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Appendix CNO-FAULT VACC INK INJURY INSURANC E As discussed in Chapter 8, no-fault insurance coverage could be used to provide payment for vaccine-related injuries. The operation of such a system is described in the article that follows. A system of no-fault insurance for sports injuries was in effect in more than 40 states for the academic year 1983-1984, under the auspices of the National Federation of High School Athletic Associations. Six eligible claims were filed and all opted to accept the insurance offer rather than pursue a torts claim.* *O'Connell, J. 1984. Personal communication, University of Virginia Law School, Charlottesville, Va. 166
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167 No-faull insurance for vaccine related · · - injuries Jeffrey O'Connell proposes an alternative insurance scheme for vaccine-injury victims Under tort law in effect throughout most of the western world, a party injured by adverse effects from a vaccine car' be paid under a legal claim only by proving the manufacturer or its product faulty. If successful, the claimant would be paid not only for his medical expense and wage loss but for his pain and suffering. But proving (a) the defendant's conductorproductfaulty and (b) the monetary value of nonmonetary loss (pain and suffer~ngJ is usually so complex that many injury victims are paid (1) not at all, or (2) only a fraction of their losses in settlement, (3) only after long delay, and (4) only after lawyers on both sides are paid large amounts of insurance dollars in litigation costs. As at least a partial solution to the problems of tort liability for personal injury, including those arising from the production and use of vaccines (especially innovative vaccines)* I suggested recently' the following: a statute under which a defendant against any claim for personal injury-including a producer or supplier of vaccines-would be given the option of foreclosing any such claim by offering within 180 days of the claim to pay claimant's net economic loss, consisting in most cases of medical expenses and wage loss above any of the claimant's own insurance already payable to him. Payment would also include reim- bursement of claimant's reasonable legal fees; if any, in addition to claimant's actual losses. Claimants would be obligated to accept such payment of their net economic loss in total satisfaction of personal injury claims except when payment for such limited amounts would be deemed by a court unconscionable. Generally speaking. then except when a claimant's psychic losses are totally disproportionate to his dollar losses, or when defendant has acted inten- tionally. no further litigation would be allowed. Note that under this proposal, no vaccine producer or supplier is re- quired to settle a case it would not settle today. This would be a safe- guard against both spurious claims and astronomical new costs. Jeffrey O'Connell is John Allan Love Professor of Law at the University of Virginia Law School, Charlottesville, Virginia 22901, USA 0264 410X/84/030173~4$03.00 ~ 1984 Butterworth ~ Co. (Publishers) Ltd A bill entailing similar features applicable to medical malpractice claims was introduced in the US Congress by Representatives Henson Moore and Richard Gephardt in the spring of 19842. Problems in law The basic problem with my proposed statute is just that-it entails passing a statute. There are three main difficulties with trying to effect reform through legislation. First. trying to get today's legis- latures' attention about any issue is difficult. Secondly, to get a legislature to pass controversial legislation is all the more difficult. Especially is this so in the face of very effective lobbying opposition-which is particularly true in the USA through opposition to tort reform by powerful trial lawyer lobbies. often independently abetted by some insurers hostile or indif- ferent to sweeping change. Thirdly. any legislation that does emerge may well be so watered down or distorted as to ill serve the objectives originally sought. Note. for example, the ex- perience under inadequate no-fault auto insurance laws in the USA under which large no-fault benefits are provided but too many tort claims are also preserved, thus making for expensive and arguably even un- workable reform. In the past in order to avoid the pitfalls of legislation, I have proposed elective no-fault insurance whereby. before time of sale of a product or service, a seller could, at its option, commit itself to pay no-fault benefits views for economic (but not non-economic) loss in the event of a resulting personal injury, with the injury victim at the same time of sale binding himself/herself to accept no-fault benefits in lieu of a tort claim. Although I have argued that such a contract entailing a valuable quid pro quo