Motor Vehicle Crash Fatalities and Fatality Rates (per Hundred Million Vehicle Miles Traveled), 1899-2009
B. Cost / Benefit Calculations and the Learned Hand Formula
5. Claim Resolution in the Real World
So far in our consideration of the negligence standard and cost-benefit
calculations we have proceeded as if parties in the real world engage pervasively in the kind of case-by-case cost-benefit thinking that the Learned Hand test and its variations contemplate. But of course, in the real world, the decision to adopt such a strategy is itself subject to a cost-benefit analysis. In many of the most common tort situations, case-by-case evaluations have fallen away in favor of what are essentially mass settlement systems.
Rules of Thumb in Auto Collision Cases
How do we define negligence in car accident cases? In a sociological study of how car insurance companies’ claims adjusters determine settlement amounts, Ross (1980) found that insurance adjusters used easy rules of thumb—like whether a traffic rule was violated—to determine liability in an accident, “regardless of intention, knowledge, necessity, and other such qualifications that might receive sympathetic attention even from a traffic court judge.” In rear-end collisions, adjusters routinely did little investigation, giving a strong presumption of liability to the rear driver. When a claimant had the formal right of way in the case of a stop sign or green light, there was usually little follow-up investigation before paying the claimant. He found similar rules of thumb for most other forms of auto accidents, including head-on collisions,
sideswipes, left-turns, and one-car cases. Instead of engaging in the complexities of the reasonably prudent person standard, or any other aspect of the negligence standard, car insurance adjusters rely on these rules of thumb to determine the vast majority of auto
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accident settlement amounts. H.LAURENCE ROSS,SETTLED OUT OF COURT 98-104 (1980).
What does this mean for our understanding of the tort system as a provider of individualized justice? Does every plaintiff get her day in court? John Witt and Samuel Issacharoff examined how privatized information aggregation takes place in “mature torts”—torts with common fact patterns like the car accidents Ross studied in Settled Out of Court. They argue that the existence of repeat-play lawyers and claims agents on both the plaintiffs’ and the defendants’ side “permits private settlement systems to emerge based on the information the agents possess about the value of claims in the retail
litigation market of adjudication.” Over time, they claim, these private settlement systems depart substantially from the explicit negligence calculus of the Learned Hand test. In the aggregate, the standardized negotiations of the repeat-play claims agents and defense lawyers can look less like tort law in the courts than like the public bureaucratic systems that administer accident claims in programs like workers’ compensation. Such private claims settlement systems emerged by the 1950s and 1960s:
The development and increased coordination of repeat-play claimants’
agents, of course, promoted considerable anguish among certain sectors of the defense bar. Yet as some defense-side agents noted, the presence of bargaining agents who knew the short-cuts, the heuristics, and the rules-of-thumb often made the settlement process considerably more efficient.
In Chicago, for example, insurers found that for precisely these reasons, the repeat-play plaintiffs’-lawyer specialist was ‘an easier man to deal with than a general practitioner.’ Insurers dealing with such lawyers reported that they were regularly able to strike ‘package-deals’ in which they disposed of ‘a great many cases at one time.’ Indeed, together the plaintiffs’ bargaining agent and the liability insurer’s claims adjuster were, as the vice-president of one early casualty insurance organization put it, the ‘lubricant’ that made the law of torts ‘run with as little friction as possible....’[B]y the mid-1960s, automobile accident tort claims were being settled with much greater speed than other personal injury tort claims.
John Fabian Witt & Samuel Issacharoff, The Inevitability of Aggregated Settlement: An Institutional Account of American Tort Law, 57 VAND.L.REV. 1569, 1614 (2004).
One example of such repeat-play plaintiffs’-side claims agents are the so-called
“settlement mills”: high-volume personal injury practices that, as Professor Nora Engstrom describes them, “aggressively advertise and mass produce the resolution of claims, typically with little client interaction and without initiating lawsuits, much less taking claims to trial.” The eight firms from around the country that Engstrom studied resolved three times the number of claims heard by jury trials in all federal district courts in the same period. Intriguingly, in the absence of individualized accident information or proven ability and willingness to take a claim to trial, bargains between insurance
companies and mill lawyers were informed by past settlements, rather than past jury
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verdicts. Engstrom found that, by using these settlement mills, plaintiffs with very small meritorious claims and plaintiffs with any size of unmeritorious claims fared fairly well, with far lower costs than further litigation would have imposed. However, plaintiffs with especially meritorious claims or serious injuries fared relatively poorly when they hired a settlement mill lawyer. Thus insurance companies may be cooperating with settlement mills because they “share two sets of overlapping interests: speed and certainty. Insurers, it appears, cooperate with settlement mills, even in marginal cases, because cooperation is profitable.” Nora Engstrom, Run-of-the-Mill Justice, 22 G.J.LEGAL ETHICS 1485, 1486, 1491 (2009).
Theoretically, the past settlements that such lawyers rely upon to produce new settlements were once informed by a jury verdict in a related negligence case. Is that a satisfactory relationship to the negligence standard and the formal tort system? If not, what would you do to influence or change the settlement mill system? Does the merit or seriousness of a plaintiff’s claim change your judgment? Is the existence of the settlement mill a good or a bad thing for the plaintiff who wants her day in court?
Interestingly, Engstrom’s paper was published in a journal of legal ethics. Why do you think that is? What kinds of ethical problems arise from the settlement mill system?
The Failure of No-fault Auto
In the mid-1960s, a group of professors responded to the expense of litigation in courts over tort cases with a novel proposal: “no-fault.” Under their plan, only the gravely injured would have access to the tort system; instead, all car accident victims, regardless of fault, would receive partial but speedy compensation from their own insurers.
Reformers modeled their plans on the workers’ compensation systems that had displaced tort law in workplaces half a century before. The plans spread widely—and quickly. By 1976, about half of the states in the U.S. adopted some version of no-fault auto, or at least substantially restricted car accident victims’ ability to sue.
But then the wave of reform halted. Resistance from the plaintiffs’ bar and some unexpected problems could reasonably explain the rapid end of no-fault programs. Yet Engstrom argues that the halt of no-fault auto expansion came when no-fault systems and the tort settlement system began to converge. Repeat-play claims agents had begun to produce in the shadow of tort law a system of settlement that resembled the no-fault systems of the reformers. Auto torts claims became less adversarial, with more victims recovering modest settlement awards. Meanwhile, modern no-fault systems became more adversarial, with more claims, money, lawyers, and lawsuits. With less at stake, the momentum for no-fault systems faded. Nora Engstrom, An Alternative Explanation for No-Fault’s ‘Demise,’ 61 DEPAUL L.REV. 303 (2011).
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What is at stake in choosing between tort and public compensation mechanisms like workers’ compensation and automobile no-fault systems?