On June 27, 2012, the New Hampshire Legislature made history and placed our state at the forefront of medical malpractice reform by passing Senate Bill 406, the first “Early Offer” bill of its kind to become law in the country. This law will be effective on January 1, 2013. The law provides a statutory framework for an optional alternative method of settling medical malpractice cases. The basic premise behind the law is simple. In exchange for the ability to receive a speedy and certain settlement of a claim within 4-6 months, a plaintiff forgoes the ability to receive compensation for some non-economic damages. The guiding principle of the law is that it is completely voluntary for all parties. Neither side can ever be forced to participate in the Early Offer process against its will.
What was the genesis of the bill? The concept of Early Offer has been promoted by Professor Jeffrey O’Connell of the University of Virginia Law School. Doug Dean, President and CEO of Elliot Health System in Manchester, heard Professor O’Connell make a presentation about Early Offer and he liked the concept. He began to consult with various groups in New Hampshire to see if this idea could be incorporated into legislation. Our firm, on behalf of Elliot, assisted in the drafting of Senate Bill 406, together with legislative leaders and other supporters such as the New Hampshire Medical Society, the New Hampshire Hospital Association, and the Business and Industry Association. Doug Dean led a coalition of supporters who worked diligently with legislative leaders to pass the bill into law.
How does it work? A person who suffers a “medical injury” as defined in the law, or someone with the authority to act on his/her behalf, has two choices to pursue compensation. The claimant may choose to pursue an action under the traditional existing tort system, which includes the medical screening panel under RSA 519-B and then a lawsuit, if necessary, under RSA 507-E. In the alternative, the claimant may pursue an “Early Offer” under the new RSA 519-C. The choice is completely up to the claimant.
If the claimant elects to pursue an Early Offer, the claimant and his or her attorney will gather all medical bills for treatment of the problem caused by the act of medical negligence, and all lost wage information for time out of work, together with any evidence of expenses for “replacement services” incurred by the claimant during any period of disability. The claimant will send this information with a “notice of injury” to the provider alleged to have caused the injury, which will include relevant information about the injury and a demand for reimbursement of the economic loss caused by the injury. This demand will include all lost wages, medical expenses, replacement services, an extra amount set out in the statute based upon the nine-level injury severity scale maintained by the National Practitioner Data Bank, and a 20 percent attorney fee paid by the provider. The extra amount based on severity is designed to compensate claimants for a portion of their non-economic damages. If the claimant is still treating or is still out of work, the demand will include a request for reimbursement for future losses as they accrue. The notice of injury must be accompanied by a signed waiver of rights in the form set out in the statute, RSA 519-C:13. Most claimants are expected to be represented by lawyers, especially since the law requires payment of attorney’s fees to be made by the provider if there is a settlement. If claimants enter the process pro se, the law requires that they be given a neutral legal advisor, who must be a lawyer, to help them understand and navigate through the process. This legal advisor is also paid for by the provider.
Once the provider (or insurer as the case may be) receives the notice of injury, it will have 90 days to respond to the offer, unless it requests an Independent Medical Exam (IME), in which case it will have 120 days. The provider may either decline to make an offer, in which case the claimant is free to pursue litigation with no limitations, or it may make an offer that corresponds to the requirements of the statute. This free choice guarantees the voluntariness of this process for the provider/defendant. If the provider prefers to defend the matter in litigation for any reason, it will simply decline to make an offer, thereby forcing claimants to either bring suit or abandon their claims.
If the physician/hospital decides that the claim is meritorious and it makes sense to settle the claim under Early Offer rather than in litigation, it will make an offer. If the offer meets the demand, the matter should be settled, but the claimant has 60 days to either accept or reject the offer. The statute does not require the provider to offer the exact amount the claimant is seeking. This is a protection against “highball” demands from claimants. However, if a provider offers less than the claimant is seeking, the claimant then has 60 days to either accept the lower offer or ask for a hearing before a neural hearings officer, paid for by the provider, who has the power to adjust the provider’s offer to whatever the officer finds that it should be under the statute. If the hearings officer finds that the provider’s position is frivolous, penalties can be assessed. These protections are designed to prevent “lowball” offers from providers.
The statute also doesn’t require claimants to accept an offer, or a hearing officer’s award, even if it meets their demands. In order to protect claimants’ rights to access the courts, claimants have the right reject satisfactory offers and bring suit in the traditional tort system. However, if they do that, they have to reimburse the provider for the costs and fees incurred by the Early Offer process only, not in the subsequent court case, unless they recover at least 25 percent more than the offer they rejected, in which case they owe nothing. The law also requires a claimant to post a bond or other security to assure the payment of these costs when he/she files suit. This provision is designed to prevent claimants from “gaming” the system by asking for an Early Offer without any intention of accepting it, just to see how much the provider would be willing to pay, as an aid to their future litigation strategies.
What are a lawyer’s ethical obligations to advise potential clients about this option? Professional Conduct Rules 1.4 and 2.1 together require a lawyer to give advice to clients about the law, as well as the practicalities of settling malpractice claims, so that clients can make informed decisions about their cases. The A.B.A. Model Rule comment to Rule 2.1 suggests that when a matter is likely to involve litigation, it may be necessary under Rule 1.4 to inform the client of forms of dispute resolution that might constitute reasonable alternatives to litigation, such as Early Offer. Lawyers who handle these cases would be well advised to amend their standard contingent fee arrangements to reflect the fact that the client has been fully and fairly informed about both options before the client chooses which option to pursue.
To see a copy of the law or to learn more about Early Offer, please go to www.nhearlyoffer.com.
Full article link: http://www.nhbar.com/publications/archives/display-news-issue.asp?id=6498.