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September|October 2002
The Hours By Niki Kuckes
The Blood-Money Myth By Tom Baker
Monsoon in a Teacup By Ratna Kapur
Smog & Mirrors By Alec Appelbaum
Prosaic Justice By Anthony Sebok

The Blood-Money Myth

Personal-injury plaintiffs and their lawyers will stop at nothing in their callous pursuit of money. Or that's the stereotype. In truth, they have a heart.

By Tom Baker

Personal-injury cases are shaped in large part by the existence of insurance policies. If there's an automobile accident, for instance, lawyers rarely bring a suit against a defendant who lacks insurance. Policy researchers are so confident that insurance dictates the course of personal-injury cases that they rely heavily on data from insurance companies to learn about the nature of litigation in the field.

Yet law professors teach and write that personal-injury cases involve something more than collecting money from insurance companies. There are two leading theories of tort law—the "corrective justice" approach, and the law-and-economics approach—and both of them argue that the law demands that individuals pay for the harm they wrongly cause others. According to theories of corrective justice, people have a moral obligation to take responsibility for their actions; by the lights of the economic approach, people need to be deterred from harming others in the future. In both schools of thought, the key assumption is that people who have harmed others have to feel some financial pain.

Of course, law professors realize that defendants have the option of avoiding pain by buying insurance. Under theories of corrective justice, buying adequate insurance is a morally responsible act, and people who do needn't endure financial penalties; according to law and economics, buying adequate insurance is a clever way of redistributing the deterrence, and individuals who do are also off the hook.

In our imperfect world, however, people often fail to buy enough insurance to compensate those they injure. To judge from the two dominant theories of tort law, we should expect that out-of-pocket payments by underinsured people would finance a major fraction of personal-injury awards.

But this prediction turns out to be stunningly wrong. Plaintiffs almost never collect real money from real people in ordinary tort cases. To discover why, I recently conducted a study involving in-depth interviews with personal-injury lawyers in Connecticut and South Florida. The reason for the absence of real money in personal-injury cases, I've concluded, is not only because it's more difficult to collect money from people than from insurance companies, but also because plaintiffs and their lawyers have significant moral qualms about squeezing "blood money" out of ordinary people for an ordinary wrong. If I'm right that moral qualms play a role in how personal-injury litigation works, legal scholars of both persuasions need to re-examine their theories—at least as they apply to ordinary torts and ordinary people.

"Plaintiffs are not the greedy animals that they're sometimes painted to be," one lawyer said to me. "And you know, it's not unusual for a plaintiff to say, 'Hey, look: I don't want to take Millie's house. Take the insurance and that's it.' "

A common-sense morality lies behind the norm against taking blood money—"accidents happen"; "life goes on"; "two wrongs don't make a right." The morally accepted course of action is to take the insurance money slotted for accidents, but not to add to the world's pain—or, in the words of a lawyer, to spread "bad karma"—by causing harm to the defendant.

That said, plaintiffs' lawyers pursue insurance money—and insurance money alone—in part because it's relatively simple and convenient to do. "It is easier to collect from an insurance company," explains one lawyer, "than it is to go against the individual and try to garnish wages, foreclose on a home, as well as other things that most people aren't interested in doing. Whereas the insurance companies, they're like a bank." Even defense lawyers emphasize that liability insurance money is designed to be paid out. "We pay claims," one defender explains. "It doesn't bother me in the least when the check goes out. That's what we do."

And there are other targets for plaintiffs' lawyers that are easier to pursue than blood money. In the aftermath of an automobile accident, for instance, the plaintiff may have her own underinsured motorist's coverage as a cushion. If so, the plaintiff's own insurance company will pay once the defendant's policy is exhausted. In other cases, particularly those involving medical malpractice, there are institutional defendants who can be pursued. In his book Damages: One Family's Legal Struggles in the World of Medicine, the journalist Barry Werth describes how a successful plaintiff's lawyer fashioned a malpractice case to target the hospital rather than the doctor because the doctor didn't have enough insurance. (Another reason for focusing on the hospital, Werth reported, was that the lawyer prided himself on never requiring doctors themselves to pay.)

But though the relative ease of obtaining insurance money accounts for some of the reluctance to pursue blood money, it's not the whole story. As bail bondsmen know, just about everyone has some money that they can fork over to free themselves from a tight spot. It's reasonable to expect that tort settlements would require an underinsured defendant to pay something. Yet my research found, and official reports by insurance companies confirm, that this isn't the case.

It's not that defendants lack assets, but rather that many plaintiffs' lawyers and their clients don't derive enough benefit from taking those assets to justify the cost involved—and, significantly, that cost includes a psychological or moral component. "Most people don't have much more than their house and their car and their clothes and their furniture," one lawyer said to me. "The clothes aren't worth anything and their furniture isn't worth anything; their car isn't worth anything. [Plaintiffs and their lawyers] don't want to take the house. Psychologically, they are probably not going to go after it. There's a lot of threatening and posturing, but they don't go after it."

The moral consensus against taking blood money is so strong that many defense lawyers get personally outraged at the rare plaintiff's lawyer who does insist on it. A defense lawyer told me about a routine dog-bite case in which the plaintiff's lawyer insisted that the defendant top off the insurance money. "We offered him the [$50,000] policy and he wanted more," the defender recounted. "He wanted another ten or fifteen thousand. At first I thought it was a mistake, and I called him up and I said, 'What are you, kidding? Fifty is fifty is fifty is fifty, that's all we got! Take it and go away!' So my guy ended up paying another fifteen thousand dollars out of his own pocket to settle this case. And I've never spoken to [the plaintiff's lawyer] since."

