There has been no shortage of catastrophic MPL verdicts over the past several years, not only from the ‘usual’ venues, but also from historically defence-friendly or more rural territories. Richard Henderson of TransRe discusses the implications from a reinsurance perspective.
While there are numerous sources for medical professional liability (MPL) verdicts, no one source captures them all. Since 2001, TransRe has utilised not only our own data but also data from various public and subscription sources to build our own database of MPL verdicts.
“In the space of just four years, a full 25 additional verdicts came in for amounts greater than the 25th largest verdict in 2014.”
While we do not represent that we have every MPL verdict, we do have thousands of verdicts within our repository. For the purposes of this discussion, we will focus solely on the physician, medical practitioner and hospital verdicts, but not medical products or long-term care claims, even though claims within these areas can impact many MPL writers or captive entities.
Why focus attention on verdicts?
This is a common question raised whenever we discuss verdicts. How significant are verdicts in the larger picture when only a fraction of claims perhaps 5 to 8 percent of them are actually tried? Even when tied to an adverse if not catastrophic verdict, the ultimate claim resolution is often much less than the verdict amount.
There are several reasons that verdicts are extremely relevant within the MPL space. At the outset, when it comes to claim valuation, those managing and defending MPL claims constantly assess (1) what is the likelihood that this claim can be successfully defended; and (2) what is the reasonable jury verdict valuation if the claim is tried to a plaintiff’s verdict?
This, in turn, is often a significant variable in the “settle/defend” discussion, as well as claim valuation for settlement purposes. The more verdict data that can be analysed, the more justification there may be in the ultimate decision.
Conversely, an increase in plaintiff verdict frequency and/or severity fuels ever-increasing demands. This, in turn, leads to higher levels of an insurance tower being on notice and, in many instances, demanding that settlement be obtained within lower layers what is commonly referred to as a “hammer demand” with the threat then being that failure to settle within that lower layer could expose that insurer to a bad faith claim-handling exposure.
Similarly, with lower-limit policies, often on the physician or Advanced Practice professional, this can also lead to similar demands to settle from their personal counsel.
What about claims that are tried to a plaintiff’s verdict? From an appellate perspective, historical verdicts which are on point with the claim in question may be used to justify a radically different valuation and/or provide an argument for a new trial.
Beyond that, particularly in the context of catastrophic verdicts, these can often lead to extracontractual litigation, whether between insured vs insurer including claims which exceed policy limits or between multiple insurers. In these examples, other verdicts may well be a central part of the respective arguments.
What have we been seeing?
By numerous measures, 2018 yielded the most adverse MPL verdict outcomes compared to any year since our verdict-tracking study commenced in 2001. In making this statement, we start by taking the aforementioned verdict data from which we conduct a multi-dimensional analysis of the 50 largest verdicts each year.
Figure 1 tabulates the 50 largest verdicts and calculates a mathematical average. By this measure, 2018 yielded an average verdict of $29.8 million, which surpassed the prior record of $28.3 million in 2012. Not only did 2018 yield the largest average verdict, it was also the fourth consecutive year of increase. It was the first time in the nearly 20-year study where average verdicts increased each year for four consecutive years.
(Note that Figures 1, 3 and 4 are “inclusive”. That is, any verdict which appears on the $50 million graph [Figure 1] has by definition been part of both the $25 million [Figure 3] and $10 million [Figure 4] graphs. The same is true for the $25 million verdicts [Figure 3]—they are automatically part of the $50 million graph.)
Since a simple numerical average can be skewed by a disproportionate number of large verdicts, we then take the same 50 verdicts and turn them on their side for a cross-section of where the 10th, 25th and 50th largest verdicts appear (Figure 2).
We can see specific jury valuation bands and determine whether we are looking at a handful of aberrational verdicts at the top end or whether there is a pattern of verdicts within particular ranges which are more instructive.
What we saw in 2018 was also a record number of verdicts coming in at all three of these levels. With 12 verdicts of at least $40 million, the 10th largest verdict for 2018 dwarfed the values for any other year.
