Best practices for evaluating damages in third-party liability claims
Properly assessing damages is crucial to developing a clear plan for handling a liability claim.
Damages are an essential part of nearly every third-party liability claim. Yet, evaluating damages can invoke a sense of dread and anxiety in even the most seasoned of claims professionals and litigators. This is because damages can come in many different forms and require different burdens of proof. In the end, it can come down to rolling the dice at trial. But, properly evaluating damages, both pre-suit and during the pendency of litigation, is crucial to having a clear vision and plan for investigating alleged damages and making key decisions regarding whether to attempt early resolution of a case or mount a vigorous defense.
One of the first things to know is whether the incident occurred in a comparative-negligence or contributory-negligence jurisdiction. The majority of states utilize some variation of a comparative negligence model, which considers the percentage of fault of the plaintiff and adjusts the damages accordingly.
However, comparative negligence can mean different outcomes in different states. Most states follow the 50%-51% modified comparative negligence model in which a plaintiff cannot collect damages if his or her fault is greater than either 50% or 51%.
South Dakota has its own comparative negligence model in which a plaintiff can collect damages if he or she is “slightly” negligent and the defendant is “grossly” negligent. Alabama, North Carolina, Virginia, and Maryland use a contributory negligence model, which prohibits any recovery by a plaintiff if he or she was at fault by any measure. It is thus important to analyze the jurisdiction’s at-fault statutes for guidance as to how much, if any, a potential plaintiff’s recovery may be reduced or even barred if he or she is determined to have caused or contributed to the incident. Some states, such as Georgia, also allow a jury to apportion damages to a nonparty who may have caused or contributed to the incident and, where appropriate, the plaintiff’s recoverable damages may be reduced further.
Jurisdiction matters
Next, you will want to consider factors about the jurisdiction where the incident occurred and where the defendant resides or where a corporate defendant is located. In most cases, this is where a potential lawsuit can be filed. The potential venue can have a significant bearing on the outcome of the case, so it is important to consider the demographics of the venue, as well as the jury verdicts rendered in similar cases.
Further, a conservative jurisdiction usually awards smaller verdicts, which is usually viewed as more favorable to defendants, whereas more liberal jurisdictions typically have jurors who are willing to award higher verdicts and, therefore, are viewed as plaintiff-friendly. Depending on the parties and the facts, it may also be possible to remove a case to federal court to temper venue concerns, among other reasons, if appropriate.
Once these preliminary considerations are evaluated, it is important to consider the facts of the incident and communications received from the injured party or his or her counsel to get a sense of what types of claims may be made. Recorded statements, demand letters, and medical records can be great sources of important information.
For instance, while the medical records are important to evaluate any physical injuries, the records may also alert a savvy claims professional about potential lost wages or future loss of earning capacity claim if the records mention employment, and potential inability to work. The medical records may also include work restrictions or work excuses.
Medical records may also include a description of the facts of loss that may differ from the plaintiff’s version. The medical records may also answer questions regarding gaps in treatment, such as delays in treatment due to the COVID-19 pandemic or a plaintiff’s travel schedule. Similarly, the records may also mention that the injured party is unable to do certain things for themselves and require a spouse’s assistance. This could signal a potential loss of consortium claim. Similar language is often included in pre-suit demand letters.
Burden of proof
Another factor to consider when evaluating claims, especially pre-suit, is who has the burden of proof and what might be necessary to meet that burden. Typically, a plaintiff has the initial burden of proving their claims and then, once met, the burden shifts to the defendant to rebut the plaintiff’s claims or evidence. A simple illustration of this is on the topic of medical expenses. A plaintiff can meet the requisite burden of proof by tendering his or her medical bills as evidence at trial. The burden then shifts to the defendant to refute the medical expenses, which is typically completed through expert testimony of medical providers and/or medical billing and coding professionals as to the usual, reasonable and customary medical charges. It is often necessary to obtain one or more experts to help support defenses at trial, which is usually costly and should be a consideration in any damages analysis.
A plaintiff’s claim for lost wages can significantly increase the value of a case. In general, most states calculate lost wages based on the total amount of the monthly wages the plaintiff missed due to his or her inability to work. The biggest variation between states involves the deduction of taxes when calculating the lost wage award. Some states, such as New Jersey, deduct the amount of taxes that would have been deducted from a plaintiff’s paycheck had they been working when calculating the award and some do not.
Due to the recent increase in the ability to work from home, it is important to further investigate the plaintiff’s work conditions and available accommodations.
An analysis of potential punitive damages is also critical when analyzing third-party liability claims. Throughout the country, states vary regarding statutory caps on punitive damages. Some states have different ways of calculating the statutory caps and qualifiers for damages.
For instance, Illinois does not allow punitive damages in legal malpractice suits. In Kansas, Missouri and Montana, punitive damages are partially based on the defendant’s income, while Mississippi’s punitive damages limits are based on the defendant’s net worth. As such, it is important to look at the jurisdiction’s specific punitive damage statute and the type of claims involved.
States similarly vary as far as a plaintiff’s ability to recover attorney fees. For example, Hawaii does not allow an award of attorney fees to not exceed 25% of the amount recovered out of the judgment awarded to the plaintiff. Alaska has a specific way of calculating attorney fees to the prevailing party based on the amount of judgment and what was contested at trial.
There are a variety of factors involved in analyzing damages in third-party liability claims. It is critical to start the investigation early using the tools and resources available, such as medical records, social media posts and open records requests, to determine a plan for an early resolution or vigorous defense to the claim.
Kori Eskridge is a litigation associate practicing in the areas of property liability, premises liability, automobile liability and fraud for corporate and insurance clients, as well as insured individuals. She may be reached directly at kori.eskridge@swiftcurrie.com.
Kelly Chartash represents clients in matters related to insurance coverage and commercial litigation. She focuses her practice on third-party insurance coverage disputes, automobile litigation and premises liability, having successfully defended clients in dispositive motions and in jury trials. She may be reached directly at kelly.chartash@swiftcurrie.com.
Opinions expressed here are the authors’ own.
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