The prohibition against going after blood money is complicated by the fact that pretending to be after blood money is part of the ritual of getting the defendant's insurance company to settle a case. In most states, the law demands that insurance companies act reasonably in deciding whether to settle a case and that they make an effort to settle the case within the limits of the defendant's insurance policy. If an insurance company doesn't act reasonably and the verdict goes against the defendant, the company is liable for the entire verdict, even if the verdict exceeds the limits of the defendant's policy.

Say an insurance company unreasonably passes up a chance to settle a medical malpractice case for less than the $1 million limit of a doctor's malpractice policy, and the case yields a $10 million verdict. The company would have to pay the whole thing. Since hindsight is always 20/20, the bigger the difference between the verdict and the policy limit, the more likely it is that the insurance company will be found to have breached its duty to accept a reasonable settlement.

This duty to settle reinforces the norm against taking blood money. It gives plaintiffs an incentive to offer to settle a case within the policy limits, to "set up" the insurance company for a later breach of the duty to settle the claim. At the same time, the risk of being on the hook for an entire verdict gives the insurance company an incentive to settle for the policy limits to get rid of the claim. So lawyers for a defendant typically interpret threats to go after a defendant's assets as pressure on the insurance company, not as an effort to actually require the defendant to pay.

The pressure on the plaintiff to settle within the limits of the defendant's policy also reinforces the tendency not to seek blood money. But the pressure to settle doesn't fully account for the reluctance to do so in the first place. There's no practical reason that the settlement ritual couldn't involve a custom of "policy limits plus." By that practice, plaintiffs could offer defendants the opportunity to settle for the policy limits plus, say, $50,000. As long as the defendant was able and willing to put up that amount to get out of a case, that would put the same amount of pressure on the insurance company to settle, while also extracting something extra—blood money. But that custom doesn't exist.

Still, all the lawyers I interviewed agreed that there are circumstances in which collecting blood money is morally appropriate. That happens when the defendant's conduct is so repugnant that it outweighs the qualm against making the defendant pay personally. If someone has recklessly caused a death or very serious injury, he becomes a target for blood money. The combination of a bad act and a death produces the clearest kind of case. "Parents and relatives of people who are killed by drunk drivers want blood," one lawyer says. "They really want blood."

In an ordinary case, blood money is less desirable than insurance money. But when plaintiffs are "out for blood," the value of blood money exceeds that of insurance money: "The fact that personal money was coming from the defendant made [the plaintiff] feel a lot better," a lawyer explains, "and made that money more worthy or more valuable to the plaintiff than just the insurance money."

The amount of blood money, however, isn't as important as the fact that some blood money has been won. A plaintiff's lawyer says, "Families seem to want to exact something out of the individual beyond the insurance policy. It may not be a lot. I think the most we've ever asked for is $25,000 beyond, say, a $300,000 [insurance payment] on a death case, but it was their way of getting retribution, as silly as that may sound." One thing that the story about blood money teaches is that retribution isn't frivolous. It's too serious for most ordinary cases.

The failure to buy insurance can also be seen as reckless behavior that warrants blood-money punishment. Buying inadequate insurance is not, in itself, egregious enough to justify a blood-money demand. (Otherwise, every case with an underinsured defendant would be a blood-money case.) But an ordinary defendant who refused to buy something as common as auto insurance, or a wealthy doctor or lawyer who tries to game the system by purchasing a small amount of malpractice insurance, is particularly at risk.

At first, all of the plaintiffs' lawyers I interviewed said that they had never collected blood money, and all of the defense lawyers said they had never paid blood money, except in rare cases. Eventually, I found a defense lawyer with a different story. The lawyer agreed to give me names of lawyers who had reputations for going after blood money. With his help, I spoke to three of them in my Connecticut interviews.

The lawyers said adamantly that they had a professional obligation to get every penny they could for their clients, but they recognized that other lawyers followed the "no blood money" norm. They also said that, in reality, they rarely collected blood money. ("Did I throw him out of his house?" one lawyer asked, when referring to a case in which he was tempted to pursue blood money. "No. Would I if he had pushed me to it? Sure. Why not?") The main way they differed from other lawyers was in the degree to which they emphasized practical reasons for not requiring defendants to pay at least some of their own money.

I can't say with precision how many lawyers fall into this category (though the existence of even a small number means that cautious people should be buying umbrella liability insurance policies). But I can say that they agree about the blood-money norm, and they report that, although they're willing to collect blood money, they usually don't.

Before personal liability insurance became widespread—first for auto liability in the 1930s, then for homeowners after the Second World War—all tort suits against individual defendants involved real money paid by real people. While some of that money might have been termed blood money, many of the awards of damages in the middle of the last century lacked the retributive overtones that the term "blood money" suggests.

It's only since the extensive adoption of liability insurance that all tort damages paid by real people out of their own pockets have been regarded primarily as punishment, and only secondarily as compensation. As a result, tort law in action seems much less concerned with deterrence and personal responsibility than tort doctrine and theory would suggest. The blood-money story says that legal education and theory on this topic needs to be rethought.

Tom Baker is the Connecticut Mutual Professor at the University of Connecticut School of Law. This article is adapted with permission from an article originally published in Law & Society Review.

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