New Hampshire’s Insidious Early Offer Medical Malpractice Law

Over the Governor’s veto, the New Hampshire legislature passed an “early offers” law for medical malpractice claims. Tort reformer Walter Olson rounds up some commentary, most notably Torts Professor Christopher J. Robinette’s support, but intentionally excluding (dismissing it as “error-filled screed in a Litigation Lobby outlet”) The Pop Tort’s critical piece. In short, the new law sets up a process under which patients can request an “early offer” of a settlement prior to full-blown litigation that is supposed to cover their “economic loss” and then provide a modest sum for pain and suffering.

That sounds like a reasonable idea in theory, but, if the patient turns down the “early offer,” the plaintiff faces a number of penalties, including the requirement that, if they don’t obtain a verdict for 125% or more of the early offer, then they pay the doctor’s or hospital’s full defense costs. Indeed, the patient has to post a bond for the potential value of those defense costs before filing the case. In essence, if a plaintiff asks for the “early offer” but doesn’t accept it, they are then precluded from filing suit, because a lawsuit would simply be too expensive and too risky.

Here’s the critical information you need to know: Olson, Robinette, and other supporters like Dr. Kevin Pho have misunderstood the bill. Here is how they each describe it:

  • Olson: “The law establishes incentives for defendants to make offers early in the litigation process that cover plaintiff’s economic losses such as medical bills and lost wages.”
  • Robinette: “If extended, the offer must cover all economic loss—medical bills and lost wages. … [F]or the most severely injured patients, the recovery of full economic loss, which is mandatory under early offers, would be an improvement.”
  • Pho: “Medical costs and lost wages would be covered.”

These interpretations are all wrong. An “early offer” under the bill would not cover “plaintiff’s economic losses,” it would only cover a small portion of them. It certainly does not cover the patient’s “full economic loss,” it covers a tiny fraction of it.  It does cover “lost wages,” but not as any rational person would understand them — it only covers lost wages in the past, and not lost wages going forward due to the patient’s inability to work. 

Read New Hampshire SB 406 itself. It defines “economic loss” as follows:

“Economic loss” means monetary expenses incurred by or on behalf of a claimant reasonably related to a medical injury and its consequences, including actual out-of-pocket medical expenses, replacement services, additional payment to the claimant pursuant to RSA 519-C:7, and 100 percent of the claimant’s salary, wages, or income from self-employment or contract work lost as a result of the medical injury. Economic loss does not include: pain and suffering, punitive damages, enhanced compensatory damages, exemplary damages, damages for loss of enjoyment of life (hedonic damages), inconvenience, physical impairment, mental anguish, emotional pain and suffering, and loss of the following: earning capacity, consortium, society, companionship, comfort, protection, marital care, parental care, attention, advice, counsel, training, guidance or education, and all other non-economic damages of any kind.

(Emphasis added) In serious cases involving disability, paralysis, blindness, or death, “earning capacity” is by far the largest loss. “Lost wages” only goes back from the time of the injury to the time the claim is decided, but their loss of earning capacity is the loss in wages and income the plaintiff experiences for the rest of their life. Here’s how the New Hampshire Supreme Court defines “earning capacity:”

Loss of earning capacity damages are “based upon the amount by which the earning capacity of the plaintiff has been reduced through the conduct of the tortfeasor.” Restatement (Second) of Torts § 906(b) comment c at 462 (1965). “[T]he measure of damages for impairment of earning capacity is the difference between the amount which the plaintiff was capable of earning before the injury and the amount which he or she is capable of earning thereafter.” 2 J. Stein, Stein on Personal Injury Damages § 6:5, at 6-15 (3d ed. rev.1997); see 2 J. Nates et al., Damages in Tort Actions § 10.01, at 10-3 to 10-6 (2006) (noting distinctions among claims for “future loss in earnings,” “future loss of earning capacity,” and “life-time loss of earning capacity”).

Laramie v. Stone, 999 A. 2d 262 (N.H. 2010).

Consider, as an example, a 40 year old worker who was earning $50,000 a year, and is then blinded or paralyzed by malpractice during surgery: if they file a claim a year after the event, their lost wages are merely $50,000, but, assuming retirement at 65, their lost earning capacity is $1.25 million. In cases involving disability, permanent injury, or death, the “economic damages” provided by the early offer are a fraction of the real economic damages; in the example above, New Hampshire’s “early offer” law re-defines “economic damages” to reach a number that’s less than 5% of the patient’s real economic damages.

But it’s not just a matter of the early offer being too low. All of that compensation for lost earning capacity, i.e. “the difference between the amount which the plaintiff was capable of earning before the injury and the amount which he or she is capable of earning thereafter,” is forfeited by requesting the early offer, because the post-offer penalties — like the requirement they post a bond and the requirement they win at trial and exceed the offer or pay the defendant’s attorney’s fees — makes attempting litigation too expensive and too risky, regardless of the size of the damages and the obviousness of the liability.

