The missing plaintiff made an economic decision

By Mitterand Jean-Francois

I am among those who have always thought that the United States were the most litigious society on the face the earth. I acquired this assumption on the surface of comparing the plethoric number of lawyers available in the U.S. with other countries and more importantly because of my assumption of a society where citizens are the most educated about rights. Another explanation of this belief was founded in the vast array of mass media information available to a high information consumption society such as the American society. I was stricken perplexed as at the very introduction of Engel’s analysis, he announced with no prevarication that this assumption had no foundation in facts that support the American society as the most litigious, worse yet, a non-litigious one.

Engel offers in support of his thesis data collected at the beginning of the '90s showing that, to the contrary of a wide belief, only a basic 10 percent of the injured in the U.S. litigate their injuries. Although there is an argument to be had that such a bold conclusion is lame for want of recent data, the striking low number even for two and a half decades ago remains disheartening.

Engel attributes the scanty search for injury redress that characterizes the United States to many social and cultural factors. He even offers a philosophical and psychological approach of human decisions to tackle the latter, but to my contrarian view, he inadequately brushed and basically overlooked a very practical explanation for the scantiness of injury claims, an economic one that with my permissive, elementary knowledge of economics I will dare to address here. It’s called the marginal benefit of decisions.  A crippling flaw of Engel’s analysis is that it does not present a statistical analysis that shows how the degree and severity of injury is factored in the swath of the 90 percent that avoid seeking compensation for injuries. And I believe that the extent of injury is the most explicative factor in a decision to file a claim. First, because the injured is a rational decision-maker aware, due to the amount of information available nowadays, that it’s one thing to file a claim, but another to prove injury sufficient for the adequate amount of damages that will compensate for the costs associated with successfully litigating a claim.

The marginal benefit theory explains that a rational plaintiff will compare the benefits derived from filing a claim with the associated costs. A major component of the cost structure that underpins the claim process is most importantly the opportunity cost, when it’s factored into rational decision-making. Not only, in the case of an injury with a low degree of severity, treatment and litigation costs consume the major part of a compensation award; what additional costs that a plaintiff incurs in terms of time spent in trips to treatments coupled with procedural hassles discourage plaintiffs from pursuing their claims. Simply put the potential meager award amount, which is mostly determined by injuries’ degree of severity, informs a rational decision maker not to incur the costs necessary to pursue a claim. As a result, we see the wide swaths of 90 percent of the injured that choose lumping over suing. That is to me the most practical reason behind lumping, having myself decided to lump instead of suing. Most of my acquaintances that have made a similar decision did so due to lack of benefit motivation.

Another topic expanded by Engel in his explanation of lumping is that of quandary of causation, which, he rightfully explains, suppresses injury claims. Causation is another factor that enhanced the lumper’s marginal benefit approach to the decision not to file his claim. Engel’s quandary of causation posits that the difficulty there is of the plaintiff to prove causation of his injuries is a major factor of the reduced trend of injury complaints. By quandary of causation, Engel simply means that it is not what you know of your state of injury that offers you a viable injury claim, but what you can prove. No other thesis can be said, in my view, to be more on point in explaining the “missing plaintiff” than that assertion. I used to own a chiropractic clinic, and in that capacity, I was involved in a fair deal amount of coordination with patients’ lawyers. The very first premise that lawyers factor in the decision to represent a plaintiff with personal injuries is based on transfer of energy. Such transfer of energy is estimated based on the extent of damages sustained by the vehicles involved, for instance, in a car accident. Where the lawyers in question estimate vehicle’s damages to be below $3,000, they tend to refuse representation because they strongly believe that there is a direct correlation between the amount of energy transferred, as evidenced by the vehicle’s damages, with the degree of injury’s severity that can be claimed. What this analysis demonstrates is that, absent high transfer of energy, insurance companies will not compensate, for a claim where an individual may be severely injured, adequately to cover chiropractic treatment costs and at the end yield a residual amount of award that will adequately cover the lawyer’s fees and adequately compensate the plaintiff’s injury. In sum, the missing plaintiff, being a rational decision maker, weighs the economic practicality or feasibility of a claim in deciding to lump his injury instead of undergoing the costs hurdles that unavoidably control the viability of the suit.

At the end, I have not made any new assertion as to the cause of that missing plaintiff, but I am, based on my various experiences with injured parties, rather convinced that Engel would have been more convincing if he privileged a marginal benefit approach to his explanation of the missing plaintiff. If he directed more empirical evidence to that practical aspect, I am convinced he would have had a stronger argument that probably would better endure the test of time instead of the great deal of sophistry spent on a cultural, physiological, and philosophical approach of a pure practical matter. However, he owns a formidable argument as to litigation costs and the problem of causation in his attempt to explain the missing plaintiff.

As to methods that would increase injury reporting, I dread that bringing efficiency in the current state of things may result in the ripple effect of insurance cost increase for the consumer; for that reason, I am reluctant to persuade of measures that would encourage injury reporting. However, if I could have my way in implementing a measure that I am sure to result in no added insurance costs, I would devise a system where people are not penalized for late claims reporting. I would require insurance companies to ask preliminary questions to people involved in injuring incidents and evaluate during intakes whether the persons involved in the incidents need medical treatments. Where such a need is noticed, the insurance companies themselves would be required to direct the victim to appropriate medical treatment facilities. I would also require that physicians automatically refer for chiropractic evaluations patients who report during annual checkups that they were involved in accidents.

In conclusion, at the preamble of The Myth of the Litigious Society, I was stricken with perplexities as to the United States being, contrary to my preconceived notion, not a hyper-litigious society. I have much reservations as to whether this fact remains the same several decades after Engel’s study. When we consider the state of information technologies then versus the current state of access to information currently, I am inclined to believe that the trend toward reporting injury claims has risen at least above 50%. Also, the relationship between the severity of injuries and lumping necessitate new studies to shed the light on whether “the missing plaintiff” is an anomaly or simply a rational decision maker.