High/Low Agreements: An Effective Settlement Vehicle

While a jury has awarded a $43.32 million verdict against a Texas medical center and one of its doctors, the seriously injured plaintiff will only receive $9 Million. Why? Keep reading.

The jury found that the hospital was grossly negligent in its retention and supervision of a doctor on probation whose improper care led to a patient’s complete loss of his quality of life and ability to provide for his family.

According to the lawsuit, a 61-year-old man was admitted to the hospital with stomach pain and vomiting in April 2014. A CT scan showed gallstones in his bile duct, but the attending doctor erroneously diagnosed the man with an anatomical abnormality, and said surgery was impossible, according to the claim. Over the next month, the man was put in a medically induced coma, during which time he was basically ignored. When the hospital finally sought a second opinion, the new doctor rejected the prior diagnosis and performed surgery without complication. However, due to the misdiagnosis by the first doctor, the man had to undergo a liver transplant, is currently on organ rejection medication, and can no longer work.

The lawsuit alleged that the first doctor had been placed on probation by the Texas Medical Board in June 2013, after finding glaring deficiencies in his treatment of a patient in a similar case. In that situation, the medical board found that the doctor failed to adequately document the patient’s records, inaccurately diagnosed the patient, and performed medically unnecessary procedures. Pursuant to the hospital’s bylaws and policies, the hospital privileges of a doctor on probation are automatically suspended.

The jury’s concluded the hospital was negligent, and awarded the plaintiff $43 million, including nearly $18.6 million for past and future pain and suffering, medical expenses, and loss of earning capacity. However, the jury found gross negligence as well, and this finding permitted them to tack on $25 million in punitive damages. The jury also found the hospital was 90 percent liable for damages, while the doctor was 10 percent liable. The doctor had settled with the plaintiff before trial.

As I noted earlier, despite the $43 million verdict, the plaintiff only received $9 million. This is because his lawyer hedged his bet and entered into a $4 million/$9 million high-low agreement with the hospital’s insurer a week prior to trial. In the shadow of a $43 million verdict, this seems to be a questionable decision, doesn’t it? In this writer’s opinion, it was a great decision, despite this huge verdict. Here’s why:

A high/low agreement is a settlement in which a defendant agrees to pay the plaintiff a guaranteed minimum recovery in return for the plaintiff’s agreement to accept a guaranteed maximum amount, regardless of the jury’s actual verdict. In this case, the plaintiff would receive a low of $4 million regardless of how the jury ruled, even if the award was $0. If the jury returned a verdict of $4 million up to and including $9 million, then the actual verdict amount is paid to the plaintiff. (Thus, if the verdict is $5 million, the plaintiff receives $5 million.) If a jury returned a verdict exceeding $9 million (as it did), then the plaintiff is entitled only to the $9 million high-end number agreed. The most important part of the agreement is that there will be no defense shenanigans, no delays, no endless appeals and motions, no Chapter 13 bankruptcy proceeding; the money will be paid within 30 days.

This case reveals how high-low agreements can be useful tools for long-suffering plaintiffs who need certainty of financial support moving forward. On the opposite side, physicians and hospitals and insurance companies receive certainty for budgetary planning, a cap on potential liability. These agreements are beneficial to both sides.

The odds of prevailing at trial, especially at these numbers, strongly favor defendants in a medical malpractice case. Juries can be unpredictable, though, as we see in this case. For the defendant, a ‘runaway’ jury verdict may exceed insurance policy limits, tap into hospital and medical office assets, and even send the hospital into bankruptcy. For the plaintiff, the agreement reduces the inherent risk of a low or nothing verdict, something someone in this condition cannot afford. The plaintiff may believe that he or she suffered significant injury through negligence, but may be concerned about his ability to convince a jury of the extent of the alleged injuries. High-low agreements are best seen as “insurance” for both sides to prevent worse-case scenarios. Both sides accept some potential loss against a far greater risk at the hands of unpredictable jurors.

Sometime between the end of this trial and 30 days, the plaintiff in this case was presented with a mid six-figure check from his very talented attorney. Considering a $43 million verdict, we can assume that every delay tactic I mentioned would be employed to prevent or reduce eventual recovery. Maybe, years later, the plaintiff receives the entire amount; maybe he doesn’t and how long would he have to wait for quality-of-life sustaining compensation?  High-low agreements can certainly reduce (or increase) potential recoveries; that is the risk, but there are risks and benefits to every decision a trial lawyer makes. The guarantee is the key, and if the agreed upon recovery ($9 Million plus the amount of the doctor’s settlement in this case) takes care of the plaintiff’s support needs while providing result certainty to the defense, this is a win-win situation for all involved. I’m certain that the plaintiff in this case would rather have his good health than this result; nonetheless, I congratulate the plaintiff and his lawyer on their recovery and wish him well as he heads into a very challenging future.

Mark M. Bello is an attorney, certified civil mediator, and award-winning author of the Zachary Blake Legal Thriller Series. He is also the CEO of Lawsuit Financial and the country’s leading expert in providing non-recourse lawsuit funding to plaintiffs involved in pending litigation, a member of the State Bar of Michigan, a sustaining member of the Michigan Association for Justice, and a member of the American Association for Justice.