for surrender of tort rights, would be upheld by the courts, others, especially practicing lawyers advising businesses and health care providers, have questioned that a potential accident victim can validly waive his or her tort claim prior to injury even in return for a guarantee of no-fault benefits. In order to avoid such difficulties, I hereby make the fol- lowing proposal: N+fault policy I propose an insurance policy or product warranty whereby a vaccine producer or supplier (including a health care provider) can at its option, before a vaccine is sold bind itself to tender within 90 days of any resulting serious injury a victim's net economic loss regardless of the existence of tort liability in any particular case; in other words. regardless of whether the defendant's conduct or product was faulty. Net economic loss will include any resulting medical expenses. including rehabilitation and wage loss beyond the victim's own collateral sources such as accident and health insurance. sic}; leave. etc. Benefits will be payable month by month as loss accrues. The victim and anyone with a claim based on the victim's injury. such as members of his family. will then be given an additional 90 days to accept such tender or to claim in tort. In other words. upon acceptance of the no- tault tender of net economic loss, the victim will be required to waive this tort claim against the tendering party. In stin other words. the plan allows a potential tort defendant to make a pre-accident commitment to make a no-t'ault post-accident offer of a potential accident ~ ictim's net Vaccine, Vol. 2, Septem her 1 984 1 7 3
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168 views economic loss conditioned upon a postaccidenet abandonment of normal tort claims. True, by giving the victim a post- acc~dent option of accepting or re- jecting payment of net economic loss the possibility of adverse selection arises i.e., those with valid tort claims could choose to sue in tort and those without them to accept the tender. But those who have suffered serious injury would seem especially likely to become risk adverse in choice bet- ween certain, if limited, benefits, as opposed to the gamble of a lawsuit. Risks to insurer Granted. however. that because of adverse selection, such an insurance programme may entail unusual risks of unpredictable costs for an insurer. One way to soften those risks would be for the tendering party, if it chose to do so, to require the victim to waive tort claims not only against the tendering party but against third parties as well. Thus a producer of an innovative vaccine tendering benefits would gain leverage to bargain with any third party also arguably con- tributing to the adverse reaction (such as a supplier of material or a health care provider) for a contribution to the pool of insurance funds required to pay net economic losses. Such a contribution could be exacted at the start of the policy period with any such third party becoming an additional insured under the policy in return for an annual contribution to the policy's premiums. Or the insurance contract might call for the right of the tendering party to designate any third party at the time benefits are tendered as also benefi- ting from the waiver of tort claims in return for a contribution to the pool required to pay a given victim. Nor would there be a need for the tendering and third party to agree immediately on the amount of the third party's contribution under either a pre-accident or postaccident sharing agreement; rather the parties might agree to arbitrate at their convenience their respective shares of the no-fault damages or pool. The point is, however, that by such devices a vaccine producer or supplier could gain help in funding its tender from others involved in the chain of delivery. As to non-serious injuries, such victims of vaccines are today less likely than, say, victims of slips and falls or auto accidents to pursue tort claims. Thus, from the viewpoint of a vaccine Producer or supplier it would - - r r ordinarily make less sense to have a 174 Vaccine, Vol. 2, September 1984 no-fault compensation system cover- ing small injuries since they result less often in payment from the current system. Today, even when there is relatively clear liability. if the victim's loss is only a few thousand dollars and there is no residual disability. it is often not profitable for a competent plaintiffs attorney to pursue the case. But even assuming all that to be true, here lies the virtue of the flexibility of the contract approach outlined above: the contract calling for the tender of net economic loss can be structured, at the option of the vaccine producer or supplier, to exclude smaller cases. The contract could include a dollar deductible of, say, $10 000 or even higher, such that the tender need not be made in cases