Loser Pays in the U.S.? Some States Have It.

Most U.S. physicians are not clamoring to embrace the British healthcare system. But, one feature accessible to our colleagues across the pond is an exception. Loser pays.

In the U.S. tort system each side bears the burden of paying its own legal fees. Plaintiffs typically solve this problem by locking into a contingency fee arrangement. There, the plaintiff’s case is propelled by his attorney. The attorney collects a steep percentage of any award or settlement, after expenses. If the plaintiff loses, he pays his attorney nothing.

 

The defendant pays his lawyer. In medico-legal cases, defense costs are typically paid by the doctor’s professional liability carrier.

 

In England, in contrast, the party that prevails can collect reimbursement for its own legal fees from the adverse party.

 

What would happen if the U.S. embraced a loser pays system? Would it deter meritless cases?

 

Some states have some form of loser pays. But, the devil is in the details. Get one detail wrong, and you collect nothing. A recent Georgia case, Chadwick v. Brazell 2015 WL 1243887 (Ga.App.), illustrates this point.

 

The patient sued her cosmetic surgeon for complications related to breast implant surgery. She sued for actual damages and punitive damages. (Many medical malpractice policies do not pay for punitive damages. Punitive damages are infrequently awarded, typically for egregious behavior, well beyond ordinary negligence.) The surgeon offered to settle the case for $200,000. The patient rejected the offer.

 

Georgia law encourages settlements. If a defendant makes a good faith offer which the plaintiff rejects, some outcomes allow the defendant to collect reasonable attorney’s fees from the date the offer was rejected forward.

 

“If a defendant makes an offer of settlement which is rejected by the plaintiff, the defendant shall be entitled to recover reasonable attorney’s fees and expenses of litigation incurred by the defendant or on the defendant’s behalf from the date of the rejection of the offer of settlement through the entry of judgment if the final judgment is one of no liability or the final judgment obtained by the plaintiff is less than 75 percent of such offer of settlement.”

 

The surgeon’s offer was $200,000. The patient rejected the offer. The case went to trial and the surgeon lost. The jury awarded the patient $125,000.

 

The final judgment, $125,000, was less than 75% of the settlement offer. So, on first blush, the surgeon should have been reimbursed for his own legal defenses from the date his offer was rejected forward.

 

Again, the devil is in the details. To take advantage of the “loser pays” arrangement, the offer must:

1. Be in writing and state that it is being made pursuant to this Code section (9-11-5);
2. Identify the party or parties making the proposal and the party or parties to whom the proposal is being made;
3. Identify generally the claim or claims the proposal is attempting to resolve;
4. State with particularity any relevant conditions;
5. State the total amount of the proposal;
6. State with particularity the amount proposed to settle a claim for punitive damages, if any;
7. State whether the proposal includes attorney’s fees or other expenses and whether attorney’s fees or other expenses are part of the legal claim; and
8. Include a certificate of service and be served by certified mail or statutory overnight delivery in the form required by Code Section 9-11-5.

 

Seems straightforward enough. But, in the surgeon’s settlement offer, the $200,000 was listed as a single line item. No mention was made as to whether any payment was to be allocated for punitive damages. The surgeon was skunked.

 

On appeal, the surgeon made two arguments.

 

He agreed the statute notes one must state with particularity the amount to be proposed to settle a claim for punitive damages, if any. But, he presumed that if no amount is defined, the amount is reasonably construed to be zero. The appellate court rejected this argument. It concluded that if the amount proposed to settle punitive claims is zero, the offer must say zero.

 

More aggravating, just prior to trial, the patient dropped her claim for punitive damages. The surgeon argued that by the time the jury rendered its verdict, there was NO claim for punitive damages. The appellate court still skunked the surgeon. It concluded that at the time the offer was made, a claim for punitive damages was on the table, and needed to be addressed.

 

Georgia is not alone in allowing reimbursement for some legal fees in some circumstances. In at least one state, we are aware of settlement offers by doctors as low as $10,000 to get the plaintiff’s attention he might be on the hook for the defendant’s legal fees if he rejects this offer.

 

So, some form of loser pays is alive and well in some states. Just make sure your i’s are dotted and your t’s are crossed.