To put that into further perspective, we saw seven $40 million or greater verdicts in 2017, and eight in that category for the three-year combined period of 2014–17.
The 12 $40 million or greater verdicts in 2018 spanned no less than eight states, with Pennsylvania, Illinois, Michigan and Florida each having two. All involved catastrophic injuries, with six of the 12 involving newborns, and two others involving multiple amputations.
To provide additional texture to these results, the 25th largest verdict in 2018 was nearly $2 million greater than the 10th largest verdict in 2014. In 2018 there were 15 additional verdicts which came in for larger values than the 10th largest verdict just four years earlier.
Similarly, digging down to the 50th largest verdict from 2018 and comparing that to prior years, we again not only achieved a record in 2018, but the 50th largest verdict in 2018 was greater than the 25th largest verdict in 2014.
That means that in the space of just four years, a full 25 additional verdicts came in for amounts greater than the 25th largest verdict in 2014. This would give further weight to the position that it is not just the handful of ultra-large verdicts that are of concern, but that verdict values rose at all levels within the 50 largest verdicts.
Table 1 analyses the same verdict data, but in a manner which further carves out where specific verdicts were rendered so as to provide one more dimensional analysis.
Here, we start with the truly “catastrophic” MPL verdicts: those which are at least $50 million. What we saw in 2018 were six such verdicts three of which exceeded $100 million which was the third highest total for any year in the study.
For the preceding year of 2017 there were no $50 million verdicts, and for the five-year stretch of 2013–2017, there was a total of only eight verdicts of $50 million or more. Through the first eight months of 2019 we have seen three verdicts of $50 million or greater, two of which exceeded $100 million. The largest of those verdicts, a $229 million birth injury verdict in Baltimore, has been referenced as the largest MPL verdict in US history.
Whether we reach the same number of $50 million-plus verdicts in 2019 remains to be seen, but it is worth noting that two of the $50 million verdicts in 2018 were rendered in September and October, respectively.
Verdicts at the $25m and $10m thresholds
Within these verdict bands (Figures 3 and 4), we begin to see a sufficient volume of verdicts to draw even more meaningful conclusions. In both segments, we saw a continued upward development of claims for the fourth consecutive year again, the first time we have encountered four consecutive years of increase during the nearly 20-year evaluation period.
The number of claims in the overall MPL population vary from year to year, but trended downward nationally starting in the mid-2000s, eventually leading to what many MPL writers observed as record low claim frequency within the past several years. The population of claims which are even available to be tried has therefore also declined.
While there is no one specific source for MPL verdicts, our observations on a broad basis are that fewer claims are being tried in 2019 compared to 2018, and that the same can be said when comparing claims tried in 2018 to 2017. One of the states which does drill down to track MPL verdict activity is Pennsylvania, and its data support this downward movement of MPL jury verdict frequency.
While its 2018 data are not presently available, Pennsylvania logged 102 MPL jury verdicts in 2017, which was down from 110 in 2016 and 128 in 2014. Going back to 2009, there were 154 MPL claims tried to verdict statewide in Pennsylvania, and in the calendar year 2005 there were 223 MPL claims tried to verdict more than twice as many as in 2017.
Assuming most other states have experienced reasonably similar drops in MPL claims that are actually tried to verdict, that arguably makes the increase in adverse MPL verdicts much more pronounced.
We are often asked why there is an undulation of verdicts within these bands. There are several theories, ranging from the inherent random risk which exists whenever claims are tried, to broader links to the health of the overall US economy/availability of funding sources, to varying levels of risk tolerance (or avoidance) of decision-makers when they may perceive a trend is going in one direction or another. There may be some level of validity to all theories.
We have included our data valued through to the end of August 2019. If we were to assume the first two-thirds of the year will represent what we see for the final third, we would see each band reverting back slightly from the record adverse results of 2018, but only to the then record/near record levels of 2017.
Since we are seeing a reduction in the number of claims tried, 2019 may after all not really be an improvement; it may just reflect decreased risk tolerance in trying claims, with more claims being moved to settlement vs running the risk of trial. Even at that, the cumulative verdict amounts in our roster surpassed $1 billion by July 2019, or roughly a full month ahead of the “record” year of 2018.