of lesser amount. In addition, further restrictions in the definition of the insured event calling for a tender of net economic loss could be devised, limiting tender to, say. certain types of adverse results occurring within a given time frame. Also the obligation to tender could be to a pilot programme covering a limited period or place after which the results ofthe programme could be assessed. It might be asked how a pre- accident committment to make a post- accident tender of net economic loss differs from an identical post accident offer of settlement under present law? In effect the tender scheme herein proposed entails a sale to a potential accident victim of the insurer's capacity at common law to resist making a prompt offer to settle the claim for the victim's real losses. And the price for that surrender of defendants' right to be intransigent is to surrender the victim's of common law tort rights, perhaps coupled with a higher price for the product or service in question. If enough accident victims with serious tort claims are sufficiently risk averse to accept the tender of net economic loss, it may well be that such tender for all accident victims can be completely financed out of the surrender of tort claims, with no need for additional funds to pay for the redemption of the tenders. I f not some additional cost may be neces- sary, but genuine value would seem to be transmitted for any additional costs. Early 20th century employers who backed workers' compensation in return for surrender of tort rights were not at all sure what the new no- fault benefits would cost compared to tort liability, but they were willing to take the gamble that either it would cost no more or that any additional cost would be worth a far saner insurance system. At least some of their grandchildren will probably be willing to make the same bet today. Indeed, that is the case with schools covering athletic injuries under a programme such as that outlined above and described in more detail below. If at least some defendants will be willing to sell their right to take advantage of injury victims' tort plight, what of victims' lawyers? Note the new dilemma of such lawyers. A tender made pursuant to a pre- acc~dent commitment-before the precise causation or circumstances of any injury can be known-is not an admission of any kind. Threats to take such an offer offthe table after 90 days are much more credible than with a postaccident offer not made pursuant to a pre-accident commit- ment. Legal advice Thus. plaintiffs lawyers who advise seriously injured clients to reject such a prompt but transient offer covering such essential losses could well face malpractice actions themselves if the gamble of tort litigation fails. Indeed, a virtue of marketing the insurance plan to vaccine producers and suppliers is its appeal of allowing them to strike back effectively at the legal profession's perceived harassment of health care providers and businesses through Personal injury claims. Under this plan plain- tiffs' lawyers will be under similar pressure they now impose on vaccine producers and health care providers: ( 1 ) to get informed consent from, or to warn clients as to the risks of rejec- tion of the tender. and (2) to face litigation if services lead to a bad result. Such pressures on plaintiffs' lawyers will likely lead to acceptance of the tender of net economic loss and thus to a lessening of the strains and difficulties on vaccine producers and health care providers now resulting from legal claims by injured users of vaccines. Note that the insurance contract should probably call for payment of claimant's counsel fees for advice with respect to the receipt of benefits for net economic loss in addition to the claimant's losses themselves. Such a feel not entailing all the preparation of litigating a tort action. could be based on a scale tied to the present value of the projected benefits or just to reasonable counsel fees in the knowledge that they will be much
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169 less than those accompanying tort . . . litigation. Economic considerations In essence the tender scheme assures victims of adverse vaccine reactions an option of prompt payment of their real losses. Such a programme is unlikely to result in overall burdens greater than those imposed by tort liability. This stems from the huge savings in defence costs and in eliminating payment for pain and suffering by a tender of net economic loss. In other words, if claim frequency will increase under the tender plant average claim cost will be drastically reduced. To give some idea of such savings consider the situation in the USA in Michigan under no-fault auto insurance. Prior to no-fault there, every motorist was required to carry $20 000 of tort liability insurance. Compulsory coverage under Michigan's