Tuesday, April 28, 2015
A personal injury settlement mill, is a high volume personal injury law practice that attempts to mass produce the settlement of claims and utilize aggressive advertising campaigns in an effort to obtain clients. Settlement mills litigate a disproportionate amount of their cases and take very few cases to trial. Such firms can be routinely found advertising on television during both daytime and late night. There are exceptions to the rule and not every firm that aggressively advertises is a mill. However, a majority of such firms are mills characterized by minimal interaction between the attorneys and their clients.
Law Professor Nora Engstrom published a fascinating article in the May 2010, issue of the Stanford Law Review, entitled Run of the Mill Justice. 1. Engstrom interviews numerous attorneys and staff members at law firms throughout the country that fit the description of being a settlement mill. She concludes that advertising is the life blood of a settlement mill. In fact, such law firms can afford to employ a mill mentality as they do not rely on former or current clients for referrals of new cases. Rather, such practices are aware that no matter how the client interprets the work performed on their behalf, more cases will come in off of the mass advertising they pay for.
Unique Characteristics of a Settlement Mill
What separates settlement mills from their more traditional counterparts is several factors. For starters, we often see paralegals, case managers (whatever that is) and law clerks handling a predominant portion of duties on cases as opposed to actual attorneys. Judging from our own experience of taking over cases that were previously handled by large volume practices, our clients often express shock that they are speaking with an attorney. In contrast, said clients generally met with an investigator retained by the law firm for their initial meeting wherein they executed a contingency fee agreement. All subsequent conversations with the client were handled by either a case manager or paralegal. This only supports the claim by others that settlement mills do their clients a vast disservice by attempting to mass produce settlements as opposed to working claims up to their full value. Ironically, settlement mills often take far longer to resolve claims. This may be due in part to the lack of attention paid to individual files by attorneys as the cases fall under the purvey of a paralegal or law clerk.
In recent weeks we took over several files from a law firm which fits all of the characteristics of a mill. All of the files were older than a year and a lawsuit had not been filed yet. In some cases, it may make sense to allow cases to build value in pre-litigation before a lawsuit in considered. However, this is not the case with your typical neck or back injury case which comprised the cases we took over. In fact, the previous firm had failed to send out a demand on any of the above referenced cases. Even more troubling, is the client had surgery in two of the cases and a demand had not been submitted even six-months post-procedure. The case was not building value during such time. Rather, the claim was actually akin to a depreciating asset.
Insurance Carriers Love Settlement Mills
Settlement mills are loved by insurance carriers as they remove the uncertainty and risk from the process. As Professor Engstrom states, "Settlement mills differ from conventional personal injury law firms in many obvious respects: They have higher claim volumes, advertise more aggressively, tout a different fee structure, settle claims more quickly and with less effort, file fewer lawsuits, and delegate more duties to para-professionals. We have seen, in fact, that they even settle claims in a different way, implicitly challenging conventional accounts of claims resolution behavior. Rather than negotiating in the shadow of trial, as prevailing accounts of bargaining behavior presume, settlement mills bargain in the shadow of past settlements. A current South Carolina settlement mill attorney perhaps said it best. When I asked him, “How are cases valued for settlement?” He answered, “What I’ve settled ’em for before.” Shorn of a realistic likelihood of litigation, settlement mill claims are simply and systematically settled for formulaic going rates worked out over time by repeat players (the settlement mill negotiator and insurance claims adjuster), relatively independent of the merit-based assessments and individualized considerations that would loom large if the cases were headed to trial. Much like workers’ compensation tables, these going rates are predictable, generally applicable, and tied less to fault than to the gravity of the injury the claimant has sustained." 2.
Insurance carriers are well aware of the law firms that employ a mill mentality. Knowing full well that such firms are most interested in resolving cases in a mass mentality. "These lawyers have no intention of filing suit. (Engstrom cites one Louisiana firm that tried four cases in a year and lost all of them, before deciding that was no way to make money in the law.) What’s more, she suggests, insurance adjusters know this. So they are more than willing to pay hundreds of questionable soft-tissue claims at $2,500 or $5,000 a pop to insure that the truly dangerous accident case, the kind the right jury might decide was worth millions of dollars, gets settled along with the rest." 3.
Law firms, that settle claims in a mass production mentality are not feared by insurance carriers. Insurance giants like Geico, State Farm and Allstate have a disdain for spending money in defense of claims. Their respective profit margins are increased when they can settle claims with little or no effort. Oftentimes, the only way to realize the true value of a claim is to litigate the case. The threat of a trial and the possibility that the carrier will be on the hook for a large verdict or a judgment that exceeds the amount they valued the claim at, forces their hand. In contrast, when a law firm has a history of resolving claims for pennies on the dollar, the insurance company will only seek to mitigate their exposure. Further, such law firms will resolve the bigger damages cases with the respective carriers in much the same manner as the smaller claims. This is a win-win situation for all parties involved. The law firm is essentially guaranteed that almost all of their claims will be settled with ease and minimal risk. Thus, the law firm will be operating at a much higher margin as such cases are predominantly handled by non-attorney personnel.
