Medical Malpractice Litigation and the Market for Plaintiff‐Side Representation: Evidence from Illinois

Abstract

How concentrated is the market for medical malpractice (med mal) legal representation? Do successful plaintiffs’ lawyers start off with better cases to begin with, do they add more value to the cases they handle, or both? How do top plaintiffs’ lawyers market their services, and where did they go to school? How large are the “wages of risk”—the compensation to plaintiffs’ lawyers for working on contingency? How often do plaintiffs proceed pro se, and with what results? We address these questions using a data set of every insured med mal case closed in Illinois during 2000–2010. We show that most plaintiffs have a lawyer. We quantify the market share, case mix, and amounts recovered by the 1,317 law firms that handled med mal cases in our sample, stratify the firms into four tiers, and assess differences across tiers. We find that the market for plaintiff‐side med mal representation is both unconcentrated and highly stratified. At all firms, a small number of cases account for a heavily disproportionate share of total recoveries. We use the extensive covariates in our data to (imperfectly) address sample selection, and to estimate the effect of having a lawyer and law firm tier on outcomes. Controlling for observable claim characteristics, having a lawyer predicts a large increase in the probability of prevailing and the estimated recovery. Higher‐tier firms have only modestly higher success rates, but substantially higher estimated recoveries. However, the differences shrink and are statistically insignificant when we compare first‐tier to second‐tier firms. This suggests that there are substantial benefits to having a lawyer—and a higher‐tier lawyer—but diminishing marginal returns at the top of the market. Assuming that there is some unobserved case selection, our findings provide a plausible upper bound on the “value added” by different tiers of plaintiffs’ lawyers.

Screening Plaintiffs and Selecting Defendants in Medical Malpractice Litigation: Evidence from Illinois and Indiana

“…We begin by briefly describing our Illinois data and our analytical approach. Our Illinois dataset is described in detail in earlier work (Rahmati et al ; Hyman et al ). In brief, we obtained a closed claims database from the Illinois Department of Insurance (IDOI) covering every med mal case closed during 2000–2010, with or without payment.…”

“…Figure is about success rates, not recoveries. Conditional on success, greater injury severity is strongly associated with higher recoveries, apart from a “death discount” (Hyman et al ; Rahmati et al ).…”

“…These specialist lawyers generally receive cases through referrals from other lawyers (Hyman et al ). They screen potential referrals intensely before accepting them, and are correspondingly less likely to drop cases they initially accept, but still describe the decision on whether to pursue a case as an ongoing process that does not end with initial acceptance.…”

“…In prior work, we computed success rates for the top 22 law firms active in the Illinois med mal space (Hyman et al ). Because we did not exclude nonserious cases, we obtained lower success rates than those we report in this article for all firms.…”

“…If so, the decision on taking on a new case may involve comparing the instant case to the next best alternative, rather than to $0 expected value. Plaintiffs’ lawyers also sometimes invest in lower‐payoff cases, which will not fully cover the opportunity cost of their time, in order to “keep the doors open” and maintain a reputation in the relevant community while waiting for the occasional large‐dollar cases that provide most of their revenue (Hyman et al ).…”