Study: Settling injury claims early saves money

Chris Rizo Jun. 8, 2008, 10:51pm

Jeffrey O'Connell

CHARLOTTESVILLE, Va. (Legal Newsline)-By promptly settling personal injury lawsuits rather than fighting claims in court, businesses can save an average of $114,000 per tort claim or $670,000 for severe injuries, a study suggests.

The study, by University of Virginia Law School Professor Jeffrey O'Connell and Associate Professor of Finance Patricia Born of California State University-Northridge, examines court settlements of businesses facing personal injury cases between 1988 and 2004 in Texas and Florida.

Their findings, published this month in the Columbia Business Law Review, suggest that by promptly paying plaintiffs' out-of-pocket medical expenses and lost wages can save businesses money, while avoiding protracted court battles, high legal fees and "pain and suffering" awards.

O'Connell and Born propose an early offer system that would give businesses 180 days to offer claimants payments for their medical expenses and lost wages plus an additional 10 percent for attorney fees.

"There would be no compensation for pain and suffering. On average, the wait for payment from the time of the claim would be reduced by at least 2 1/2 years compared with today's tort system," O'Connell said in a statement.

Under their model, claimants could only reject settlement offers if the defendants' actions involved gross misconduct.

"Thus a crucial element of the tort system's deterrence mechanism is retained: Injured parties could still win suitably large monetary awards under the early offers model for both economic and non-economic damages in clear cases of aggravated error," O'Connell said.

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