Settlement mills are motivated to resolve claims in a mass production mentality by the fact that insurance carriers will resolve the questionable soft tissue cases, which may not fare well if they ever saw the light of a jury trial. In turn, the bigger surgery cases and potential catastrophic injury claims get settled along with the rest. In other words the settlement mill and insurance industry are complicit in the manner for which they resolve claims.
Professor Engstrom states, "When cases settle, the settlement value reached approximates the parties' overlapping estimate of the trial outcome discounted for risk and foreseeable transaction costs. Critically, these models take for granted that, in reaching settlements, both parties at the negotiating table will be armed with particular information - a forecast of how the claim would fare at trial - and a particularly potent weapon - the ability to head to trial, should negotiations break down. Settlement mill bargains are remarkable because they are struck by a negotiator without (1) first-hand information about verdicts obtained in comparable cases, (2) detailed information about the intricacies of the particular claim, and (3) the proven willingness and ability to take the claim to Court." 4.
The biggest loser in this process is the injury victim with a potentially significant case. Most personal injury clients have little to no idea what the true value of their claim is. The settlement mills will often attempt to convince their client that they are making the right decision in resolving the claim for the amount offered and will exaggerate the potential risk of filing a lawsuit or moving the case forward in litigation if a lawsuit has been commenced. In my personal injury practice, the clients whom retain us after terminating their relationship with a firm that fits the mold of a settlement mill, have stated the only time they spoke with an attorney (if they conversed with one at all) was in an effort to convince them to take the offer presented by the insurance company.
Another concern is the “for profit” lawyer referral services, which heavily advertise on both television and radio. Please do not confuse the non-for-profit lawyer referral services that are associated with the Bar Association in many States. The critics of lawyer and medical referral services have complained of shoddy services offered by the physicians associated with the service.
A south Florida newspaper published an exposé into 411-Pain illustrating odd relationships between a number of physicians and lawyers within said referral network. A number of clients complained of not speaking to their lawyers and having paralegals and legal assistants calling only to encourage them to treat very often with the Chiropractor (within the network) even when it damaged the case due to excessive medical bills. Further, other individuals complained of calling the lawyer physician referral service and being referred to an attorney that met them at their Chiropractic appointment.
When I hear consistent complaints of personal injury victims being encouraged to seek medical appointments to the tune of 4-5 visits a week with a Chiropractor; bells and whistles immediately go off. What raises a red flag is the thinly veiled attempt by the attorney to facilitate the physician (part of the same referral network) utilizing a very aggressive treatment protocol in an effort to use up all of the patients’ available personal injury protection (benefits). In fact, one individual was interviewed for the article and affirmatively stated his lawyer lost interest in the case once the Chiropractor had used up the $10,000.00 in Florida no-fault benefits available under his car insurance policy.
It is frightening to see how many personal injury victims lose out in this process. Settlement mills maintain a mass production mentality. Even the few settlement mills that brag about jury verdicts are often misleading the general public via misinformation. The rare settlement mill that tries a number of cases each year will cherry pick the most egregious injury cases for litigation. Meanwhile an army of paralegals and case managers handle the normal run of the mill injury case. The inherent problem with such process is support staff often overlook the biggest cases in the beginning, and fail to take important steps to protect the interests of their client. What may appear to be an average case at first glance to an overworked clerical staff member may actually be a claim that is likely to exceed $100,000.00 in settlement value to the trained eye of an experienced litigation attorney who routinely represents personal injury victims. This is a tragedy that most consumers have no idea about.
The tough talking lawyer on television or the radio proclaiming himself to be a “hammer” or “aggressive” may be little more than a marketer and perform few if any legal tasks. He or she may have not seen the inside of a Courtroom in many years, if ever. The attorney showing you pictures of his family including pets, may never meet with you or work directly on your case. Advertising is merely theater of the mind. I have seen many medical injury attorneys sell clients on the personal attention they will offer by highlighting their family and discussing helping yours. In reality, common sense dictates that smaller firms offer much more in the way of personal attention.
Matthew Dolman is a personal injury and civil trial attorney at the Dolman Law Group, in Clearwater, Florida.
1. Run of the Mill Justice Professor Nora Freeman Engstrom Georgetown Journal of Legal Ethics, 1486-1545, at 1487.
2. Id., at 1517
3. Study of "Settlement Mills" Shows Insurers Like Them Daniel Fisher http://www.forbes.com/sites/danielfisher/2010/12/03/study-of-settlement-mills-shows-insurers-like-them/
Dolman Law Group
800 North Belcher Road
Clearwater, FL 33765
(727) 451-6900