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OCR for page 166
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
OCR for page 167
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
OCR for page 169
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
OCR for page 170
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
Representative terms from entire chapter:
economic loss
