Medical Malpractice Settlement Formula? How to Value Cases

malpractice 2Most malpractice lawsuits in Maryland are resolved after negotiating through adversarial bargaining.  At the end of the day, our clients only have two options: settle or go to trial. Sometimes, they do not even have two options.  We have tried medical malpractice cases where there was no settlement offer.

Is There a Formula to Determine the Value of Medical Malpractice Cases?

There is a settlement formula to determine the value of a medical malpractice claim.   The formula has four parts:

  1. Average verdict expectancy if the doctor or hospital is found responsible?  How do you figure this out?  It is not easy.   As a starting point, you look at similar cases in similar jurisdictions. Our website is a great starting point to figure out the trial value of hundreds of different malpractice cases.  You can also use Metro Verdicts Monthly,  ATLA Law Reporter, and Jury Verdict Research.  But that is just the starting point, you have to bake a host of other factors.  There are too many to list but the biggest ones are the venue (Baltimore and P.G. County drive values) where the case is being tried and how well the plaintiff and defendant will present.  If you get your mind around these three factors, you are probably 80% of the way home to the settlement value of the case.
  2. Chances you will win the case?  There are cases where the health care provider simply admits liability.  When that happens, you can skip this step because liability is 100%. Otherwise, you multiply the trial value of the case by the chance of success.  If you have a 50% chance of success and the trial value is a collectable $3 million, the value of the case is $1.5 million.
  3. Plaintiff’s litigation costs?  If it is going to cost $100,000 from the point of settlement to the time of trial, than you have to discount the settlement value by the litigation costs.  Our law firm is fronting all of those costs and if we lose the case, the burden of those fees is on us.  But if we prevail, those costs come out of the client’s recovery so these costs must be discounted to get to the settlement value of the case.
  4. Client’s time value of money?   Money now is worth more than money later.  Usually the moment of choice of settlement in a malpractice cases is within a short window of the trial date.  But the vast majority of malpractice cases are going to be appealed so the road could be longer than just the trial date.  There is a formula to calculate the time value of money.  But what matters is your client’s time value of money.  If they are paying credit card interest at 18% or, worse, they are dying, the math will be wildly different then the classic time value of money calculations an economist would use.
  5. Client’s willingness to assume risk?   This ties in a little with that fourth prong.  How willing is the client to take the risk?  Looking back at the second prong, would the client be willing to put $1.5 million on the roulette table in the hopes of making $3 million.  Of course not.  I always tell your clients not to consider our risk of loss in their considerations.  My law firm has enough cases where we can take on risk.   We get large verdicts in malpractice cases.  We also get zero verdicts, too.  We have enough cases where we can act as our own insurance company.  The big hits cancel out the zero verdicts.  But the client has just the one case and no one to act as an insurance policy for them.   So how much money should they give up as a premium essentially to remove that risk?   That really depends on the client and how life altering a settlement or verdict would be for the client.

riskMost lawyers do not use this analytical method consciously. They are using intuitive case-value analysis based on experience and feel.  But really, that unconscious analysis really does include these factors.  I think it is a good idea to sometimes breakdown that intuitive thinking to really think about how you approach the value of these cases and how to convey your opinions to your client.

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  • Ron Miller

    The big issue is the last one: what does the client want to do? How much risk do they want to take on?

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