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Ensure your client’s award is collectible

BOSTON, Mass. — Long after the headlines trumpeting the latest humongous jury verdict have faded from the public’s radar, the victors are left facing a less spectacular reality: In all likelihood, they will not collect the amount the jury awarded.

In fact, Rick Friedman, a Seattle-based attorney who lectures trial lawyers on jury trials, estimates that less than 10 percent of personal injury verdicts are fully collected.

Friedman reached that number by diving into a 2009 Department of Justice study that found that while plaintiffs win about half of personal injury trials, a “win” includes as little as $1 in compensation.

The study also revealed a surprisingly anemic median jury award in tort cases of $24,000.

“That means half of personal injury [jury] verdicts are under $24,000,” Friedman said.

Whether a verdict is reduced by the trial judge, overturned or reduced on appeal by a higher court, or settled for less than the jury awarded, collecting a verdict is a high hurdle for plaintiffs’ attorneys.

“It’s like gambling against the house in Las Vegas. The defendant has every advantage,” Friedman said.

‘Luck of the draw’

Even before filing a case, plaintiffs’ lawyers are looking for the deep pockets and considering the collectability question.

“Your client may have catastrophic injuries and the case may look wonderful on paper, but if there isn’t a large insurance policy to fund a verdict, it’s important to tell your clients that right from the get-go,” Chicago attorney Philip Corboy Jr. said.

That conversation can be commonplace in auto accident cases, in which plaintiffs’ lawyers complain that drivers are chronically underinsured, or the insurer is insolvent.

“It’s crazy, but that’s the way it works. It’s the luck of the draw and all depends on how much insurance whoever hits you has or how big the company is,” said Robert Eglet, a plaintiffs’ attorney who recently won two huge verdicts against Teva Pharmaceuticals, the largest generic drug maker in the world.

Eglet did not have to worry about Teva’s ability to pay his two jury verdicts totaling $688 million because the company posted a bond. But in the middle of his third trial, Teva settled all of its estimated 80 cases for roughly $285 million.

“There are always motions for remittitur, and punitives are reduced quite often,” said Eglet, whose two verdicts against Teva were comprised mostly of punitive damages.

The pressures to settle for less than the full verdict are many: Your client can’t afford to wait through a long appeals process, the verdict is likely to be reduced, or there are legitimate appellate issues.

Paula Sweeney, a plaintiffs’ med-mal attorney in Dallas, estimates that 100 percent of cases settle after verdict in Texas, a state with a healthy menu of tort reform restrictions including damage caps, a bar on collecting if the plaintiff’s contributory negligence exceeds 50 percent, and a new rule that allows future medical bills to be paid on a periodic payment plan, in which the unpaid amounts go back to the defendant if the plaintiff dies.

“In malpractice cases, virtually 100 percent of the time you are going to settle for less of a verdict than you are entitled to, because the other side knows that when they go to the state supreme court there’s an overwhelming likelihood of turning your verdict around. They’ll reverse, reverse and write zero in the blank,” Sweeney said.

“My leverage is if you take 10 to 20 percent off [the verdict], let’s settle it now and cash it out before we ever get to a hearing on the judgment, because everybody’s going to move for judgment,” she said.

Eglet adds that there’s pressure on both sides to settle.

“Look how much in bonds Teva had to buy to cover these judgments. There’s shareholder pressure that they need to settle these cases that are affecting the stock price,” Eglet said.

‘Taking the lid off’

Nicholas Rowley, a plaintiffs’ med-mal attorney who has won some large verdicts recently, said winning at trial is “just one battle in the war.”

His strategy for collecting a verdict is to drive a wedge between the defendant and the insurer’s defense counsel.

Rowley, who began his career working for a med-mal insurance firm, said many plaintiffs’ attorneys don’t recognize that those interests are often at odds.

“There are competing interests. The defense lawyer wants to litigate and is giving the insurance company a skewed view of the case. The actual insured defendant wants this thing to just go away,” the San Diego lawyer said.

In a case such as his most recent verdict, which yielded $78 million against a doctor whose malpractice insurance policy limit was $2 million, Rowley typically sends a letter outlining to the doctor “all the things the defense lawyer has done contrary to the interest of the insured,” such as not passing on demand offers and rolling the dice at trial, thereby exposing the insured to a much greater judgment.

Rowley said his post-verdict letters invite the insured to “get on the same team” as the plaintiff to sue the insurance company for the excess verdict.

The strategy is what some lawyers call “taking the lid off the policy,” especially in states that have bad-faith insurance laws with teeth, according to Friedman.

Rowley said in 90 percent of his cases he makes a claim of negligence or bad faith by the insured against the insurance company.

“Then the verdict gets paid,” he said.

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