no-fault law pays unlimited medical expenses, plus about $72 000 in wage loss, in addition to coverage of $20 000 for those tort claims preserved under the no-fault law. All this latter insurance is provided at a cost no greater, and apparently a little less, than the cost of only $20 000 of traditional tort liability. And if a motorist is willing to accept no-fault payment only to the extent collateral sources are not paid, one can further cut the no-fault premiums approximately in half. Scheme for sports injuries An insurance contract based on such a pre-accident commitment to make a postaccident tender of net economic loss is in effect in 47 states for serious high school athletic injuries (those entailing medical expenses over $10 000) starting in the academic year 1983-84, under the auspices of the National Federation of High School Athletic Associations. A similar programme for college athletic injuries will likely be in effect by the academic year 1985-86. The genesis and operation of a pilot programme for high school injuries in effect in the State of Washington for the academic year 1982-83 was discussed in the Seattle Times as follows: A thread of irony, spun by cata- strophic injuries more than seven years apart binds Chris Thompson of Seattle and Marty Wittman of - acoma. Thompson was left paralyzed by a football injury suffered in 1975. when he was a 1 5-year-old sophomore at West Seattle High School. Wittman suffered a similar fate last December (1982) when, as a 16-year-old sopho- more at Curtis High in Tacoma' he was injured while competing in a prep wrestling match. Because of those injuries, their lifestyles-and their families' life- styles-were altered drastically. But while Thompson waits and wonders about whether he ever will receive any money from a $6.5 million jury award made 17 months ago, Wittman and his family are benefiting financially from an insurance policy created because of the lawsuit Thompson filed-and won. The policy. . . was endorsed on a pilot basis for the 1982-83 school year by the Washington Interscholastic Activities Association which was desperate to provide liability coverage for its member schools in the wake of the Thompson verdict. It was designed, said Doug Ruedlinger, the plan's . . sales agent, because "we didn't want the high-school athletic associations being litigated out of existence." Now, he said, 47 state associations have endorsed the plan for the 1983-84 school year. The plan is basically a $10 COO deductable 1sic], no-fault, liability insurance policy co-authored by Jeffrey O'Connell. a University of Virginia law professor... The premium is $1 a year for each athlete covered [payable by the school]. ''When an injury occurs and the claim exceeds $10 000, our policy is effected,'' said Ruedlinger, who heads the Doug Ruedlinger [Insurance brokerage] Co. of Topeka, Kansas. Above $10,000, the plan, according to Ruedlinger, provides for such things as medical and rehabilitation ex- penses, transportation costs, costs of remodeling the family home to accommodate a wheelchair plus wages lost by parents who have to take time off work to help administer care to the injured athlete. Also, the policy specifies it will provide up to $300 of income a week for life, if the beneficiary has less than $300 of income from other sources. [But nothing is paid for pain and suf- fering| There is a catch, or what Ruedlinger called an 'if.' The coverage will go into effect only if the beneficiary. . . land hisJ family agree not to file suit against the school, school district or state 1athletic association. "They don't have to sign their right to sue away,'' Ruedlinger said. . . "But what this plan says is that so long as you don't sue, you're covered." Wittman, hospitalized for six months following the injury and now subject to rehabilitation two days a week on an out-patient basis, was the first beneficial of the plan. Symbol- ically, Ruedlinger presented the keys to a new van to Wittman last month. The van has been modified to include views hand controls and a wheelchair lift Plans for remodeling the Wittman home have been completed and sub- mitted for approval, said Randy's mother, Mrs Fred Wittman. Until the remodeling is completed, the family is .. . . living In an apartment. Mrs Wittman and Marty, following a period of negotiation, feel the Ruedlinger Plan is acceptable. . . . Nearly eight years after iThompson, 22, now a student at the University of Washingtonl was rendered a quad- riplegic by the football injury and 17 months after a jury ruled the Seattle School District liable for the injury, Thompson has received no com- pensation. The $6.4 million verdict in King County Superior Court has been appealed to the State Supreme Court. "I'm not only bitter, I'm kind of worn out about the whole thing," Thompson said. "And there's no real end in sight.'' After