Explanations for recent verdict severity
There are numerous potential explanations for the verdict activity described above. The three leading theories are as follows.
Millennial effect/lottery mentality
Many point the finger at millennials, and what is perceived to be their approach to litigation and verdict valuation. While this is perhaps a generalisation, many experienced defence trial counsel and organisers of mock trials and focus groups agree that millennials have a different mindset compared to other juror populations, and that the plaintiff’s bar is doing a better job of reaching millennial jurors.
There is also the common argument that jurors in general have a “lottery mentality”, fuelling these verdict amounts. It is not uncommon for plaintiff’s counsel even to reference salaries of entertainers or athletes during their closing arguments.
The “reptile theory” has been formally espoused by many in the plaintiff’s bar for the past 10 years. It claims to have helped achieve in excess of $7.7 billion in verdicts and settlements across a variety of product lines, including of course MPL.
That is a somewhat arbitrary figure, but use of reptile tactics continues to be widely observed, not only in trial but also during depositions in order to lay the groundwork for increased leverage at mediation and trial. While the defence community is increasingly aware of reptile, there are some who are still caught off-guard when confronted with these tactics.
Verdicts are inherently unpredictable
Another common theory is that there is nothing to be said about verdicts aside from the fact that they can yield unpredictable if not occasionally catastrophic results. It could be argued that is why people buy insurance and reinsurance, to smooth these fluctuations.
Should we be trying MPL claims?
While it may seem counterintuitive given the results and commentary above, there are many who feel that more claims need to be tried if we are to see improved results. Three specific suggestions follow:
Go on the offensive with the “damages” defence
Historically, the MPL defence strategy has focused the majority of attention on (a) standard of care; and (b) causation. The third component damages is relegated to a peripheral role with the presumption that if people start talking about damages, that indicates the rest of the defence is weak.
Conversely, defence counsel proponents of damage-anchoring techniques argue that optimal results can be achieved by early and aggressive investigation to verify or refute the extent of plaintiff’s damages, including retention of damages experts early in the process. This leads to a defence anchor value on damages, which sets the tone as opposed to waiting for the plaintiff to establish a damages valuation without a firm defence figure.
Proponents also believe that various studies, including mock trials/focus groups as well as post-verdict juror interviews, have established that in the absence of a defence valuation of damages (other than $0), juries will lean toward the plaintiff’s figure.
Embrace technology and high quality graphics
As reported by Law 360, a American Bar Association survey reported that only 21 percent of attorneys contacted were not using some form of technology in the courtroom in 2018, as opposed to 54 percent non-usage in 2014. This is one study, was not limited to MPL, and was not meant to be taken as an absolute valuation, but these estimates should shock no-one.
While the defence is also embracing the use of such technology, it is not uncommon for us to hear concerns over the additional layer of cost that such a vendor adds to the process.
There is certainly an argument which says that to reach today’s jurors including millennials most efficiently more emphasis must be given to higher end technology, even if this adds to cost. The best defence may not necessarily be the least expensive defence, especially in a complex medical professional claim.
Maximise collaboration opportunities
It has long been said that the best defence is a collaborative defence, not only between defendants but also up and down an insurance or reinsurance tower of coverage, particularly for large captive insurance writers who may engage multiple insurers/reinsurers as part of their programme. The true value of such partnerships should extend beyond a mere financial backstop and should maximise the insurer/reinsurer’s broad market experience and exposure to provide collaborative guidance and direction wherever possible.
We advocate early and frequent communication with our partners such that when a serious claim arises, there is ample opportunity to have a meaningful discussion over potential value-added suggestions which may benefit the defence.
Only a small percentage of MPL claims are tried to verdict, but the impact of these verdicts should not be underestimated. While jury verdicts can be unpredictable, we can collectively learn from verdict outcomes and look to achieve more acceptable results going forward, not just on claims tried to verdict, but by extension to other claims within the portfolio.
Richard Henderson is senior vice president at TransRe. He can be contacted at: email@example.com
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