Indeed, New Hampshire’s system “early offer” system is so bad that there’s only one situation in which a patient should use it: if they have a claim that’s been rejected by malpractice lawyers. There will thus be only two types of claims in the system: frivolous claims where the plaintiff and their lawyer thought they could get some nuisance settlement, and meritorious claims where a plaintiff was duped by the health care provider (or poorly advised by an incompetent plaintiff’s lawyer) into entering the rigged process.

Which brings me to another point: Olson, Robinette, and Pho all dismissed claims that patients could be misled into giving up their rights under this system. But if one of the leading tort reformers, a law professor who specializes in torts, and a prominent doctor who advocates for malpractice liability limitations didn’t even see the key trick in the bill — i.e., redefining “economic loss” to mean something it has never meant in the law, something it certainly doesn’t mean to most citizens — what hope do we have for regular folks?

[Update: Anyone really interested in the above should read the comments to Robinette's post, his followup post, and the comments there (and on Overlawyered linked above). In sum, Robinette responds that plaintiffs who have already accepted the early offer can petition, over and over again, for lost wages as they accrue. In addition to the administrative problems — and the fact that, at some unknown point, the review board could simply discontinue or reduce the lost wages if it thought plaintiff would have lost their job or had a salary reduction — that remains a tiny fraction of the value of a normal loss of "earnings capacity" verdict. A normal "earnings capacity" award is a lump sum (which can be invested) that includes estimates of increased wages due either to individual career advancement or advancement of wages as a whole in particular sector. Consider, for example, a college freshman at the top of their class killed by malpractice (a real case of mine): their lost wages were $0, because they didn't have a steady job in college, but their lost earning capacity was between $3 million and $5 million.

The bill was sold to the public and the legislature with the claim that early offers include “economic loss.” Everyone who wrote that should revise it to: “patients will be offered a settlement for past economic loss, but zero compensation for future losses. They will then be turned into paupers who have to hire a lawyer to beg weekly for any wage losses that accrue, except for loss to earning capacity, which is specifically excluded by statute and so will never be available. Also, the weekly begging process will at some point fail and further compensation will be denied for reasons completely outside of the patient’s control.”

Doesn’t sound nearly as reasonable that way, does it? The NH early offer system is, at bottom, a trap for meritorious cases and a honeypot for weak cases that were otherwise worthless. This is great if you're a negligent health care provider who wants to get out of a bad case on the cheap or if you’re a troll plaintiff’s lawyer who wants to throw hundreds of weak cases at the system in the hopes a couple stick. For everyone else, it's a disaster.]

[Update II: Robinette has another update with a fascinating addition. He reached out to Jeffrey O’Connell, the law professor who originally drafted the language actually used in the bill. Turns out it was not O'Connell's intention to exclude "earnings capacity" per se, but rather a smaller subset of earnings capacity. As O'Connell intended it, the plaintiff would be awarded losses future expected income, but would not be able to recover for income that was possible pre-injury but not expected. That's a much smaller subset of damages — indeed, it's not even available in many jurisdictions — and I wouldn't be as concerned about it.

According to Robinette " clarification is being sought" on the matter that will remove the doubt. Personally, I'd recommend striking "earnings capacity" from the excluded damages, which creates an ambiguity, and just leaving the lost earnings portion of the "economic loss" definition as "100 percent of the claimant’s salary, wages, or income from self-employment or contract work lost as a result of the medical injury."

I still think lump sum is a lesser award than periodic payments, but that's a different issue, and I continue to believe the biggest problem is that, once an early offer is sought, the plaintiff is effectively forced to take it, because the penalties for subsequent litigation and too high. As the 2006 Harvard Medical School study found, one in six cases involving provable malpractice nonetheless lose at trial. Faced with those penalties, no reasonable malpractice lawyer would take a post-early-offer case, even if the case was highly meritorious.]

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  • Lil

    Imagine that: a torts professor, a doctor, and some other tort reformer touting a bill they didn’t even read carefully! A couple of weeks ago, you advised lawyers to “turn every page” of their documents. Well, the same is true for fake lawyers who teach at law school and/or write garbage on the internet (as for doctors, I don’t expect them to read much legal stuff). They should have read every section carefully and then they should have consulted with attorneys who actually practice in the field. The prof and the other guy don’t seem to know what “economic loss” and “earning capacity” mean. That’s embarrassing!

  • http://www.patient-safety.com/ Joel

    The problem is that when the AMA and the state medical boards and other lobbyists for medical interests knock on the doors of legislators persuading them that such legislation is for the greater good, there is no one knocking on those doors after them to give the view of the patient community as to what constitutes the greater good. There is no agency or board on the side of patients. There is no one legislators or journalists can call to get a coherent statement representing the interests of patients. They hear only from medical interests who persuade them that such things are good for patients no matter how bad they actually are for patients.