon, Patricia M. and Lee A. Lillard. (1983). “Settlement Out of Court: The Disposition of Medical Malpractice Claims,” Journal of Legal Studies 12, 345–377.Google Scholar
  5. Dobbs, Dan B. (1982). “Chapter 8: Personal Injury and Death.” In Dan B. Dobbs, Remedies: Damages, Equity, Restitution. St. Paul, MN: West Publishing Company.Google Scholar
  6. Farber, Henry S. and Michelle J., White. (1990). “Medical Malpractice: An Empirical Examination of the Litigation Process,” Working Paper No. 3428, National Bureau of Economic Research, Inc., Washington, DC.Google Scholar
  7. Fournier, G. M. and T. W. Zuehlke. (1989). “Litigation and Settlement: An Empirical Approach,” Review of Economics and Statistics 71, 189–195.Google Scholar
  8. Gould, John. (1973). “The Economics of Legal Conflicts,” Journal of Legal Studies 2, 279–300.Google Scholar
  9. Hughes, James W. (1989). “The Effect of Medical Malpractice Reform Laws on Claim Disposition,” International Review of Law and Economics 9, 57–78.Google Scholar
  10. King, Elizabeth M. and James P., Smith. (1988). Computing Economic Loss in Cases of Wrongful Death. San Francisco, CA: The Rand Corporation.Google Scholar
  11. Lillard, Lee A. and W. Kip Viscusi. (1990). “The Bargaining Structure of the Litigation Process,” unpublished manuscript.Google Scholar
  12. Metzloff, Thomas B. (1991). “Resolving Malpractice Disputes: Imaging the Jury's Shadow,” Law and Contemporaty Problems 54, 43–129.Google Scholar
  13. Naifeh, Steven and Gregory W. Smith. (1989). The Best Lawyers in America, 1989–1990. New York: Woodward/ White.Google Scholar
  14. Nalebuff, Barry. (1987). “Credible Pretrial Negotiation,” Rand Journal of Economics 19, 197–210.Google Scholar
  15. Landes, William M. (1971). “An Economic Analysis of the Courts,” Journal of Law and Economics 14, 61–107.Google Scholar
  16. P'ng, Ivan P. L. (1987). “Litigation, Liability, and Incentives for Care,” Journal of Public Economics 34, 61–86.Google Scholar
  17. Reinganum, Jennifer F. and Louis, Wilde. (1986). “Settlement, Litigation and the Allocation of Litigation Costs,” Rand Journal of Economics 17, 557–566.Google Scholar
  18. Shavell, Steven. (1982). “Suit, Settlement, and Trial: A Theoretical Analysis Under Alternative Methods for the Allocation of Legal Costs,” Journal of Legal Studies 11, 55–81.Google Scholar
  19. Sloan, Frank A., Randall R. Bovbjerg, and Penny B. Githens. (1991a). Insuring Medical Malpractice. New York, NY: Oxford University Press.Google Scholar
  20. Sloan, Frank A., et al. (1991b). Winners and Losers: How Medical Malpractice Claims are Resolved, unpublished manuscript.Google Scholar
  21. Sloan, Frank A. and Chee-Ruey, Hsieh. (1990). “Variability in Medical Malpractice Payments: Is the Compensation Fair?,” Law and Society Review 24, 601–659.Google Scholar
  22. Sloan, Frank A. and Stephen S.van Wert. (1991). “Cost and Compensation of Injuries,” Law and Contemporary Problems 54, 131–168.Google Scholar
  23. Snyder, Edward A. and James W. Hughes. (1990). “The English Rule for Allocating Legal Costs: Evidence Confronts Theory,” Journal of Law, Economics, and Organization 6, 345–380.Google Scholar
  24. Viscusi, W. Kip. (1986). “The Determinants of the Disposition of Product Liability Claims and Compensation for Bodily Injury,” Journal of Legal Studies 15, 321–346.Google Scholar
  25. Viscusi, W. Kip. (1988). “Product Liability Litigation with Risk Aversion,” Journal of Legal Studies 17, 101–121.Google Scholar

Copyright information

© Kluwer Academic Publishers 1991

Authors and Affiliations

  • Frank A. Sloan
    • 1
  • Thomas J. Hoerger
    • 2
  1. 1.Department of EconomicsVanderbilt UniversityNashville
  2. 2.Vanderbilt UniversityNashville

Personalised recommendations