Settlement out of court: the disposition of medical malpractice claims

by Patricia Munch Danzon, Lee A. Lillard

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The main purpose of this paper is to present empirical estimates of a model of the disposition of claims through the courts. A second purpose of the paper is to provide evidence relevant to the policy debate over tort reform. The theoretical model is described in Sec. 2. Section 3 discusses estimation and describes the data. Section 4 reports empirical results, including goodness of fit of the model and parameter estimates. Section 5 provides estimates of the probability of winning at verdict for cases settled out of court. Section 6 analyzes the discrepancy between mean award at verdict and settlement and the extremely skewed distribution of dollar payout. Section 7 discusses the effects of actual and hypothetical tort reforms and simulates their ramifications on the entire disposition process. Section 8 contains concluding remarks.

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