being told of the Ruedlinger Plan, Thompson said: ''I think it's excellent. It seems to address the problems." There was, of course, no Ruedlinger Plan when Thompson was injured. "He had to go to court because he had no other recourse," said Ruedlinger. And [going to] court offers no guarantees. ''I can show you half a dozen articles pointing out where the parents (of catastrophically injured athletes) have gotten [nothing!'' Ruedlinger said. Doug McBroom, Thompson's at- torney, agrees, saying that after efforts to settle Thompson's suit out of court failed, "We rolled the dice in the courtroom.'' . . . Meanwhile, Thompson waits and wonders about the direction of his future, which changed so dramatically in the fall of 1975 when his spinal cord was injured during a game against Lindbergh High in Renton. Thompson contended in his suit that the school district was liable for damages because it failed to warn players not to lower their heads when blocking and tackling. Wittman, who was injured when he was slammed to the mat by an opponent from Clover Park High, said he is planning to return for his junior year at Curtis in September. The nature of the prolonged, expensive agonizing litigation aris- ing out of high school athletic in- juries, as well as other injuries, and the often irreconcilably conflicting testimony over elusive, and indeed often illusive facts, is revealed by a report of a recent District of Columbia case. Carl Greene. then a seventeen-year-old football player at Anacostia High School had his Vaccine, Vol. 2, September 1984 175
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170 views nerves severed in his left arm while making a tackle in a 1974 inter- scholastic game. According to the Washington Post: Greene. . . contended that his left arm was first injured during a practice and that 1Anacostia] coach Wyman Colona negligently put him in the line- up two weeks later for Anacostia's homecoming game against Spingarn High School. in which Greened arm was permanently paralyzed. Colona contended at the trial that Greene had never reported a serious injury prior to that game. . . . Greene testified that he told Colona of"burning and tingling'' in his arm after the injury during a practice. Colona testified that Greene had reported only a bruise. According to Greene. the original injury occured during a practice a few days after Anacostia played its first 1974 regular conference game. G reene, who played as a linebacker. told the jury it was nearly dark when a offensive player broke through the line with the ball. and Greene tackled him. Colona testified that he did not hold practices in the dark and that practices during the regular season did not include tackling. According to Greene. Colona placed him in subsequent games after putting extra padding on the injured 176 Vaccine, Vol. 2, September 1984 [left] shoulder. Colona said the padding had been placed on the right shoulder [not the left1 to protect a bruise. Greene and former teammates, as well as the team's defensive coach at the time. testified that Colona dis- couraged reporting of injuries. Other former players and coaches who testified for the 1defendantl City said Colona had the safety of his players uppermost in his mind and never would have put Greene in the line-up had he known he was seriously injured. A medical expert who testified on Greene's behalf said the nerves in the arm could not have been severed unless Greene had been injured previously. A medical expert for the City testified that there was no indication that Greene had suffered any earlier damage to the arm. City officials said at the trial that school medical records that might have documented an earlier injury could no longer be found. The case finally came to trial in 1983-almost nine years after the injury-and resulted in a $1.5 million verdict for Greene. The City im- mediately indicated it would appeal. So the accident victim's uncertainty and delay is far from overt. Surely an alternative insurance device makes sense for injury victims, including those from vaccines. Not a device, it will be noted, that forecloses tort rights, if the victim wishes to pursue them. But a device that gives one a choice of prompt payment of one's actual losses as they accrue versus the delays and uncertainties of a tort claim. Jeffrey O'Connell 1 O'Connell, in 'Offers That Can't Be Refused', 77 Northwestern University Law Review 589 ( 1 982); Best's Review (Prop./Cas. ed.), December, 1982 p. 1 2. 2 Moore and O'Connell, in 'Medical Malpractice Reform', forthcoming in Louisiana Law Review 3 Washington Post April 23 1983 p. 1. cols 1-2 Prepared for the Conference on 'Barriers to Vaccine Innovation,' sponsored by the Institute of Medicine, at the National Academy of Sciences, Washington, D.C., November 28- 29, 1 983
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