Maryland Personal Injury Insurance Settlement Offers 101. The offers aren't intended to settle the case.


I was chatting with a prominent, youngish, personal injury defense lawyer the other day and our conversation inspired this article. They were bemoaning the practice of  some Maryland District Court judges awarding injured parties at trial two times their medical expenses as damages and they thought this was excessive. 

I was flabbergasted. Two times medicals is absurdly low and here was a prominent partner in an area firm decrying it. To understand, think of someone going to District Court with $6,000.00 in medical expenses and receiving a verdict for $12,000.00.So pay the medical bills of $6,000.00, pay the lawyer 40% for trial or $4800.00, pay the case expenses of say $200.00 and the victim gets $1,000.00.

Going to court for a day or more and the total net is  $1,000.00. How did we get this to point? Has it always been thus?

The span of my career has seen this devolution in slow motion and here is my explanation. 

Forty-two years is a long time to spend plying any trade much less something as stressful as being a trial lawyer. Nonetheless, that has been my calling.

There are many things to learn in order to do this work sucessfully. Sure you learn the pertinent law and how to apply it to personal injury and malpractice cases but there are innumerable other aspects to helping people cope with injury, death and loss. Understanding the process is essential to helping ones clients recover physically, emotionally and spiritually.

Cases have lifespans and often the way they appear at the beginning is far different than how they conclude.Some are straight forward with an injurious accident or incident, medical care, lost time from work, recovery and settlement. These scenarios are increasingly uncommon however.

When I commenced on this career path there existed a comfy ecosystem of injury lawyers, insurance defense lawyers and insurance companies, all adhering to a commmon goal: resolution of claims or in rare cases, trial.

A simple rule of thumb prevailed in  98%  of all cases, the insurer paid the injured party three times the special damages incurred by the injured victim and that was that. Special damages, "Specials" to lawyers and insurance adjusters, were the economic damages such as medical expenses and lost income earning opportunities. Sure there were more catastrophic cases involving wrongful death, paraplegia, loss of limbs and serious, undisputed permanent injury, but they were rare and not subject to the laws of liability physics that governed most of the personal injury case world at that time.

This resulted in peaceful coexistence between plaintiffs lawyers and liability insurance carriers for the better part of a decade. Naturally, such a simple formulaic approach was susceptible to abuse. If three times " specials" was what would be paid in settlement then increasing the amount of specials by charging more for medical care or providing more care, would yield larger settlements.

In a similar vein, insurance companies began nibbling at the three times specials and turned it into three times medicals plus wages, which in some cases was insignificant and others quite consequential. An injured car accident victim with ten thousand dollars in medical bills and ten thousand dollars in lost wages would have received three times the combined medical bills plus wages or three times  twenty thousand dollars for a total settlement of sixty thousand dollars

With a new model, the three times medicals plus one time wages, a formerly sixty thousand dollar settlement became a forty thousand dollar settlement. Obviously, the plaintiffs lawyers weren't going to take this lying down so more cases went to trial and in many instances, jurors surprised lawyers on both ends of the case by rendering verdicts that were still less than the new reduced case evaluation formula of three times medical bills plus wages.

These outcomes were not universal but they occurred frequently enough that all of the players in the personal injury world took note and a new era began. Settlement offers became less and less tethered to the old school analysis, while at the same time the insurance industry cultivated a bumper crop of medical experts with impressive resumes, who received training in " forensic medicine" ie. how to persuade jurors that injured people were attempting to milk the system.

It became routine to hear from the lips of the " Independent Medical Examiners" the rule that car crash victims all required no more than 6 to 8 weeks of care and then should be discharged from further medical intervention. Many jurors accepted this nonsense as true particularly because the bulk of the medical experts utilized by crash victims were simply whomever they randomly chose to treat their injuries and not trained advocates.

There are many reasons that it is simpler for defense experts to look at all the medical care after the fact and retrospectively poke holes in either the plaintiff's treatment narrative or the observations made by healthcare providers along the way. Healthcare professionals are in the business of healing people and any positive patient feedback is emphasized and often that is at odds with the big picture of how someone is doing consistently in injury recovery.

Also, treating medical professionals aren't focused on the goal of creating a narrative for use down the road in court and many are ill-equipped to affirmatively advocate for the seriousness of the patient's injuries and the appropriateness of all of their treatment.

This cadre of " Defense Medical Examiners" or DMEs went effectively unchallenged for some years until the victims rights attorneys sucessfully utilized the power of the subpoena to get pertinent financial records from the defense doctors which disclosed " Shockingly!" that the various defense doctors were making hundreds of thousands of dollars every year from the insurance companies seeking to have the claims against them undermined.

In many instances the doctors prevaricated about how often they performed DMEs and just how lucrative it could be. For many the actual day to day practice of medicine was not nearly as economically rewarding as serving as an advocate for State Farm or Allstate. These multi-billion dollar insurance goliaths were happy to pay their experts and at least in Maryland, were in a position to hide their involvement from jurors.

This was because of an evidentiary anachronism under Maryland law. Essentially, the historic rule was that the word insurance was forbidden to be spoken during a personal injury trial as it might influence the jurors willingness to award damages. This arose in the era before Maryland and most other states came to require liablity insurance for all drivers.

The idea was that jurors would be more inclined to award damages to an injured person if they knew the money was coming out of an insurance company rather than the at-fault parties pocket. Of course, the damages awarded to injured people theoretically at least, were to be divined from the evidence at trial rather than the issue of who would pay these damages.

