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Incentives against Settlement

A candid defense attorney once described a medical malpractice case as an annuity, bearing interest above the prevailing rate. The longer a file is open, the longer the law firm can draw that interest. Every few months additional court papers can be filed. Client reports need to be done on a regular basis. Each piece of paper and court appearance that the defense attorney can generate, or force the plaintiff's attorney to generate, results in substantial fees. This approach is usually described as being "tough" on the plaintiff. Being tough usually means forcing court appearances and motion practice rather than coming to agreement.

Most malpractice lawsuits settle before a final jury verdict. Unlike attorneys who defend criminals, malpractice defense attorneys have an incentive not to cooperate with the plaintiff's attorney in reaching a settlement. Cases are often settled at the courthouse door because that is the longest the defense can delay before running the risk of a trial. Defense attorneys are risk adverse; they would rather settle a case than run any substantial chance of losing the case. This is related to the public relations aspects of litigation. A successful defense of a malpractice lawsuit is not news, but a $1 million verdict will attract news coverage. A case that is settled is not lost and usually does not generate adverse publicity. From an earnings perspective, the ideal defense case is one in which the defendant was negligent enough to justify settling the case but careful enough to justify delaying that settlement to the bitter end.


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