The Easy Cases Are Gone

Over the last few years, as the number of lawyers and lawsuits have increased, the insurance companies have adopted a policy of not settling cases. In the past, insurance companies routinely settled virtually every claim for a multiple of the injured party’s medical expenses. A slip and fall or auto accident case was worth approximately six times the amount of the medical expenses incurred by the client.

When an individual went to an attorney claiming injury from an accident, the attorney would send the client to a cooperative doctor for extensive medical care and therapy. The doctors (and chiropractors) billed wildly for every imaginable treatment and procedure—almost all of which was unnecessary and was performed solely to inflate the amount of the medical bill. The physician would get paid out of the proceeds of the eventual settlement. The lawyer had a nice fat medical bill—multiplied by six under the standard formula—which he could then present to the insurance company. The insurance company paid the inflated claim then raised the rates on all its policyholders to cover these costs.

At least several generations of personal injury attorneys have made handsome livings by playing this game. But unfortunately for them, in most states, this game is over. Starting in the early 1990s, many insurance companies adopted a policy of no settlement. When the attorneys offered up the medical expenses, the claims adjusters were required by their companies to reject the claim. The policy was to litigate every claim all the way to trial. It was understood that this strategy would be more expensive in the short run as the companies incurred huge legal bills fighting even the smallest claim. The upside was that the personal injury lawyers, deprived of their bread and butter fast settlements, would be driven out of business as their cash flow disappeared. Most attorneys can’t wait two, three, or five years to get paid. And they certainly don’t want to shell out all of the costs of bringing a case to trial, including depositions, expert witnesses, and discovery. Even worse is that after putting up all the money and going to trial, the case could be lost. Years of hard work and lots of money down the drain. That result means financial disaster and one more overeducated short order cook.

The insurance companies were like a pack of big goofy elephants. They had no idea that they had the power to step on and crush their lawyer adversaries. Once they decided to use their great strength—virtually unlimited capital—they were successful beyond their expectations. Lawyers stopped taking the "slip and falls," the bogus auto accidents, or any other insurance case without a big potential payoff. The insurance companies were the big winners. The lawyers, their incomes and lifestyles seriously impaired, looked around for new groups to target—an easier and softer prey not so willing and able to fight back.