Proportional Recovery And Incentives To Settle

Proportional recovery allows plaintiffs to recover damages prorated by some percentage proven at trial. The typical example of proportional recovery in modern tort law is the loss-of-chance doctrine, which allows medical malpractice plaintiffs to recover damages using probabilistic evidence of causation, with damages proportional to the probability of causation they can demonstrate. Advances in scientific data on attributable risks and causation, together with ongoing academic debates, are likely to prompt courts to consider expanding proportional recovery rules in tort law. This Article examines how proportional recovery rules affect parties’ incentives to settle lawsuits. It presents the results of a vignette experiment designed to test how proportional recovery rules, such as the loss-of-chance doctrine, affect litigation risk. Subjects considered several legal scenarios, were randomly assigned to evaluate them under traditional causation and recovery rules or a proportional approach, and were asked whether they would prefer to settle or litigate their claims. The experiment reveals that subjects facing proportional recovery rules were 12 percentage points more likely to settle their claims. Subjects facing proportional causation and recovery were also willing to accept settlement offers that were approximately 8% smaller. The results suggest that reductions in administrative costs are a yet-unidentified benefit to proportional causation. Moreover, they indicate that the current approach to the loss-of-chance doctrine in medical malpractice, which only permits low-probability plaintiffs to recover proportional damages, exposes courts to the downsides of proportional recovery without the corresponding administrative benefits the experiment identifies.