Anectdotally, my discussions with jurors after verdict invarariably revealed their belief that insurance would pay the verdict and the lawyer for the at-fault party was always referred to as the " insurance company lawyer" and of course the insurance companies were financing the defense of such cases and also paying the verdicts either through liability or uninsured motorist coverage.

So asking Dr. Robert Gordon about his income always concluded in an awkward admission that he testified for his patients and also defendants and not a word about the thousands of dollars directly from the insurance giants.

Gradually this cocoon of protection eroded as the word insurance was no longer, if uttered, the basis for a mistrial. So DME doctors while still effective particularly when used against inexperienced attorneys, were shown to be hired guns and jurors came to be dubious of their " independent" opinions.

Simultaneously, with the shift in the mechanism for calculating damages for settlement purposes the insurance world embraced a once inconceivable notion, using their own employees to try personal injury cases of their insureds.

Historically, private lawyers were hired by the insurers to represent at-fault parties, thereby providing independent counsel and representation. You see, lawyers theoretically have a duty to their actual client rather than the insurance comany who is paying them. For some time this model was thought to be the only permissible way to preserve lawyer independence of the insurance companies paying them in recognition that the interests of their actual clients were not always the same as the insurance companies'.

As one could imagine the insurance companies often differed with their lawyers on the distinction between what was good for Geico or Nationwide and what was good for their negligent insured. Private attorneys for the insurance companies soon learned that siding with their actual client as opposed to their clients insurer was bad for business. 

This difficult balance was maintained because most states including Maryland would not permit the so-called " Corporate Practice of Law."

Insurance companies always had multitudes of lawyers but they weren't engaged in going to court on behalf of their at-fault insureds, where conflicts of interest could arise. So forty three years ago when I began practicing law, there were very few house counsel offices and the overwhelming majority of defense of personal injury claims fell to storied defense firms like Brault Graham, Ford & O'neill and O'Malley Miles.

However, the insurance companies had identified " defense costs" as an area that could be dramatically reduced to a fixed determinable cost if they hired their own lawyer employees and gave them vast numbers of cases to handle. This was not met with great enthusiasm from the insurance defense bar, which ultimately hemhorraged copious amounts of money.

The defense bar actually fought the permissibility of house counsel offices at Attorney Grievance commssions, where after some initial sucess, they were routed. The legal world was in transition with the advent of low cost legal clinics like Hyatt Legal Services and in the spirit of providing greater access to legal service, the once staid legal profession allowed as how it was okay for lawyers in personal injury case defense to be directly employed by the insurance companies.

Predictably, the insurance industry was initially hesitant to use these second-class lawyers rather than their usual private firm favorites but the bean-counters at corporate had a master plan to lower legal defense costs and were not going to let long-term relationships between adjusters and private defense lawyers undermine this project.

Thus, house counsel offices grew in both size and number and claims personnel were compelled to send their cases to lawyers in house counsel offices.

The private firms that historically did defense work were crushed. Firms shrank because there wasn't enough hourly work and the equity partners in these outfits suddenly started doing more plaintiff's work and began agreeing to fixed fees on defense cases rather than being paid hourly.

This propelled a race to the bottom as lawyers would bid on how cheaply they could do cases and insurance companies reaped the benefits.Defense costs overall plummeted and where the " costs of defense" once had been a variable that could yield a modest increase in a settlement offer to bring about settlement, suddenly defense costs were baked in to every claim once it went into court and required representation, as the case either went to house counsel or fixed fee private counsel.

The historic formulas for ascertaining case values disappeared and ceased being used or discussed. Enforcing this dramatic change in the landscape was rocky as cases that formerly would have been settled were not, and local courts became overwhelmed by an onslaught of personal injury cases.

The courts were not the only participants caught off guard in this process. Plaintiff's attorneys suddenly were compelled to try far larger numbers of their cases which was both expensive and time-consuming. Smaller cases soon became burdens not benefits for victims rights lawyers and this contributed to such cases dramatically decreasing in value due to the cost of trying them relative to their upside.

Never ones to miss an opportunity to squeeze a nickel of savings, the insurance industry overwhelmed their own house counsel operations with innumerable cases that would have in former days been settled. As a former house counsel lawyer for two major insurers, Geico and Zurich/ Maryland Casualty, I remember the days when house counsel lawyers had ample time to properly prepare their cases and meet with their clients.

That era is long past. House counsel operations in Maryland are deluged with cases and often eliciting a return call or email from members of these beleagured places is impossible. Trying to get discovery in state district court is largely futile, through no fault of the lawyers. They have too many cases and suffer attrition due to overwork.

The personal injury case world has been irretrievably altered and the bulk of the human participants are unaware of how things used to operate. Thus, the defense lawyer mentioned at the outset of this article truly has no idea what came before his career. Similarly, the judges of whom he complained of awarding two times medical bills as damages also are unaware of the insufficiency of this verdict and its relative historic inadequacy.

Adjusters routinely offer our clients medical bills plus a few thousand dollars more in settlement and when we explain the math where paying the doctors,and the lawyers results in the injured party receiving nothing they tell us to seek reductions from the doctors. Having " done the math" for hundreds of adjusters, many genuinely seem  not to have understood just how unfair and unacceptable their offers are.

They are following corporate marching orders and as the title of this article suggests " the offers aren't intended to settle the case."

Robert V. Clark
Maryland Car Accident and Personal Injury Lawyer